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China’s struggling housing sector will see a sharper downturn this year than previously thought, marking the fifth consecutive year of decline and pushing back any hopes for recovery, according to a report released Thursday by S&P Global Ratings.
The credit rating firm now expects new home sales to drop 8% compared to last year, landing somewhere between $1.23 trillion (8.8 trillion yuan) to $1.26 trillion (9 trillion yuan). This marks a significant shift from the firm’s earlier forecast in May, when analysts had predicted only a 3% decline.
Back then, experts thought that trade tensions and other external pressures would force Chinese authorities to roll out larger programs to prop up the housing sector, explained Edward Chan of S&P Global Ratings, in comments to CNBC.
The primary factor behind the darker outlook is simple: buyers remain nervous about purchasing homes. “So the government will need to continue to support the sector and demand to help restore homebuyers’ confidence,” Chan stated.
Last September, Chinese leaders held an important meeting where they pledged to stop the real estate slide. However, after introducing several new policies last year, political energy behind additional support measures seems to have weakened.
China’s property market weakens as policy easing slows
S&P pointed out that China’s five-year loan prime rate, which serves as the reference point for most home loans, has only dropped by 0.1% in 2025 so far. That compares to a much larger 0.6% cut throughout 2024, suggesting authorities aren’t loosening policy as forcefully as they did before, even with the housing sector still struggling.
Last August, three of the country’s biggest cities relaxed rules that had limited how many properties people could own. But these changes mainly affected homes in less attractive outer areas of cities, according to S&P’s analysis.
“If demand can be stabilized first in the higher-tier cities, particularly in the first-tier [largest] cities first, that would probably help the trajectory of the demand recovery to be more sustainable,” Chan noted.
The prospect of hitting bottom in China’s housing crisis now appears further away than before. At the current projection of 9 trillion yuan or below for this year, China’s property market will have shrunk by half within four years, down from 18.2 trillion yuan back in 2021, S&P’s figures show.
The firm anticipates an additional 6% to 7% drop next year, with home prices in the primary market falling 1.5% to 2.5%.
Government support fails to lift weak housing demand
For many years, Chinese homebuyers typically purchased apartments before construction finished. When developers hit money troubles and building work stalled, buyer confidence took a hit. This led authorities to create a “whitelist” last year to provide funding for approved unfinished developments.
By August, unsold housing stock rose to 762 million square meters, from 753 million square meters in December 2024, according to S&P data.
Chan said the government has been working hard to assure people that receiving their apartments is no longer a problem. He explained that the real issue is overall demand across the country appears weaker than anticipated.
Looking ahead, Chan believes authorities will continue stepping in with support measures, even if gradually, whenever the market shows signs of weakness.
Last August brought both the easing of some purchase restrictions and a notable public statement from Chinese Premier Li Qiang acknowledging the ongoing real estate problems and the need for greater action.
The month after that, sales among China’s top 100 developers increased 0.4% compared to the same period a year earlier, S&P reported, citing industry figures.
While developers fight to stay afloat, the report suggested that “the result may be a smaller market, but also a healthier and more resilient sector.”
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