Full Breakdown
China's Property Market Faces Deepening Crisis as Home Prices Plummet
10/20/2025, 11:28:20 AM
Decline in Home Prices and Economic Impact
In September 2025, China's property market experienced a significant downturn, with new home prices across 70 major cities falling by 0.41% month-on-month, marking the steepest decline in 11 months. Resale home values also dropped by 0.64%, the largest decrease in a year, according to the National Bureau of Statistics. Year-on-year, new home prices fell 2.2%, slightly easing from a 2.5% decline in August. This ongoing slump has raised concerns about its impact on consumer confidence and broader economic growth, as the property sector has historically been a key driver of China's economy.
Background and Context
The current crisis in China's real estate market has persisted for four years, exacerbated by a series of defaults among property developers and a significant backlog of unsold homes. The downturn has led to a contraction in property investment, which fell 13.9% in the first three quarters of 2025, following a 12.9% decline in the earlier months. Analysts attribute the prolonged slump to a combination of factors, including a lack of consumer confidence and the ongoing U.S.-China trade tensions.
Key Figures and Responses
Despite various easing measures implemented by major cities like Beijing and Shanghai, the market remains weak. These measures included mortgage rate cuts and relaxed homebuying restrictions. However, the effectiveness of these policies has been questioned, with experts suggesting that a recovery in housing prices may not occur until 2027 when inventory levels stabilize. Kelvin Lam, a senior economist at Pantheon Macroeconomics, stated, "The property market remains in the doldrums," indicating a bleak outlook for the sector.
Criticism and Opposition
Critics argue that the government's response to the property crisis has been insufficient. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, described the contraction in fixed-asset investment as "rare and alarming," warning that the weakness in real estate investment may persist longer than anticipated. Dan Wang from the Eurasia Group emphasized the need to stabilize the housing market to stimulate domestic demand effectively.
Conflicting Reports and Gaps
While some cities, such as Shanghai, reported slight increases in new home prices, the overall trend indicates a widespread decline. For instance, Beijing saw a 0.2% increase, while Shenzhen experienced a 1% drop, reflecting the uneven recovery across different regions. This disparity raises questions about the effectiveness of localized policies aimed at boosting the market.
What's Next
Looking ahead, analysts expect that further support measures may be introduced in the fourth quarter of 2025, including potential tax reductions and additional mortgage rate cuts. The Central Committee of China's ruling Communist Party is set to discuss the country's 15th five-year development plan, which may include strategies to stabilize the property market and address the ongoing economic challenges.
Verbatim Quotes
- “If the value of real estate, especially in first-tier cities, continues to shrink, people will feel they have less money to spend and will expect even less in the future,” — Hanna Liu, Economist at Nomura
- “The tone set by the meeting for the property market will still prioritise sector stability, while encouraging local stimulus policies such as home purchase subsidies and tax reductions,” — Jeff Zhang, Property Equity Analyst at Morningstar
- “It will be difficult for housing prices to recover before 2027, when inventory levels return to a reasonable range.” — Kelvin Lam, Senior Economist at Pantheon Macroeconomics
The ongoing challenges in China's property market underscore the need for effective policy interventions to restore confidence and stimulate economic growth.
