Pictured here is the construction of a real estate project in Huai'an City, Jiangsu Province, China on October 9, 2025.
Cphoto | Future publication | Getty Images
BEIJING – China's real estate market is expected to fall more sharply than expected in 2025, extending the sector's slump for a fifth straight year and delaying hopes for a market turnaround, S&P Global Ratings said in a report late Thursday.
The analysts predict that new home sales will fall 8% from last year to between 8.8 trillion and 9 trillion yuan ($1.23 trillion to $1.26 trillion).
That is a much steeper drop than the 3% drop that the major rating agency had predicted in May. At the time, analysts expected the trade war and other external uncertainties would have prompted China to roll out stronger support for the real estate sector, Edward Chan, director of corporate ratings at S&P Global Ratings, told CNBC.
The main reason for the weaker outlook is that homebuyer sentiment is still quite fragile, Chan said. 'The government will therefore have to continue to support the sector and demand [to] help restore homebuyer confidence.”
In September 2024, Beijing called for efforts to “stop” the decline of the real estate sector during a high-profile meeting. But after some new measures last year, the political momentum to ramp up further support seemed to slow.
S&P noted that China's five-year bond yield – the benchmark for most mortgages – has fallen only 10 basis points so far this year, compared with a 60 basis point cut in 2024, indicating Beijing is not easing policy as aggressively as before, despite the housing crisis.
In August, three of China's largest cities relaxed purchasing restrictions to allow buyers to own multiple properties, but the measure mainly applied to homes in the city's less desirable suburbs, S&P noted.
“If the demand can be stabilized first in the higher cities, especially in the tier 1 cities [largest] First, that would likely help make the demand recovery trajectory more sustainable,” Chan said.
A turnaround remains elusive
For the time being, hopes for a bottom for the Chinese real estate crisis seem even further away.
With sales expected to reach 9 trillion yuan or less this year, China's real estate market will halve in just four years, from 18.2 trillion yuan in 2021, S&P said. The rating agency expects sales to fall another 6% to 7% in 2026, while primary home prices will fall 1.5% to 2.5%.
In recent decades, homebuyers in China have tended to purchase apartments before they were ready. But when developers ran into financial difficulties, construction was postponed, shaking consumer confidence. This prompted Beijing last year to announce a 'white list' to finance approved, unfinished projects.
By August, completed but unsold housing inventory had risen to 762 million square feet, up from 753 million square feet in December 2024, S&P said.
Subscribe now
'The government has done a lot to reassure people [that getting] Their apartments are not the problem now,” Chan said. “The problem is that overall demand for the country as a whole appears to be weaker than we expected.”
Going forward, he expects the government to intervene, even incrementally, if the market appears weak.
August saw both an easing of some restrictions on home purchases and a high-profile admission by Chinese Premier Li Qiang that the property crisis remained unresolved, indicating a need for more support.
The following month, revenue for the top 100 Chinese developers rose 0.4% year over year, S&P said, citing industry data.
As developers strive to survive, the report said, “the end result may be a smaller market, but also a healthier and more resilient industry.”
