The property market in China is predicted to become stable in 2025, although it is anticipated to remain subdued for an extended period.

• Despite the latest stimulus measures, analysts predict that China's real estate sector may not recover until the second half of next year.
• Goldman Sachs analysts stated that the housing market has reached a turning point due to a comprehensive and coordinated easing package.
• Any rebound in home sales and new construction is projected to remain subdued in the coming years, according to analysts.

Despite the latest stimulus measures, three research firms predict that China's struggling real estate sector may not recover until the second half of next year.

In late September, Chinese President Xi Jinping convened a top-level meeting to "stop the decline of the real estate market." The Finance Ministry had previously introduced measures to stabilize the real estate sector earlier this month.

"According to Goldman Sachs analysts, the ongoing downward spiral in the housing market has reached an inflection point due to a comprehensive and coordinated easing package, as stated in an Oct. 22 note titled "China real estate 2025 outlook: Bottoming in sight.""

The current situation differs from the previous incremental relaxation measures, according to the report.

Goldman predicts that property sales and new home construction in China will not stabilize until 2027, while property prices are expected to rise by an average of 2% two years later, in late 2025.

This month, S&P Global Ratings and Morgan Stanley published reports predicting that China's real estate market will reach its low point in the second half of 2025.

According to Edward Chan, director at S&P Global Ratings, and his team, if the government continues to prioritize support for developer financing and destocking, property sales and prices could stabilize toward the second half of 2025. However, they warned that it would take time for policies to take effect.

Beijing has stated that supporting the struggling real estate sector is secondary to its goal of promoting advanced manufacturing as a new source of growth. However, this is a challenging task as property previously contributed more than a quarter of GDP, with links to both household wealth and local government finances. Despite this, China's indebted developers have faced difficulties in delivering pre-sold homes, which has negatively impacted consumer sentiment.

Parliamentary meeting next week will be closely watched by analysts for any information on fiscal spending to reduce housing inventory.

Goldman predicts that the government will spend an additional 8 trillion yuan ($1.12 trillion) on fiscal spending, which has not yet been announced.

The Goldman analysts warned that the property market downturn could last another three years if no stimulus is provided. They advised that such support must address developers' liquidity problems, reduce unsold housing inventories, and ensure the delivery of pre-sold but unfinished homes.

Beijing's crackdown on developers' debt-driven growth model led to a decline in homebuyer demand and made the practice of selling houses ahead of completion unsustainable in China.

Last month, officials announced that around 4 million homes had been completed and delivered to buyers under this year's whitelist program, and pledged to accelerate financial assistance.

In June, Morgan Stanley predicted that the inventory destocking would result in a "rebound in property loan demand in late 2025 or 2026."

Unsold inventory is expected to remain unsold, resulting in banks or other unspecified entities bearing the cost, according to analysts.

The real estate market in China has seen a decline in property sales in October, but it is less severe than the previous month.

Not a return to boom days

Although the property market is stabilizing, analysts predict that any recovery in home sales and new construction will be slow in the coming years.

According to S&P, property sales in China are predicted to decrease to approximately 9 trillion yuan this year, potentially dropping to 8 trillion yuan by 2025, which is significantly less than the 18 trillion yuan sales recorded in 2021.

The increase in unsold housing inventories is causing developers to resort to price-cutting to attract buyers and reduce stock, resulting in sales declines, according to analysts.

In September, the sales of the top 100 developers in China decreased by 37.7% compared to the previous year, marking their steepest decline since April this year, according to S&P. This drop was not limited to one month, as sales fell by 36.6% from the previous year over the first nine months of the year, data showed.

S&P Global analysts report that the decline in sales has a negative impact on developers' financial stability, causing them to become more cautious about investing in new projects and acquiring land.

In 2023, the number of new construction projects decreased by 42% from their peak in 2019, and then declined by an additional 23% in the first eight months of 2024, according to S&P Global's analysis of official data from the National Bureau of Statistics.

More to be done

Analysts remain cautious about the impact of China's real estate stimulus.

The Goldman analysts stated that the level of support has been inadequate and has encountered obstacles in stopping the current decline, with the possibility of property prices dropping by another 20% to 25% if policy fails to improve.

The People's Bank of China committed to providing a 300 billion yuan relending loan facility in May for state-owned enterprises to purchase unsold completed homes and convert them into affordable housing.

S&P stated that while the completed housing stock was aided by the small percentage (4-6%), it only accounted for a small portion of the overall housing stock.

According to a report by Morgan Stanley analysts on Sunday, recent meetings with banks in Zhejiang, one of China's wealthier provinces, revealed that they have not yet joined the new government initiative to provide loans for purchasing housing inventory.