China Housing Searches for a Bottom

China’s property market is showing early signs of stabilization after a five-year downturn: sales in major cities have improved, price declines have slowed and some global banks are again talking about “green shoots.” But official data on investment, construction starts and developer funding remain weak, making the current optimism look more like a cautious bet on a bottom than a full recovery.

Banks see the first signs of a turn

South China Morning Post reported that global investment-bank analysts and property agents have become more cautiously optimistic on Chinese housing after five years of a bear market. According to Bank of America, primary-home sales in 30 key cities rose 3% year on year in the first 18 days of April, while recovery sustainability became “more evident” as affordability improved after price declines of more than 30% since 2021 and pressure from secondary-market listings eased.

The important signal is the transmission of activity from the secondary market to the primary market. The secondary market, meaning transactions between existing homeowners, usually gives the clearest read on buyer sentiment because prices are more flexible and less shaped by developer incentives. If demand for existing homes begins moving into new-project sales, it may mean some households are again willing to buy from developers rather than only hunt for discounted resale homes.

Prices are falling more slowly, but still falling

Official data do not yet confirm a durable turn. China’s National Bureau of Statistics showed that in April 2026 new commercial residential prices in 70 large and medium-sized cities were still declining in many markets: Beijing’s new-home index stood at 99.8 from March and 97.7 from a year earlier, Guangzhou at 99.8 month on month and 95.6 year on year, and Shenzhen at 100.3 month on month and 94.7 year on year. Shanghai remained an exception, with its index at 100.4 from March and 103.7 from a year earlier.

That means stabilization is uneven. China’s first-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — are no longer moving together: Shanghai and parts of Hangzhou look stronger, while some southern markets continue to correct after years of overheating. In lower-tier cities, pressure remains heavier because inventories are larger, income growth is weaker and fewer high-paying jobs are being created.

Development investment is still falling

The central contradiction in China’s housing market is visible in construction data. The National Bureau of Statistics said real estate development investment fell 13.7% year on year in January-April 2026 to CNY2.3969 trillion, while residential investment dropped 13.1%. Floor space under construction fell 12.1%, new starts declined 22.0% and completed floor space dropped 24.0%.

For the market, that is more concerning than one month of stronger sales. New starts show whether developers are willing to launch projects and take future demand risk. If that measure is down by more than a fifth, the sales recovery may reflect discounts, local incentives and limited supply in stronger districts rather than a genuine return of confidence.

Sales fell, but the decline narrowed

In January-April 2026, the floor space of newly built commercial buildings sold in China fell 10.2% year on year to 252.58 million square meters, while sales value dropped 14.6% to CNY2.3 trillion. Still, the floor-space decline narrowed by 0.2 percentage point from January-March and the sales-value decline narrowed by 2.1 percentage points. That moderation is what is feeding talk of stabilization.

The gap between floor-space sales and sales value also shows that price pressure remains. If value falls faster than area sold, average transaction prices are still under pressure or the sales mix is shifting toward cheaper projects and cities. For developers, that means liquidity may improve slightly, but margins and debt-servicing capacity remain weak.

Money has not returned to developers

Developer funding remains one of the weakest links. In January-April, funds raised by real estate development enterprises fell 18.4% year on year to CNY2.6697 trillion. Domestic loans dropped 25.9%, deposits and advance receipts from buyers fell 17.6%, and individual mortgage loans declined 31.7%.

These figures explain why stronger sales in selected cities do not automatically become a sector recovery. Chinese property long relied on buyer prepayments, bank credit and rapid land turnover. After major developer defaults, households became more cautious about paying for unfinished apartments, banks became more selective in lending and local governments lost part of their land-sale revenue base.

Beijing is focused on cutting inventory

Chinese authorities are placing more emphasis in 2026 on stabilizing the market through urban renewal, new-supply control and housing-inventory reduction. Reuters, via Channel NewsAsia, reported that a housing-policy conference in Beijing identified 2026 as a crucial starting point for the new five-year plan, with tasks including market stabilization, urban renewal and affordable-housing development.

A key tool is the purchase of existing apartments for conversion into affordable housing. The goal is to reduce developer inventories, give local governments housing stock for social rental or discounted sale, and support prices. But the scale remains limited: the stock of unsold and underused housing is large, while local-government budgets have already been weakened by falling land revenue.

First-tier cities are leading the recovery attempt

Bank optimism is concentrated mainly in the largest cities. These markets have higher incomes, stronger labor markets, less demographic pressure and more demand from households upgrading their living conditions. Shanghai’s new-home prices are already rising year on year, and Hangzhou’s April new-home index reached 102.3 from a year earlier, contrasting sharply with cities still posting declines of more than 5% to 7%.

This divergence changes the structure of China’s market. Previously, property almost everywhere was treated as an asset expected to appreciate alongside urbanization. Now housing in strong cities with technology employment and limited land may stabilize, while cities with excess construction, weaker industrial bases and population outflows remain under pressure.

The resale market is setting new prices

One sign of normalization is that secondary-market listings have fallen from peak levels. That matters because excess resale supply had been putting pressure on new homes: buyers could negotiate with owners of completed apartments and avoid the risk of buying unfinished projects. When resale listings decline, developers gain more room to sell, especially in first-home and first-upgrade projects.

The process is still fragile. If owners start listing apartments again after a small improvement in activity, prices could come under renewed pressure. For a real turn, the market needs not only more viewings and transactions, but also household confidence in income, employment and developers’ ability to deliver projects.

Stocks believed the story before buyers

JPMorgan previously said China’s property market may be near a tipping point that could help the country’s equities outperform emerging-market peers. The bank argued that a recovery in Hong Kong real estate was spilling over into major mainland cities, while the delayed wealth effect from the rebound in Chinese equities was helping revive housing demand.

Equity markets usually move faster than physical property markets. Developer shares can rise on expectations of support, debt restructuring or better sales even when actual homebuyers remain cautious. Bank optimism is therefore useful as a sentiment indicator, but it is not proof that apartments have again become a mass-market buying asset.

The bear market changed household behavior

Five years of falling prices have changed the psychology of Chinese buyers. Before the crisis, many households bought property because they feared it would become more expensive later. After developer defaults and price declines, the logic reversed: buyers wait for discounts, completed units, stronger developers and extra incentives. That sharply reduces the effectiveness of old stimulus tools based only on lower down payments or mortgage rates.

A bear market means an extended period of price declines and weak expectations. For China, it is especially painful because property was not only a place to live but also the main store of family wealth. When households stop believing in housing appreciation, they spend less, borrow more cautiously and hold more savings.

Developers remain divided

Even if sales stabilize, not all developers will benefit. State-owned and quasi-state-owned builders, along with larger private developers with bank access and completed projects, look stronger. Weaker firms with debt, unfinished projects and low buyer trust remain at risk.

National data show that office sales by floor space rose 10.8% in January-April, but office sales value fell 1.2%, while commercial business premises declined by both area and value. That is another sign of selective recovery: some assets are selling better, but pricing and demand quality remain weak.

Stabilization is not a new boom

A soft-stabilization scenario is possible if prices in the largest cities stop falling, resale supply declines and inventory-buying programs accelerate. Developers would get more liquidity, banks would face less asset-quality pressure and households would receive a signal that the worst phase may have passed. Even then, the market is unlikely to return to the 2010s model, when real estate was the central engine of China’s economic growth.

China’s economy is shifting toward industrial upgrading, technology, equipment exports, electric vehicles, batteries, artificial intelligence and infrastructure. Property no longer needs to be the main growth engine, but its decline cannot deepen indefinitely without damaging banks, local budgets and consumption. Beijing is therefore trying to put a floor under the market, not reflate the old bubble.

The real issue is trust, not price

The April improvement in 30 cities shows that buyer demand has not disappeared. After price declines of more than 30% in some segments, housing has become more affordable, especially for households that had long waited to buy a first home or upgrade. But affordability in China is now measured not only by price, but by trust in the developer, project quality, construction completion and employment prospects.

If April’s improvement continues into May and June, banks will have a stronger case for a turning point. If it proves seasonal after discounts and local incentives, the market will return to the same problem: too much housing, too little confidence and developers with weak balance sheets.

As experts at International Investment report, the “green shoots” in China’s property market look real but narrow: they are visible in stronger cities, resale-market dynamics and selected first-home projects, but they do not erase falling investment, weak developer funding and excess inventory. The critical risk is that investors again confuse stabilization with recovery. The market may stop falling, but that does not mean it is ready to become China’s main growth engine again.