China's Real Estate Market in 2025: Challenges and Recovery Prospects

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The Chinese real estate market is showing signs of stabilization in early 2025 after years of decline. Despite persistent structural challenges, government support measures and policy adjustments are yielding initial results. However, analysts caution that the country still faces significant hurdles, and the upcoming year will not be easy.

Bloomberg, citing China Real Estate Information Corp., reports that in February 2025, new home sales by China's top 100 developers increased by 1.2% year-on-year, reaching 188 billion yuan ($25.8 billion). This marks a positive shift after a 3.2% decline in January. Analysts emphasize that sustained transaction growth is essential for stabilizing housing prices. According to Fitch Ratings, restoring consumer confidence is the only way to revive the real estate sector.

Government Support Remains Critical

Government intervention remains crucial in the market's recovery. Bloomberg Economics analysts Xu Chang and David Qu expect additional stimulus measures to be announced at the annual session of the National People's Congress. As part of the "whitelist" program, 5.6 trillion yuan in loans has already been allocated to support housing construction. Additionally, the government continues its plan to complete pre-sold but unfinished housing projects—a key measure to restore public trust.

China’s Housing Minister Ni Hong stated in a Reuters interview that from January to February, the market showed signs of halting its decline and gradually improving. However, he warned that full recovery could take time due to the magnitude of structural imbalances. Experts predict further price declines throughout 2025, with no full recovery expected before 2026. Some estimates suggest that housing prices have dropped by 20–30% compared to their August 2021 peak.

This sharp decline has led to a severe liquidity crisis, developer defaults, and buyer protests. The widespread halt in construction has negatively impacted consumer sentiment and economic behavior. With 70% of Chinese household wealth tied to real estate, the downturn in this sector is exacerbating overall economic uncertainty. Deflationary expectations are growing, leading consumers to cut spending, further deteriorating the situation.

Comparisons to Japan's "Lost Decades"

Given these circumstances, Bloomberg notes that China faces challenges similar to Japan’s 1990s economic stagnation, particularly the risk of a "balance sheet recession." With deflationary pressures, low bond yields, and declining property values, China is experiencing the longest market slump in 65 years. Estimates suggest that household wealth has shrunk by $18 trillion due to the housing crisis.

However, key differences exist between China and Japan’s situations. China's government has greater control over macroeconomic policy and the ability to deploy large-scale fiscal stimulus to prevent prolonged stagnation. Premier Li Qiang, in his government report, emphasized accelerating the construction of eco-friendly and smart residential complexes, which could provide further sectoral support.

Urban Renewal and Infrastructure Investments

China is expanding credit programs for promising projects and increasing investments in urban redevelopment. In 2024, around one million housing units were modernized, and this number is expected to rise in 2025. These efforts aim to support demand while mitigating the social impact of the crisis.

Despite ongoing risks, analysts and government officials express cautious optimism. Real estate remains a pillar of China’s economy, and positive trends in this sector have a multiplier effect on the broader financial system. The government is demonstrating strong commitment to stabilizing the industry, which lays the foundation for a gradual recovery.

Outlook for 2025

The Chinese real estate market in 2025 is at a turning point. A combination of macroeconomic measures, direct lending, infrastructure investments, and strategic regulatory policies could enable a gradual recovery. However, the pace and sustainability of this process will depend on consumer confidence, government decisions, and global economic conditions.