Property Market Declines Deepen Amidst Surging Inventory
China’s property sector remains the biggest drag on the country’s economy. The market has been sliding for five years, and each month brings new pressure. Sales by the top 100 developers plunged 36% in November from a year earlier, showing that demand is still weak. Even worse, new home sales in November fell another 20% to 30%, according to recent research. These numbers show how fragile sentiment has become across the housing market.
Developers are now fighting to survive. Vanke, once one of China’s most trusted property companies, is seeking to delay repayment on a major bond. That move shocked creditors and pushed S&P Global Ratings to downgrade its debt again. As concerns rise, buyers pull back even further. And so, the cycle tightens its grip on the economy.
The core problem is excess supply. China has too many completed but unsold apartments, and the pile keeps growing. By August 2025, unsold inventory reached about 762 million square meters, up from 753 million at the end of last year. This heavy backlog keeps prices under pressure and forces developers to cut deeper to move units. As a result, home prices in 100 major cities dropped nearly 8% in November, and the decline is widening.
Because of this, the housing market is still searching for a bottom. High listing volumes signal that sellers are desperate, while weak confidence among buyers delays any true recovery. Several economists say the slowdown may last well into 2027 unless Beijing takes bold steps to reduce inventory. Even with past measures, such as a 300 billion yuan facility to help state firms buy completed units, the effect has been modest. Therefore, market clearing remains slow, and stability stays out of reach.
Transitioning to a healthier property cycle will take time. Analysts at the Economist Intelligence Unit believe prices could bottom out by early 2027 if land supply tightens and demand slowly returns. That would shorten the inventory turnover cycle to a more normal level. However, at the current pace, the market likely needs at least 18 more months. Until then, property will continue to weigh on China’s economy.
China Pursues Domestic Consumption Boosts Amidst Obstacles
Beijing knows that the real estate slump threatens the country’s broader economic goals. As a result, leaders are pushing for stronger domestic consumption to offset the drag from property. Recently, six ministries rolled out a sweeping plan to expand consumer industries, from electronics to sporting goods. The strategy aims to create sectors worth more than 1 trillion yuan by 2027. However, it offers few details on how to raise incomes or create jobs, which are essential for real demand.
Household stress adds to the challenge. Bad loans for households now exceed those of corporations, reflecting the pressure from falling home values and weaker labor markets. Families cannot restructure debt as easily as companies can. Therefore, many consumers hesitate to spend, especially with the housing market stuck in decline. This caution limits growth in retail sales and weakens momentum across the economy.
Nevertheless, Beijing is planning more support. Policymakers will meet at the Central Economic Work Conference to map out priorities for 2026. Many economists expect fresh stimulus to lift confidence and encourage spending. Yet the impact will depend on whether the measures boost income, not just production. Without stronger household demand, the housing market and the wider economy will continue to struggle.
Deflation Risks Escalate as Housing Market Weakens
Deflation remains another major concern, and the weak property sector plays a key role. Chinese consumers have become increasingly price-sensitive since the pandemic. Companies now compete fiercely for every sale, leading to heavy price cuts. Even during the biggest shopping festival of the year, sales grew much slower than last year. This trend shows how cautious households remain while real estate wealth erodes.
Inflation numbers tell the same story. Headline inflation hovers around zero, while core inflation—excluding food and energy—sits at only 1.2%. Much of that came from surging gold prices. Without gold, core CPI would be closer to 0.9%, according to analysts. This weak pricing power reflects the strain on China’s economy.
Because property is such a large part of household wealth, falling home prices reinforce deflation. When values drop, consumers feel poorer and spend less. Developers cut prices further, banks list more foreclosed properties, and the cycle grows sharper. Economists warn that this negative feedback loop must be stopped soon.
Therefore, several banks expect Beijing to act in 2026. One option under discussion is an interest-rate subsidy for homebuyers. This would lower mortgage costs without hurting banks and could stabilize sales. Morgan Stanley says a 1-percentage-point cut in mortgage expenses could lift new home demand next year and ease deflation pressures. If higher-tier cities respond first, the recovery may slowly spread.