The credit rating agency S&P Global Ratings predicts that in 2025, the sales of commercial housing in China will decrease by 5% to 10%.
According to S&P Global Ratings, with the Chinese authorities rolling out a series of stimulus measures, the decline in commercial housing sales in 2025 is expected to narrow, with a drop ranging between 5% and 10%. The total sales for the year are projected to be between 87 trillion and 92 trillion Chinese Yuan.
First- and second-tier cities are expected to stabilize first under policy support, while the situation of simultaneous decline in volume and price in third-tier and below cities is likely to continue, with a possible sales decline of up to 15%. The imbalance of supply and demand in the “low-tier cities” real estate market remains a key constraint to the overall stabilization of the property market.
The report points out that the implementation of the policy on 1 million units of monetized resettlement is expected to unleash a demand for purchasing housing of 40 to 50 million square meters between 2025 and 2026.
The use of unsold commercial housing for affordable housing is the main driving force for short-term improvement in the market of low-tier cities. However, due to strict acquisition conditions and the high level of difficulty for real estate companies to participate, the likelihood of large-scale implementation in 2025 is relatively low. Currently, the acquisition price is only about half of the current price of commercial housing, resulting in limited effects on destocking in low-tier cities.
S&P Global Ratings warns that the industry as a whole will face severe liquidity challenges next year, especially the need to pay attention to the improvement of the financing environment for non-state-owned enterprises and the adequacy of assets. The leverage level of real estate companies will increase further, liquidity pressure will continue to intensify, posing challenges to the overall market recovery.