China’s real estate market continues to face a downturn, with no signs of bottoming out since the industry adjustment period in the second half of 2021. The latest report released by a Chinese real estate market research institution predicts a 6.2% year-on-year decrease in national new commercial housing sales area in 2026, with real estate development investment expected to decline by 11%. Current resident employment income expectations are weak, making housing purchase decisions more susceptible to market confidence.
On Friday (2nd), the China Index Research Institute released the “2026 China Real Estate Market Outlook,” indicating that in a neutral scenario, while the decline in national new commercial housing sales area in 2026 is narrower compared to 2025, market differentiation will further intensify. The report forecasts a 8.6% decline in new construction area and an 11% decrease in real estate development investment.
Market data from 2025 reflects industry difficulties. According to the China Index Research Institute, the average prices of second-hand residential homes in one hundred cities fell by 7.46% over the year, marking about four years of continuous price adjustments. While some core cities saw a 2.29% cumulative increase in new home prices due to the introduction of high-end improvement properties, third and fourth-tier cities mainly faced downward price pressure due to inventory absorption.
Data from China’s National Bureau of Statistics shows that from January to November 2025, the national new commercial housing sales area decreased by 7.8% year-on-year, with sales amount down by 11.1%.
Regarding housing inventory, some key cities experienced a slight decline in inventory in the first half of the year, but slowing sales led to a reduction in the pace of sales. By the end of November, the average time needed to clear available inventory for residential properties in 50 representative cities stood at 22.2 months.
Faced with the continuing downward trend in the market, governments at all levels have been introducing a series of policies to boost the real estate sector. Since 2025, over 210 provinces and cities have rolled out approximately 560 real estate-related policies, primarily focusing on stimulating demand and optimizing supply. Core cities like Beijing, Shanghai, and Shenzhen have successively adjusted their policies such as home purchase restrictions and sale limitation periods, with some cities offering home purchase subsidies and reducing transaction costs.
However, new home sales have weakened marginally since the second quarter, and the second-hand housing market continues to struggle with declining prices. The China Index Research Institute report points out that with current weak employment income expectations, housing purchase decisions are more prone to market confidence influence.
The land market has also shown a slump. From January to November 2025, residential land transactions, planned construction areas, among 300 cities in China, fell by 15.8% year-on-year, with a 6% decrease in land premium payments. Real estate developers have further concentrated on obtaining land in core cities, with central state-owned enterprises becoming the main land acquirers, while local state-owned enterprises’ support has noticeably weakened. Since the third quarter, the supply of prime land parcels in core cities has slowed down, leading to a visible decline in market activity.
The China Index Research Institute predicts that the annual average sales area of new commercial residential properties in the next five years will remain between 700 million and 800 million square meters, significantly shrinking compared to peak periods in the past.
The report suggests that under the policy orientation of controlling incremental growth and improving existing stock, reducing supply could help lower inventory levels, but market stabilization still requires a turnaround in economic fundamentals and improved resident expectations.
Since the market adjustment in the second half of 2021, new home sales have decreased by nearly 50% from their peak. While current sales volumes are gradually approaching the central level of medium-to-long-term demand, there have been significant changes in housing demand characteristics. The proportion of demand for upgrades has increased, with housing purchase decisions relying more on income expectations and market confidence.
Investment data shows that from January to October 2025, national real estate development investment decreased by 14.7% year-on-year, with a continuous widening decline. Real estate enterprises’ invested funds decreased by 9.7% year-on-year. Against this backdrop, real estate investment in 2026 is expected to continue shrinking, affecting the construction, building materials, home improvement, and other related industries.
While the real estate market remains downcast, economic data for November shows a slowdown in several key indicators.
The National Bureau of Statistics reported that industrial output in November grew by 4.8% year-on-year, marking the slowest growth rate since August 2024. Retail sales only increased by 1.3%, hitting the lowest level since December 2022, significantly below the 2.9% growth seen in October. As of November, retail sales growth has been slowing down for six consecutive months, the longest slowdown period since 2020.
Appliance sales in November dropped by 19% year-on-year, the largest decline since early 2020. Automobile sales decreased by 8.5%, marking the biggest drop in ten months.
Fixed asset investment in the first eleven months of this year decreased by 2.6%, which is an increase from the 1.7% decline recorded in the previous ten months. Real estate investment during the January to November period fell by 15.9% year-on-year, surpassing the prior 14.7% decline. The average housing prices in 70 large and medium-sized cities dropped by 2.8% year-on-year in November, a wider decline compared to October. State-owned real estate developer Vanke faced debt default risks.
Furthermore, the International Monetary Fund lowered its economic growth forecast for China and urged Beijing to accelerate structural reforms and take action in the real estate industry. The IMF estimated that the cost to resolve the real estate crisis over the next three years is equivalent to 5% of the GDP. The World Bank also downgraded their growth forecasts.