Three research institutions’ analysts predicted that even with the latest stimulus measures, the struggling Chinese real estate industry may not see improvements until the second half of next year, with its downturn expected to persist for several years.
Goldman Sachs analysts forecast that Chinese property prices will stabilize by the end of 2025, with an average increase of 2% two years later. However, real estate sales and new construction are unlikely to stabilize before 2027. S&P Global and Morgan Stanley also released reports predicting that the Chinese real estate market will reach its low point in the second half of 2025.
Edward Chan, a director at S&P Global, and his team stated in a report, “If the government continues to prioritize financing support for developers and destocking, we believe Chinese real estate sales and prices may stabilize in the second half of 2025.”
However, Chan also warned that policy implementation takes time.
The Chinese authorities have clearly stated that the priority goal of economic policy is to support advanced manufacturing as a new driver of economic growth, followed by supporting the struggling real estate industry. This is no easy task as real estate once accounted for over a quarter of China’s GDP, closely tied to household wealth and local government finances.
Goldman Sachs’ forecast assumes that the Chinese authorities will increase fiscal spending by an additional 8 trillion yuan (about 1.12 trillion dollars). Analysts caution that without such a scale of stimulus measures, the sluggish property market may be prolonged by another 3 years.
They mentioned that this support requires addressing developers’ liquidity issues, reducing unsold housing inventory, and ensuring pre-sold homes are delivered.
Nomura Securities estimated at the end of last year that around 20 million pre-sold homes in China remain unfinished. In September of this year, Chinese officials stated that about 4 million housing units had been completed and delivered to buyers.
Analysts predict that around 30% of unsold inventory may never be sold, which will require banks or other entities to bear the costs.
Moreover, a stable real estate market does not mean full recovery. Analysts forecast that the rebound in home sales and new residential construction will remain sluggish in the coming years.
S&P expects Chinese property sales to fall below about 9 trillion yuan this year and further decline to 8 trillion yuan in 2025, less than half the 18 trillion yuan sales figure in 2021.
Analysts believe that the decrease in sales is due to the increase in unsold housing inventory, forcing developers to implement price cuts to attract buyers.
Standard analysts stated that deteriorating sales further affect developers’ liquidity, leading to “lack of confidence,” causing developers to become increasingly cautious in acquiring land and initiating new projects.
S&P cited official Chinese data analysis, showing that compared to the peak in 2019, the number of new projects started in 2023 decreased by 42%. In the first eight months of 2024, it further dropped by 23% year-on-year.
Goldman Sachs analysts said, “We believe the scale of support is not yet large enough, facing challenges in halting the current downward spiral.” They warned that without proper policies, real estate prices could further drop by 20% to 25%.
(This article referenced related reports from CNBC)