Has the real estate market stabilized?

Ask AI · How do policy changes help the real estate market naturally stabilize on its own?

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From the end of 2025 to the start of 2026, Hong Kong’s property market was the first to show a strong rebound trend. New projects sold out immediately upon launch, with prices clearly rising, forming a sharp contrast to last year’s sluggish market. At the same time, China’s real estate market in first-tier cities has also shown preliminary signs of stabilizing. In February, the month-on-month change in prices for new commodity residential homes in first-tier cities turned from decline to basically flat. Meanwhile, the prices of second-hand homes in Beijing and Shanghai also rebounded month on month in tandem. This shift occurred despite relatively limited newly added stimulus policies, and it carries a certain “self-driven stabilization” characteristic.

The local warming of the real estate market is the result of the combined effect of ongoing policy optimization, marginal improvements in the macroeconomic environment, and long-term adjustments within the market itself. However, the overall picture is still hard to call optimistic. The divergence between high-tier and lower-tier cities, as well as between the primary and secondary markets, remains very pronounced. Whether the real estate market can achieve a comprehensive stabilization and rebound in the future depends on the repair and strengthening of economic fundamentals, improvements in residents’ income and expectations, and progress in clearing existing inventory. For details, please read on!

By Shen Jianguang

First published on FT Chinese website (March 25)

Recently, Hong Kong’s property market has been exceptionally bullish. Many new projects sell out as soon as they open, and most of them use a lottery system. Prices have also clearly rebounded, creating a sharp contrast with last year’s sluggish state. Coincidentally, China’s real estate market in first-tier cities has also shown some preliminary signals of stabilization and a rebound. In February, the month-on-month change in prices for new commodity residential homes in first-tier cities turned from prior declines to essentially flat. The month-on-month prices of second-hand homes in Beijing and Shanghai also rebounded at the same time. What is even more noteworthy is that this change happened in the absence of any obvious newly added real estate stimulus policies in the recent period (the latest Shanghai policy further relaxing real estate was released at the end of February). It carries a certain “self-driven stabilization” implication. For China’s real estate market, which has gone through a fairly long period of adjustment, this is undoubtedly a positive signal worth paying attention to.

In the author’s view, the positive signals emerging in China’s real estate market in specific areas are the result of policy adjustments, improvements in economic fundamentals, and the deep adjustments within the real estate sector itself. However, for China’s real estate market as a whole, the situation is still hard to call optimistic. The divergence between top-tier cities and other cities remains very evident, and the secondary and primary home markets also differ significantly. Against the backdrop of slowing urbanization growth and still-high overall inventories of new homes, the author believes that if China’s real estate market—especially the primary housing market, which is closely tied to investment and growth—is to truly stabilize and rebound, it still depends on whether economic fundamentals can continue to improve and whether residents’ income and expectations can continue to strengthen.

Why has the real estate market shown positive signals?

Since the second half of 2021, China’s real estate market has entered a long-cycle adjustment phase. For 70 cities, home prices have, besides a temporary stabilization at the beginning of 2023 due to the pandemic shock ending and another at the end of 2024 due to the “926” package of policy stimulus, broadly continued to decline overall. Even for first-tier cities, the endogenous stabilization seen in February is particularly valuable. In the author’s view, the current marginal improvement in real estate prices has at least three main reasons:

First, ongoing real estate policy adjustments have created conditions for the market to gradually stabilize. Over the past two or three years, the direction of real estate policy has shifted from the past emphasis on “preventing home prices from rising too quickly” to “promoting the steady and healthy development of the real estate market.” Around this goal, the People’s Bank of China has repeatedly lowered the required reserve ratio and policy interest rates to reduce financing costs, and has also lowered interest rates on personal housing loans and housing provident fund loans. At the same time, local governments have made multiple rounds of optimization and adjustments in areas such as purchase restrictions, loan restrictions, down payment ratios, and mortgage interest rates. Some cities have also introduced measures such as “trade in the old for the new,” and reducing transaction taxes and fees to stimulate demand.

In addition, the central government has continuously sent signals to support “stopping the decline and stabilizing” in the real estate market. Some regions have begun exploring the acquisition of existing commodity housing for use as public housing or rental housing to speed up inventory digestion. In newly issued documents related to land policies by the Ministry of Natural Resources, it has also further proposed that “newly added construction land should primarily保障 major project construction and development of people’s livelihood-related undertakings, and as a general rule it should not be used for operating real estate development,” to curb new housing supply. In the author’s view, sustained policy adjustments gradually form a collective force, which helps improve market expectations and stabilize market prices.

Second, the macroeconomic environment has also shown some improvement. In 2025, China’s economic growth reached 5%, which was overall better than market consensus expectations. The economic data for January to February 2026 that has just been released also contains many highlights. Even without considering the export high growth achieved because of the later timing of the Spring Festival, fixed-asset investment growth turning from negative to positive and the rebound in retail sales of consumer goods year on year both exceeded expectations.

With support from economic growth, China’s price level has also warmed to some extent. For example, the year-on-year growth rate of the services CPI rose continuously from 0.2% in September 2024 to an average of 0.9% in January to February this year, reaching a new high since the current rebound began.

Third, the real estate market itself has already gone through a relatively long period of adjustment. Over the past 4 to 5 years, the real estate market has seen clear declines across multiple aspects such as prices and supply. Taking second-hand home prices as an example, data from companies such as E-house China (Zhongyuan) show that the prices of second-hand homes in many cities have already fallen by 30% to 40%. In some areas of first-tier cities, rental yield has started to rebound, even exceeding the yield on long-term government bonds. At the same time, China’s new housing starts have fallen by more than two-thirds from their peak, suppressing the supply of new homes.

The transactions in the second-hand market have also shown a warming trend. This is especially true in first-tier cities. For example, in Shanghai over the weekend of March 14–15, second-hand home transactions reached 2,862 units, the highest in nearly five years. Due to this, second-hand home inventory in Beijing and Shanghai has clearly fallen from high levels. For instance, in Shanghai, Lianjia listings are currently around 80k units, down by 30k units from the historical peak. In Beijing, Lianjia’s second-hand home listings have also dropped from a peak near 170k units to around 140k units at the start of February this year and may continue to decline. Changes in market supply and demand have also weakened the momentum for prices to keep falling rapidly.

From this perspective, the current positive signals in first-tier city home prices are not coincidental. They are the result of the combined effects of policies, the macroeconomic environment, and the market’s own adjustments, and to some extent they reflect the normal process of the economic cycle running.

The divergence in the real estate market remains very clear

Although some positive signals appeared in China’s real estate market in February, a detailed review of the data shows that market divergence is still very evident. The highlights are mainly concentrated in a small number of cities and have not fully covered both the first-hand and second-hand markets.

On one hand, the price rebound is mainly concentrated in high-tier cities. Data for 70 cities show that in February, prices of new homes and second-hand homes in second-tier and lower cities continued to decline on a month-on-month basis. It is still too early to judge when the decline will end. Taking second-hand housing as an example, Beijing and Shanghai are the only two cities among all cities where month-on-month prices have risen.

On the other hand, compared with the sales rebound in the second-hand market, transactions in the new home market have still been continuously setting new lows, even including first-tier cities. According to data from the National Bureau of Statistics, the contracted area of second-hand homes nationwide rose from 707 million sq m in 2023 to 737 million sq m in 2025. The rebound in transaction volumes of second-hand homes in large cities is even more pronounced. By contrast, in 2025, the sales area of first-hand commodity residential homes nationwide fell to 730 million sq m, the fourth consecutive year of decline since reaching a peak in 2021.

Even in large cities like Beijing and Shanghai, the sales area of first-hand homes continues to decline. For example, in 2025, Shanghai’s sales area of commodity housing was 12.2493 million sq m, also setting a new low since 2022. In practice, the sluggishness in the primary market has also affected the land auction market. In Shanghai’s land auctions on March 13, among three residential land parcels, only one was sold at a premium of 6.7%, while the other two were sold at the floor price. With sales not going smoothly and inventory pressure still relatively high, developers generally remained more cautious.

Outlook for the Real Estate Market

Against the backdrop of the real estate market still showing clear divergence and improvement signals concentrated in only a few large cities, the author believes that it will still face significant challenges for China’s real estate market to experience a comprehensive upswing, especially in the new home market that is more closely related to investment and growth. Even for the secondary home market in high-tier cities, whether economic fundamentals can continue improving remains the key to whether these cities’ home prices can truly bottom out and stabilize.

In the long run, after the population begins to decline and China’s urbanization has entered its later stage, demand growth for real estate will clearly slow. For example, from 2023 to 2025, China’s average annual increase in the urban population was only about 11 million, less than half of the average growth rate during 2009–2019. Growth in the total number of people employed in urban areas has also slowed significantly.

More importantly, China’s inventory level of first-hand homes is still high at present. For example, as of February 2026, the unsold area of first-hand residential homes published by the National Bureau of Statistics is about 430 million sq m—only slightly lower than the level before the supply-side reform to reduce inventory in 2015. Against the background of still weak sales and high inventory levels, China’s first-hand home market adjustment likely still requires a considerable amount of time.

In addition, even for first-tier and strong second-tier cities, whether second-hand home prices can truly stabilize depends on whether improvements in economic fundamentals can be sustained. Moreover, the problem of excess capacity has not been fundamentally resolved. In 2025, the capacity utilization rate hit a new low for this round of economic adjustment. According to data from the National Bureau of Statistics, improvement in profits of industrial enterprises also has not been clearly evident.

Overall, based on the latest home price data for the 70 cities, China’s real estate market has begun to show some localized highlights. However, only if residents’ income and employment can see tangible improvements, and the outlook for the economy also warms, and after inventory continues to be digested, will China’s real estate market have a chance to achieve true stabilization.

(The author is the Chief Economist of JD Group)