China’s Housing Market Shows Signs of Stabilisation, but Recovery Remains Fragile

China’s new home prices recorded their slowest monthly decline in a year during April, offering early indications that the housing market could be stabilising. However, analysts warn that the recovery remains uneven and the sector may need several more months — or even years — before reaching a sustainable turnaround.

Despite efforts by local authorities to stimulate home sales and improve market confidence, China’s property sector continues to face significant pressure from oversupply, weak demand and declining investment.

Analysts Warn Property Market Has Yet to Reach Bottom

According to analysts, China’s real estate downturn is not over yet. Morningstar analyst Jeff Zhang stated that property indicators are expected to remain weak in the near term, although higher-tier cities could begin to see more stable sales activity and pricing.

He added that persistent oversupply across the housing market may delay a full recovery by one to two more years.

Monthly Home Price Declines Slow

Data from China’s National Bureau of Statistics showed that new home prices fell by 0.1% in April compared with the previous month. This marked an improvement from March’s 0.2% decline and represented the slowest monthly drop since April of the previous year.

However, annual figures remained weak. Home prices fell 3.5% year-on-year, slightly worse than March’s 3.4% decline and the sharpest annual drop in nearly a year.

The slower monthly decline has strengthened hopes among investors and homeowners that China’s property market may gradually recover.

At its peak, the property sector contributed roughly one-quarter of China’s economy, making its prolonged weakness a major drag on household wealth, consumer spending and broader economic growth.

Major Cities Show Improvement While Smaller Regions Lag Behind

China’s housing recovery remains highly uneven across different city tiers.

New home prices in tier-one cities such as Shanghai and Shenzhen increased by 0.1% month-on-month. Meanwhile:

• Tier-two city home prices fell 0.1%
• Tier-three city prices dropped 0.3%

The number of cities experiencing monthly price declines also improved, falling to 49 from 54 in March.

While larger cities are seeing stronger demand and higher transaction volumes, smaller cities continue to struggle with excess housing supply and unfinished developments.

Investor Confidence Remains Weak

Despite signs of stabilisation, sentiment around China’s property sector remains fragile.

Property-related stocks declined in morning trading, reflecting continued investor caution. Broader economic pressures also persist, with Chinese retail sales increasing by only 0.2% in April.

Separate data showed property investment dropped 13.7% during the first four months of the year compared with the same period last year — a sharper contraction than the 11.2% decline recorded in the first quarter.

Mortgage Demand Signals Ongoing Weakness

Demand for housing remains subdued.

Household loans, including mortgages, contracted by 786.9 billion yuan in April after increasing by 490.9 billion yuan in March. The sharp reversal suggests many consumers remain hesitant to purchase property despite government support measures.

Existing home prices also reflected this divide:

• Tier-one cities posted monthly gains but remained lower year-on-year
• Smaller cities recorded declines both monthly and annually

Chinese Authorities Continue Support Measures

Following policy discussions at China’s annual parliamentary meeting in March, several local governments introduced incentives aimed at reviving demand.

Measures include:

• Subsidies for homebuyers
• Efforts to reduce excess housing inventory
• Calls for state-backed entities to purchase unsold homes and convert them into affordable housing

In late April, China’s top leadership pledged further action to stabilise the real estate market and reduce risks across key economic sectors.

However, analysts remain uncertain whether these measures will be enough to trigger a lasting recovery.

Outlook: Stabilisation May Come Before Recovery

Economists believe recent data may indicate the market is approaching a bottom, but caution that previous signs of recovery have proven temporary.

A meaningful rebound in China’s property sector will likely depend on reducing housing oversupply, restoring consumer confidence and improving demand beyond major cities.

For now, stabilisation appears possible, but a broad recovery may still be months — or years — away.