The slumbering property sector remains a threat to China’s economic growth because of its huge impact on the employment rate and consumer demand, according to industry officials and analysts.
Amid sharp declines in property investment, housing sales and home prices last year, a further downturn of the significant sector may put more developers, workers, homebuyers and banks at risk.
In the first 11 months of 2025, new properties worth 7.5 trillion yuan (US$1.07 trillion), comprising units for dwelling and commercial use, were sold across mainland China, down 11.1 per cent from a year earlier, data from the National Bureau of Statistics (NBS) showed.
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Home sales slumped 11.2 per cent year on year, the bureau said, without releasing the value of total transactions. This exceeded Fitch Ratings’ forecast of a 7 per cent year-on-year decline for 2025. Completion of new properties in the first 11 months fell 7.8 per cent from a year earlier to 787 million square metres (8.5 billion sq ft), the statistics showed.
“A ripple effect will spread to other industries if the real estate sector continues a downward spiral,” said Yin Ran, a property and angel investor in Shanghai. “Without strong home sales, millions of companies such as home appliance makers would struggle to keep their businesses afloat.”
The property sector and related industries, such as home appliances and construction materials, account for about a quarter of mainland economic output.
The property and construction industries alone represent about 13 per cent of the country’s economic output, as well as more than 70 million jobs.
As of November, the inventory of completed properties in China was 1 per cent lower than the end of 2024, while home sales during the first 11 months of 2025 plunged 8.1 per cent from a year earlier in terms of gross floor area, according to the NBS.
“This suggests destocking is lagging the contraction in sales,” Fitch said in a research report released last week. “We expect the elevated home inventories to continue pressuring home prices in 2026.”
A woman passes a residential complex in the district of Changping on the outskirts of Beijing on December 24, 2025. Photo: AP Photo alt=A woman passes a residential complex in the district of Changping on the outskirts of Beijing on December 24, 2025. Photo: AP Photo>
The average selling price of newly built homes dropped 3.3 per cent year on year from January to November, according to the NBS, compared with Fitch’s estimate of a 2 per cent decrease for the full year.
At the end of last year, Beijing unveiled fresh tax incentives to bolster the troubled property industry, but property brokers said most would-be homebuyers took a cautious stance as they anticipated a further drop in housing prices.
Individuals selling residential properties within two years of purchase are now subject to a value-added tax rate of 3 per cent, down from 5 per cent, according to a joint statement released by the Ministry of Finance and the State Taxation Administration.
“Buyers feel that the market-boosting measures are not enough to turn the market around,” said You Liangzhou, owner of Shanghai property agency Baonuo. “They will adopt a wait-and-see attitude until stronger stimulus policies are announced.”
Prices of pre-owned homes in the mainland’s 70 major cities plummeted 5.7 per cent as of November from the same period a year earlier, NBS data showed.
Last year, several major Chinese cities relaxed rules to encourage home ownership.
In Shanghai, local residents can now own an unlimited number of flats outside the outer ring road, where two-thirds of the city’s housing is located. Previously, families were restricted to a maximum of two units.
In Beijing, both local and non-local residents can now freely purchase new and second-hand homes outside the Fifth Ring Road, the highway that encircles the suburbs.
Stronger stimulus measures were needed to halt the decline in China’s embattled property sector, Yu Xiangrong, Citigroup’s chief economist for Greater China, said in November.
An incentive package – including interest rate reductions, tax cuts, further relaxation of home purchase restrictions and the buy-back of idle land – could help revitalise the real estate industry, he added.
Falling home prices have also deterred mainland consumers, including the country’s 400 million middle-income residents, from freely spending on goods from cars to clothing.
In the first three quarters of 2025, mainland retail sales climbed 4.5 per cent from a year earlier to 36.6 trillion yuan, according to the NBS. Consumer spending, however, lagged the country’s gross domestic product growth of 5.2 per cent during the same period.
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