China’s struggling housing market is expected to face another challenging year in 2025, with some analysts predicting that home prices will continue to weaken. After several attempts to reduce the oversupply of homes over the past year, analysts stress that destocking—reducing the glut of unsold properties—has become an urgent priority for Chinese authorities in order to avoid further economic downturns.
Since the Chinese government launched a 300 billion yuan (US$40.9 billion) fund in May 2024 to help local governments purchase unsold homes, several cities have made progress in reducing the housing glut. However, some cities missed their targets, and the overall sector remains in a slump that has lasted for four years. Analysts emphasize that reducing the unsold housing inventory will be crucial to boosting market confidence and potentially stabilizing the sector in 2025.
John Lam, head of China and Hong Kong property research at UBS, predicts that inventory levels could return to a healthy state by mid-2026, assuming no further defaults by major property developers. In 2024, supply in the top 50 mainland cities shrank by an average of 30%, but it will take more than 21 months to clear the glut, with some smaller cities facing delays of up to 30 months.
Cities like Zhengzhou and Hefei have been leaders in the buy-back programs, purchasing unsold units and providing financial relief to struggling developers. Other cities, such as Shenzhen and Chongqing, have reduced new land supply to shorten the time needed to achieve market equilibrium.
While some cities have successfully met their targets, others are falling behind. More than half of the cities tracked by the China Real Estate Information Corp (CRIC) are expected to need at least 18 more months to resolve the supply-demand imbalance.
CRIC forecasts that key cities like Shanghai, Hangzhou, Chengdu, and Xian will be at the forefront of stabilizing China’s housing market in 2025. However, with a record high inventory of 31 months in 2024, the road to recovery is still long.
Raymond Cheng, managing director at CGS International Securities, suggests that increasing the central government’s buy-back funding to 600 billion yuan could accelerate the destocking process, reducing the inventory period to around 20 months by 2027. However, in the meantime, home prices may drop further by approximately 2% in a buyer’s market.
Overall, analysts argue that confidence in the housing market will be crucial for its recovery, and while destocking is a necessary step, it may take time before any significant stabilization occurs.
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