On March 18th, 2025, a city building located in Uaan, Jiangsu Province, China.
cfoto | Future Publishing | Getty Images
BEIJING – UBS analysts on Wednesday were the latest to raise expectations that China’s struggling real estate market is approaching stability.
“After a four or five year downward cycle, we started seeing relatively positive signals,” John Lam, head of Asia-Pacific Property at UBS Investment Bank and head of Greater China Property Research, told reporters Wednesday. It is due to CNBC translation of his Mandarin language remarks.
“Of course, these signals may be local, not national,” Lamb said. “But compared to the past, it should be more positive.”
One indicator is to improve sales in China’s largest city.
Existing home sales in five major Chinese cities had risen by more than 30% from a year ago as of Wednesday, according to CNBC analysis of data accessed via wind information. This category is usually referred to as China’s “secondary home sale” and is in contrast to the main market, which usually consisted of newly constructed apartment homes.
UBS now predicts that home prices in China could stabilize earlier than the mid-2026 time frame. They expect secondary transactions could reach half the total by 2026.
UBS examined four factors that showed an inflection point in the real estate market between 2014 and 2015: lower inventory, higher land prices, higher secondary sales, and higher rental prices.
In September, Chinese policymakers called for a “stop” of the decline in the real estate sector. This accounts for a large part of household wealth, contributing to more than a quarter of the economy just a few years ago. Major developers such as Evergrande are in debt, but since 2021, the company has almost half since 2021, about 9.7 trillion yuan ($1.34 trillion) last year (S&P Global Ratings).
The Chinese real estate market began a recent decline in the second half of 2020 after Beijing began to rely on high reliance on debt for growth for developers. Real estate has continued to suffer despite a surge in measures from central and local governments over half of last year.
However, after more powerful stimuli were announced late last year, analysts began predicting that the bottom would hit the ground later this year.
In January, S&P Global Ratings reiterated its view that the Chinese real estate market will stabilize towards the second half of 2025. Analysts predicted that “surge in secondary sales” was a key indicator of key sales.
Then in late February, Macquarie Chinese economist Larry Hu pointed out three “positive” signals that could support the bottom of home prices this year. He noted that in addition to promoting policy, unsold home inventory levels have fallen to their lowest since 2011, and that the narrow gap between mortgage rates and rental yields could encourage home buyers to buy rather than rent.
However, he said in an email this week that what China’s housing market still needs is financial support channeled through central banks.
In February, head of HSBC’s Asian real estate Michelle Kwok said there are “10 signs” that the Chinese real estate market has become the bottom. The list included a recovery in new home sales, home prices and foreign investment participation.
In addition to state-owned enterprises, “foreign capital has begun investing in the real estate market,” the report said, “acquired by two Singapore developers/investment funds in Shanghai on February 20th.”
Foreign investors are also looking for alternative ways to enter the Chinese real estate market after Beijing announced its promotion for affordable rental housing.
In late February, Invesco announced its real estate investment division, which has established a joint venture with Ziroom, a Chinese company known locally for its standardized, modern style apartment rentals.
The joint venture, called Izara Holdings, is planning to first invest 1.2 billion yuan (approximately $160 million) in a 1,500-room rental housing development near one of Beijing’s Winter Olympic sites.
The unit is likely to be rented at around 5,000 yuan a month, Calvin Chow, head of the Asia-Pacific region of Invesco Real Estate, said in an interview. He says the economic hardships of developers have created market gaps and hopes that joint ventures will invest in at least one or two projects in China this year.
Ziroom’s database allows companies to quickly assess regional factors to choose new developments, Ziroom Asset Management CEO Meng Yue said in a statement, adding a venture plan that will ultimately expand overseas.
It’s not from the forest
However, the data still reflects the struggling real estate market. Real estate investments still fell nearly 10% in the first two months of the year, according to the official economic figure raft released Monday.
“The real estate sector is particularly concerned as key data is in full negative territory, with new households beginning to grow from -25.5% in the fourth quarter of 2024 to -29.6% in January to February.
“It has long been our view that without a true stabilization of the property sector, there would not be a real recovery in the Chinese economy,” he said.
Also, improvements in secondary sales do not directly benefit developers who previously earned revenue from primary sales. S&P Global Ratings placed Vanke on their credit watch this month and downgraded its rating with Longfor. Both developers were one of the biggest on the market.
“In general, China’s (recent) policy efforts have been very widespread,” Sky Kwah, director of investment advisory at Raffles Family Office, said in an interview earlier this month.
“The key at this point is execution. The sector’s recovery depends on consumer trust,” he said, adding, “You don’t reverse confidence overnight. You need to gain confidence.”
