China's Housing Market Sends Mixed Signals Ahead of Official October FiguresChina's Housing Market Sends Mixed Signals

Five years after China's property crisis began, the country's housing market is still sending conflicting signals about whether the worst is over.

The latest reading comes from the China Index Academy, a private research firm, whose survey of 100 cities found that average prices of new homes rose 0.18% in October from September and were 2.02% higher than a year earlier. But the same survey found that prices of existing homes — the resale market — fell both on the month and on the year, with no sign yet of stabilising.

Why the numbers disagree

The rise in new-home prices in the private survey owes much to the kind of homes being sold. A large share of October's new supply came from high-priced developments, which lifts the average price even if prices for comparable homes are not rising. Analysts call this a composition effect, and it is one reason economists treat headline average prices with caution.

Official figures paint a weaker picture. The National Bureau of Statistics, which surveys 70 cities and adjusts for the mix of homes sold, reported in October that new-home prices fell 0.1% in September from August and were 2.8% lower than a year earlier. Prices of existing homes fell 0.26% on the month. By the official measure, China has gone more than three years without either a monthly or an annual increase in new-home prices.

The bureau's figures for October are due in mid-November. They will show whether the private survey's improvement is reflected in the more comprehensive official data.

A tale of big cities and small ones

The national averages also hide a widening gap between China's largest cities and the rest. In Shanghai, industry trackers reported strong activity during the Golden Week holiday at the start of October, with sales of existing homes across a group of key cities running well above last year's levels.

In smaller cities, the story is different. New and existing home prices continued to fall both on the month and on the year. These cities saw some of the most aggressive building during the boom years and are now left with large numbers of unsold flats and declining populations of young buyers.

Building has slowed sharply

Activity in the wider sector remains weak. Official data show that property investment and home sales both contracted at a faster pace in the first nine months of this year than in the first half. Developers, many of them still burdened with debt, are starting fewer projects, and households remain cautious about buying.

That matters far beyond the property industry. At its peak, real estate and the industries that supply it — steel, cement, glass, furniture, appliances — accounted for roughly a quarter of China's economic output, by many economists' estimates. For local governments, sales of land to developers were a major source of revenue. As building has slowed, so has demand for materials, and many local governments have found their finances squeezed.

How China got here

The current slump began in 2021, when Beijing tightened rules on how much developers could borrow in an effort to cool a market that officials believed had become dangerously overheated. Several of the largest developers, which had relied on borrowing and on pre-sales of unfinished homes to fund new projects, ran into trouble. China Evergrande, once the country's best-selling developer, defaulted on its debts, and a Hong Kong court ordered it to be wound up in January 2024. Country Garden, another giant, also defaulted.

Since then, the government has introduced a long series of support measures: lower mortgage rates and down payments, the removal of purchase restrictions in many cities, programmes to ensure that unfinished homes are completed and handed over to buyers, and plans for local governments to buy unsold homes for use as affordable housing. Each round has produced short-lived improvements, but not a lasting recovery.

Why confidence is the key

For most Chinese families, a home is their largest investment. When prices are falling, buyers have reason to wait, which keeps demand weak and prices under pressure. Falling home values also make households feel poorer, which holds back spending on everything else — one reason China's consumer demand has remained subdued.

Many economists argue that a durable recovery requires buyers to believe prices have stopped falling. That is why small signs of stabilisation, such as the private survey's figures, are watched so closely — and why official confirmation matters.

What it means for buyers

For a family thinking about buying a home in China today, the mixed signals translate into a simple question: buy now, or wait? Falling resale prices in most cities mean that waiting has often been rewarded over the past few years. A newly built flat in a premium development in a major city may be holding its value; an older flat in a smaller city may not.

Many buyers are also wary of developers' finances. After several large companies failed, some buyers who paid in advance for homes saw construction stall. Government programmes to finish those projects have helped, but the experience has made buyers more cautious about paying for homes that are not yet built, and more inclined to buy completed flats from the resale market or from state-backed developers.

Why it matters for Asia

China is the largest trading partner for much of Asia. When Chinese construction slows, demand falls for iron ore, coal, copper and other materials from countries across the region and beyond, and for industrial goods from China's neighbours. A weaker property sector also weighs on Chinese consumer spending, which affects tourism and exports to China across Asia, from Japanese cosmetics to Southeast Asian fruit.

Conversely, a genuine turnaround in Chinese housing would be one of the most significant positive developments for the regional economy in the coming year.

What to watch

The National Bureau of Statistics publishes its October home-price figures, along with data on property investment and sales, in mid-November. Investors will look for whether official new-home prices stop falling, whether the decline in resale prices slows, and whether the improvement in the biggest cities begins to spread to smaller ones.