Balancing oversupply, low confidence crucial to stabilise China’s property market

An analyst said that property sales could stabilise in the latter half of 2025.

Stabilising China's property market will require addressing the imbalance between excess housing stock and insufficient buyer confidence, according to the S&P Global Ratings report. 

"We estimate national property sales will decline to about RMB8.5t to RMB9t in 2024 and further to RMB8t to RMB8.5t in 2025," said Edward Chan, an analyst for S&P Global Ratings. 

However, he also added that property sales could stabilise in the latter half of 2025, provided that the conditions are favourable.

"The first key condition will be easier access to funding. When developers witness more favourable funding opportunities, they might regain their confidence in land acquisitions and new starts," said Chan. 

He noted that the government will also have to increase measures to reduce inventories so that developers will no longer need to resort to drastic price cuts to destock.

Moreover, Chan also said that a rebound in developers' confidence will concurrently boost homebuyers' sentiment. Indicative of this would be a rebound in land acquisitions and new starts, as well as stabilisation in primary home prices.

"By addressing funding, supply, and confidence, the property market could see a positive shift, leading to stability in prices and sales," said Chan. 

Otherwise, he said that the current pressure on margins and deteriorating sales could take a further toll on the creditworthiness of the developers they rate.

"Structural changes will continue to reshape the outlook for China's real estate market," said Ricky Tsang, an analyst from S&P Global Ratings. 

"Developers focusing on premium-quality residential products in higher-tier cities will be more resilient during a downcycle," Tsang added.