China new home sales are set to fall as values drop to 7-8%

The agency said about 75% of publicly rated Chinese homebuilders are state-owned enterprises.

China’s new-home sales are expected to fall again in 2026, with transaction value projected to decline by 7% to 8% to about CNY7t, according to Fitch Ratings.

According to the agency, the drop reflects an anticipated 5% fall in gross floor area sold and a low single-digit easing in average selling prices.

Structural pressures continue to weigh on demand. Demographic shifts, uncertain employment conditions, stretched affordability, and high levels of unsold inventory remain the key drags on the market.

Fitch Ratings said ongoing policy support, reduced contagion risk from developer defaults, and sales volumes edging closer to long-term sustainable levels could help moderate the downturn.

A more durable stabilisation would require a broader policy package, including stronger macro stimulus, improvements in the labour market, and more effective inventory reduction.

Without this, prices could fall more sharply than forecast, raising the risk of higher mortgage delinquencies and negative equity.

Performance will continue to diverge across the sector, with wide variation between state-owned developers, private and mixed-ownership players, across cities, and even between projects in the same location.

The agency said about 75% of publicly rated Chinese homebuilders are state-owned enterprises.

The proportion of issuers on Negative Outlook or Watch has fallen to roughly 25%, from around 60% at end-2024, reflecting a moderating downturn and improving metrics at leading SOEs.