China’s housing slump continues to drag on economic growth

China’s housing slump continues to drag on economic growth

• China's property downturn is hurting household wealth and consumer spending
• New home sales hit a 15-year low, with prices down about 20 percent since 2021
• Exports remain strong, but weak domestic demand drags on overall growth

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China’s property market downturn is weighing heavily on the economy, cutting into household wealth and consumer spending even as exports help keep overall growth near official targets.

New home sales have fallen to their lowest level in more than 15 years. Prices for existing apartments are continuing to decline across many cities. For millions of households, falling property values have reduced savings and confidence, prompting tighter control over spending.

Local governments are also under strain. Many depend on land sales and real estate-linked taxes for revenue, and falling activity in the property sector has made it harder for some to meet routine expenses, including paying civil servants, the New York Times reported.

At the start of last year, policymakers were focused on the risk of a trade conflict with the United States. Instead, exports surged. China posted another record trade surplus in 2025, softening the impact of weak domestic demand. The more persistent problem has been a housing downturn that began four years ago and has steadily worsened.

Official data released by the National Bureau of Statistics showed the economy grew 5 percent last year, matching the government’s target for a second consecutive year. Growth in the final quarter was slightly slower, equivalent to an annualised pace of 4.9 percent.

Consumer demand remains subdued. Retail sales in November barely rose from a year earlier, marking the weakest monthly performance since the pandemic. Economists say both urban and rural households are holding back amid uncertainty over property values and income prospects.

Some analysts outside China question whether official figures fully capture conditions on the ground. Estimates from private research firms suggest the economy may have expanded by closer to 2.5 to 3 percent last year and could slow further in 2026.

Real estate and related industries once accounted for roughly a quarter of economic activity. The sector’s sharp contraction has had knock-on effects across construction, manufacturing and services.

Official figures show home prices down about 20 percent since 2021. Independent measures suggest steeper declines in some markets. Sales volumes have slowed sharply, particularly for newly built apartments, with homes often remaining unsold for nearly two years.

Buyers are seeking deep discounts, while sellers are reluctant to accept losses, leaving many markets stalled. Confidence in property, long viewed as a safe store of household wealth, has been badly shaken.

Authorities have taken steps to stabilise the market, including encouraging local governments to buy unsold apartments and convert them into affordable housing. Limited fiscal capacity has restricted how far these measures can go.

Oversupply remains a central issue. Years of heavy construction, combined with falling marriage and birth rates, have reduced demand for new housing. Urban living space per person has increased sharply over the past decade.

Some analysts expect prices to stabilise later this year. Others remain sceptical, citing excess supply and weak confidence. For now, the property sector continues to weigh on China’s economy, with export strength offsetting, but not resolving, the underlying slowdown