China home prices seen falling slightly less this year, property investment slump deepens

China's new home prices are expected to fall at a slightly slower pace this year, according to a Reuters poll, even as the country's property investment slump deepens amid a prolonged downturn in the real estate sector.

The poll of analysts and economists indicates that the decline in home prices may moderate somewhat, offering a faint sign of stabilization in a market that has weighed heavily on the world's second-largest economy. However, the continued contraction in property investment underscores the persistent challenges facing the sector, which was once a key engine of Chinese economic growth.

Property investment in China has been in decline for years, following a regulatory crackdown on highly leveraged developers that began in 2020. The sector's troubles have rippled through the broader economy, affecting local government finances, household wealth, and demand for a wide range of goods and services, from steel and cement to home appliances and furniture.

The modest improvement in the price outlook comes after a series of government measures aimed at stabilizing the market, including the removal of home purchase restrictions in most cities, cuts to mortgage rates, and efforts to ensure the delivery of pre-sold homes. Despite these steps, buyer confidence remains fragile, and many developers continue to struggle with heavy debt burdens and weak sales.

Analysts surveyed in the poll expect new home prices to fall by a smaller margin than previously forecast, reflecting some early signs of stabilization in major cities. Yet the overall trajectory remains negative, and the pace of decline, while slower, still points to a market that has not fully bottomed out.

The deepening investment slump is a separate concern. Even if prices stabilize, the lack of new construction and development activity has significant implications for employment, local government revenue, and the broader industrial supply chain. Many smaller developers have halted projects entirely, while larger firms have shifted focus to debt repayment and completing existing developments rather than starting new ones.

The property market's troubles are not isolated to China. The sector's slowdown has reduced demand for imported commodities such as iron ore and copper, affecting global prices and the economies of resource-exporting nations. It has also contributed to deflationary pressures within China, as weak demand keeps consumer prices subdued.

Economists in the poll noted that a sustained recovery in the property sector would require a meaningful improvement in household income expectations and confidence, which remain dampened by a sluggish labor market and an uncertain economic outlook. The government has signaled its commitment to supporting the sector, but officials have also stressed the need to avoid a return to the speculative, debt-fueled growth model of the past.

The poll's findings come as Chinese authorities prepare to release official data on property investment and home prices for the first months of the year. The figures will be closely watched by investors and policymakers for any signs that the sector is stabilizing, or whether further support measures will be needed.

For now, the outlook remains cautious. The slight moderation in the expected price decline offers a glimmer of hope, but the deepening investment slump serves as a reminder that China's property market is still far from a full recovery.

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Gavin Kendall

Business Analyst

Gavin Kendall covers public affairs, politics, business, culture and daily news for Cronkite. The role focuses on verification, context, and clear explanations for readers.

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