China's Real Estate Prices Expected to Narrow Downside, May Turn Positive in 2027

A real estate market survey conducted by Reuters from May 18th to 28th showed that the drop in China's housing prices is expected to narrow from the March forecast of 4.0% to 3.5% this year, and it is expected to rise by 0.3% in 2027, with the increase further expanding to 1.8% in 2028.

The Director of Asia-Pacific Corporate Ratings at Fitch Ratings, Lulu Shi, pointed out that China's real estate construction industry will still be in a state of contraction this year, but as policy support continues, the risk of default contagion tends to ease, and the volume of new house sales gradually approaches a long-term sustainable level, the pace of contraction should gradually slow down.

At the policy level, several cities have recently introduced home purchase incentives. Shenzhen relaxed restrictions on core areas at the end of April, Guangzhou introduced subsidies for home purchases, and the central government also reiterated the policy direction of limiting new construction and reducing inventory at the National People's Congress in March. Ren Yingxue, Deputy Director of S&P Global (China) Corporate Ratings, said that the core goal of current policies is to "prevent the market from losing momentum risk," rather than restarting prosperity through strong stimulus, and if necessary, the authorities still have policy space to mobilize.

However, the survey also shows that the expected decline in real estate investment this year is 12.0%, further expanding from the 10.3% predicted in March, and the sales volume drop has deepened from the previously predicted 6.5% to 8.3%. Huang Yu, Executive Vice President of the China Index Academy, pointed out that residents' confidence in employment, income, and housing price expectations continues to be low, which is still the core factor suppressing demand.

Analysts generally believe that core areas of first and second-tier cities are expected to stabilize first, but the pressure on suburban areas and low-tier cities with population outflows and industrial decline is difficult to significantly alleviate in the short term.