S&P: China Home Prices May Bottom Out by 2028, Tier-1 Cities to Recover First Next Year
nashnova research
S&P Global Ratings now projects China's nationwide home prices will bottom by Q3 2028, with tier-1 cities like Beijing and Shanghai recovering as early as next year — a sharp reversal from its February stance that a recovery was 'nowhere in sight,' driven by supply-side policy tightening.
Why did S&P reverse its call?
In February, S&P said unsold inventory made a housing recovery "nowhere in sight." Thursday's report sets a Q3 2028 national floor.
Two policies drove the shift: an August rule barring developers from selling unfinished homes + Premier Li Qiang's September pledge of a stabilization package, which included mortgage subsidies for first-home buyers (homes under 1.5 million yuan, up to 120 sqm).
This means → policy has pivoted from "stimulate demand" to "squeeze supply," prompting S&P to reassess inventory drawdown speed.
How does China's downturn compare with Japan and the U.S.?
Chinese home prices have fallen 22% from their 2021 peak — well below Japan's 67% crash and close to the 26% decline during the U.S. financial crisis.
S&P sees China's twin moves — supply contraction + corporate deleveraging — as matching the exit paths that worked in Japan, the U.S., and Spain.
In plain terms = the drop hasn't been as severe as Japan's, and China started cutting supply earlier and harder — that's the basis for S&P's willingness to put a date on the bottom.
What are tier-1 city numbers actually showing?
Guotai Junan International chief economist Zhou Hao forecasts that Q4 this year could mark the first year-on-year gain in tier-1 secondhand home prices since the 2021–2023 downturn.
Key signals: Shanghai's year-on-year decline in secondhand prices keeps narrowing; Beijing secondhand prices are up 1.4% from their January low; Hangzhou's new-home sales index hit a record, with prices only 14.2% below peak.
This reflects a growing divergence — since March, tier-1 cities have shown a higher probability of flat or rising prices than smaller cities.
Why are the next three months the critical window?
Zhou Hao is explicit: "If Shanghai, Shenzhen, and Guangzhou can avoid month-on-month declines in their November 2026 data, this rally will outlast the 2024–2025 one."
This means → November data is the pass-fail test for this rebound. A pass gives the tier-1 bottoming call hard evidence; a fail suggests the recent warmth was just another pulse.
Can mortgage subsidies really create new demand?
Morgan Stanley equity analyst Stephen Cheung is cautious: the subsidies mostly pull forward purchases that were already planned, rather than generating genuinely new demand.
Supporting data: secondhand home sales across 25 cities rose 50% year-on-year during the National Day holiday (Oct 1–6), up sharply from September's 20% pace — but that acceleration may itself be evidence of front-loading.
In plain terms = subsidies got a wave of already-decided buyers to act sooner. The rush is real, but what matters is how much demand remains once the rush fades.
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