The prolonged crisis in the real estate market in China shows no signs of ending anytime soon. New home prices fell again in August, and households continue to avoid new loans despite Beijing's measures to stimulate the sector.
New home prices fell by 0.1% in August compared to July, according to data from China's National Bureau of Statistics. This is the third consecutive month of the same rate of decline - a decrease of 0.1% was also reported in June and July.
On an annual basis, prices are 3% lower, after a 3.2% drop in July. Although this is the weakest annual decline since the beginning of 2026, the data still does not give grounds to talk about a broad recovery in the market.
Large cities stabilize, small ones continue to decline
The situation varies significantly depending on the size of the cities. In the largest Chinese megacities - the so-called first-tier cities – New home prices rose 0.1% month-on-month in August, breaking the previous decline. An improvement was also reported for homes on the secondary market.
However, in second- and third-tier cities, new construction prices continued to decline.
According to Zhang Dawei, chief analyst at Centaline Property, the slowdown in the annual decline across city categories indicates that the long-term downward trend has been contained. He believes the market has probably passed its most pessimistic period, but he does not expect a broad national recovery in the short term.
Chinese don't want to take out mortgages
One of the most worrying signals comes from lending. Household loans, which include residential mortgages, fell by nearly $30.2 billion in August. A month earlier, the contraction was even greater - $60 billion. The data shows continued caution among Chinese households about taking on new debt.
This is particularly important for Beijing's attempts to revive the housing market. Even with more favorable lending conditions, the recovery can hardly accelerate if consumers themselves are not convinced that the time is right to buy a home.
Property sales, investment in the sector and new construction starts have also seen serious declines in the first eight months of the year.
Mortgages can now be repaid over up to 40 years
Chinese authorities have taken a series of measures to try to bring buyers back to the market. Among them is the extension of the maximum term of mortgage loans from 30 to 40 years. This allows the loan to be spread over a longer period and can therefore reduce the size of the monthly payment.
Beijing is also taking action to change the model in which homes are sold before they are built. It is precisely the dependence on pre-sales that has become one of the symbols of the Chinese property crisis - after the financial problems of large construction companies, a number of projects remained unfinished, although buyers had already paid for their homes.
The goal of the new rules is to both restore buyer confidence and, in the long term, build a less risky model for financing construction. However, analysts warn that these measures are unlikely to lead to a rapid increase in demand.
Property continues to weigh on China's economy
The problem has long gone beyond the construction sector. The continued decline in housing prices is affecting household wealth and consumer confidence, curbing domestic consumption and putting pressure on local government revenues.
This is particularly unfavourable at a time when China is trying to reorient its economy towards stronger domestic demand.
Economic growth slowed to 4.3% in the second quarter, and weakness in consumption and investment means the world's second-largest economy remains more dependent on external demand.
Oxford Economics: Investment recovery may not happen until 2031.
Oxford Economics is particularly cautious. Senior economist Sheena Yue expects the housing sector's decline to continue through the current five-year plan, with residential investment not likely to start recovering until 2031.
Oxford Economics has also lowered its forecast for China's economic growth in 2027 to 4.3%, citing the continued decline in the property sector as one of the reasons. Stronger public investment can offset some of the negative effect, but analysts say more active policies will be needed to stimulate domestic demand.
So the main problem facing Beijing is no longer just how to stop the decline in housing prices. The more difficult task is to restore household confidence enough to convince them to buy properties again and take on debt - without at the same time creating the conditions for a new housing bubble.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be seen at imot.bg