China's property slump shows no sign of bottoming out

July 07, 2026 (MLN): China's residential property market continued its downward trajectory through the first half of 2026, with home prices falling further as prospective buyers held off on purchases in anticipation of steeper declines ahead, leaving both sales volumes and prices in retreat with little indication of an imminent turnaround.

The country's real residential property price index stood above 85.1 in the first quarter, down sharply from a peak of 113 in 2021 and now below the level recorded when tracking began in 2005, effectively erasing two decades of gains.

Revenue from residential land sales dropped roughly 65% from its 2020 high through 2025, prompting state-backed local government financing vehicles to scale back their reliance on land auctions after leaning heavily on them in the early years of the downturn.

Land-use rights sales, which accounted for nearly 40% of local government revenue at their 2021 peak, generated less than a third of that share through most of 2025.

Secondary-market home prices across 100 major cities slipped 0.42% month-on-month in June to average 12,639 yuan (roughly $1,750) per square meter, according to media reports.

The downturn was broad-based across city tiers. First-tier cities saw secondary home prices fall 6.95% year-on-year in June, while second-tier cities recorded a steeper 8.21% drop.

Local governments have responded to the fiscal strain by cutting spending and turning to asset-backed securities collateralized with state-owned assets to raise funds.

The property sector's troubles carry outsized weight for China's broader economy, given that residential real estate makes up close to 70% of urban household wealth  a far higher concentration than in the United States. 

Buyer demand also continued to weaken, with new housing sales falling 10.8% year-on-year by floor area and 13.5% by value over the first five months of the year, as many households appeared to be deferring purchases indefinitely.

Developers, meanwhile, pulled back sharply on investment, which dropped 16.2% year-on-year in January-May, while new construction starts fell 22.6% and completions declined 23.4%.

For an economy where household wealth is so heavily tied to real estate, the risk is less about a single sharp crash and more about a prolonged drag on consumer confidence.

As long as prices keep resetting lower and buyers keep waiting for the bottom, spending elsewhere in the economy is likely to stay subdued, making the property sector as much a barometer of broader consumer sentiment in China as it is a market in its own right.

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