China’s home prices to fall less than previously expected, but market still weak: Reuters poll

A recent Reuters poll indicates a slightly improved outlook for China's new-home prices, now forecast to decline 3.8% in 2025 before modest growth by 2027. However, the broader property sector remains challenged, with projections for 2025 real estate sales and investment worsening to falls of 7.5% and 11.0% respectively. Despite ongoing policy support, the protracted crisis persists, pushing market stabilization expectations to no earlier than H2 2026 or 2027, and highlighting the potential need for substantial direct central government intervention, estimated at 5 trillion yuan, to absorb significant unsold inventory.

Analysis

A Reuters survey signals a complex and deteriorating outlook for China's property sector, despite a marginally improved forecast for new-home prices. While the expected price decline for 2025 has been revised to -3.8% from a previous -4.8%, this is sharply contrasted by worsening projections for core activity. Forecasts for property sales have deteriorated to a 7.5% contraction in 2025, significantly worse than the 5.0% decline predicted in May, while real estate investment is now expected to shrink by 11.0%. This indicates that existing policy support measures are failing to gain traction against structural headwinds like weak buyer sentiment, high inventory, and strained developer balance sheets. Consequently, the consensus timeline for market stabilization has been pushed back to the second half of 2026 or later. The report highlights a growing view that incremental policy easing is insufficient, with analysts floating the need for a massive direct government intervention, estimated at 5 trillion yuan ($699 billion), to absorb unsold inventory and establish a market floor.

Key Decisions for Investors

• Maintain a cautious and likely underweight stance on the Chinese real estate sector and its linked industries, as the worsening outlook for sales and investment presents a greater risk than the slightly moderated price decline forecast.
• Investors should closely monitor any signals of a shift from incremental policy support to large-scale direct fiscal intervention by the central government, as a state-funded inventory purchase program would be a significant catalyst for a market bottom.
• The wide dispersion in economist forecasts for 2025, ranging from a 1.5% to a 15% price drop, underscores extreme uncertainty and suggests that any exposure should be hedged against the significant tail risk of a much deeper-than-expected downturn.
• Given the delayed recovery timeline to H2 2026 or 2027, long-term investors should re-evaluate their theses, as the crisis is proving more protracted than previously anticipated.