Falling Sales Offer Few Signs of End to China’s Property Slump

China's property market slump continued through May 2025, with cumulative sales of the top 100 developers falling 7.1% year-on-year to 1.3 trillion yuan, according to CRIC data; CIH reported an even steeper decline of 10.8%. While major cities like Shanghai showed pockets of strength with some projects selling out rapidly, third- and fourth-tier cities continue to face oversupply and weak demand, indicating a growing divergence within the market.

Analysis

China's property market continued its downturn into May 2025, with cumulative sales for the top 100 developers in the first five months falling 7.1% year-on-year to 1.3 trillion yuan, an acceleration from the 6.7% decline observed in the January-April period, according to China Real Estate Information Corp. (CRIC). Data from China Index Holdings Ltd. (CIH) painted an even bleaker picture, reporting a 10.8% year-on-year drop to 1.4 trillion yuan for the same period, with May sales alone plummeting 17.3% year-on-year. This sustained weakness, with Jan-May 2025 sales representing less than 30% of the levels seen in the corresponding period of 2021, underscores the depth of the slump despite some accommodative policy expectations for June. A significant market divergence is evident: while major cities like Shanghai experienced robust demand, with specific projects such as one by Greentown China Holdings selling out rapidly, third- and fourth-tier cities continue to grapple with oversupply and weak demand. Analysts anticipate this divergence will persist and advocate for targeted government interventions rather than broad-based stimulus to address these regional imbalances.

Key Decisions for Investors

• Investors should exercise caution regarding broad exposure to the Chinese property sector, given the accelerating sales decline and persistent overall market weakness.
• Consider a selective investment approach, potentially focusing on developers with significant operations in higher-tier cities where demand remains resilient, while closely monitoring inventory levels and pricing power.
• Monitor upcoming government policy announcements for targeted support measures, as their specificity and effectiveness will be crucial in potentially stabilizing distressed segments of the market and influencing developer outlooks.