After a yearslong slump, China's real estate market may be set for a turnaround

S&P Global Ratings sees China’s residential property prices bottoming in Q3 2028, while prices in major cities could recover as soon as next year; prices nationally are already down 22% from their 2021 peak. Government restrictions on unfinished-property sales and mortgage subsidies may curb supply and support near-term demand, but analysts warn that subsidies could pull purchases forward rather than generate lasting demand. Existing-home sales across 25 cities rose 50% year over year during Oct. 1–6, up from 20% growth in September.

Analysis

A property-price floor would not necessarily mark an earnings recovery: policy-driven supply restraint can support prices while lower land purchases and fewer starts keep developer revenue and demand for construction materials weak. The more important transmission is whether completed-home sales restore household confidence and reduce the incentive to save; a temporary sales surge around a subsidy or holiday may simply pull purchases forward. That makes price stabilization a weak standalone signal for a broad China-risk rerating.

For Alibaba (BABA), the channel is indirect: a durable improvement in household confidence could support discretionary spending on its platforms, but the article provides no evidence of incremental spending or a near-term earnings change. Its AI-related wealth-effect argument is also not a reliable substitute for property-market demand data. Avoid treating BABA as a direct property-recovery trade.

Near term, watch monthly existing-home prices and transactions in Shanghai, Shenzhen and Guangzhou, alongside new starts, land purchases and completed-home delivery. A three-month price stabilization without transaction follow-through would favor a “price floor, weak volumes” interpretation. Over 6–18 months, sustained inventory reduction could lower systemic risk, but may do so through prolonged construction contraction. Data-integrity caveat: the article refers to November 2026 data, which is not yet available as of October 8, 2026; do not use that purported confirmation in positioning until verified.

Key Decisions for Investors

• No immediate BABA trade on this signal. Reassess only if property stabilization is accompanied by improving Chinese consumer-spending indicators or a change in Alibaba guidance; the property-price narrative alone is not an earnings catalyst.
• Keep a watchlist, not a broad long, for China property-linked risk. Confirmation requires several months of stable or rising Tier-1 existing-home prices plus transaction follow-through; price gains with falling volumes would falsify the demand-recovery thesis.
• Avoid extrapolating a price bottom into a construction rebound. Track developer land purchases, new starts and completion activity: continued contraction would be negative for construction-material demand even if home prices stabilize.
• Treat the subsidy-driven sales pickup as potentially borrowed demand. If subsequent monthly sales reverse or the cited November 2026 data cannot be independently verified, discount the bullish catalyst and avoid adding China domestic-demand exposure on this evidence.