Eliza Wong
Market Shows Early Signs of Recovery Amid Policy Support
China’s property market is displaying tentative signs of stabilization as recent data indicates narrowing price declines across major cities. The National Bureau of Statistics (国家统计局) reported improved metrics for August, suggesting that the government’s targeted policy measures are beginning to yield positive results. This development comes at a crucial juncture as the market enters the traditional Golden September, Silver October (金九银十) sales period, which could provide the critical window needed for the market to achieve stabilization and recovery.
Official Data Points to Gradual Improvement
According to the latest National Bureau of Statistics data, new home prices in 70 cities declined by 0.3% month-over-month in August, representing a slight improvement from July’s figures. The number of cities reporting price increases rose to 9, up by 3 from the previous month, while those experiencing declines dropped to 57. This subtle shift suggests the market may be approaching a turning point after months of consistent downward pressure. Fu Linghui (付凌晖), spokesperson for the National Bureau of Statistics, emphasized that despite market fluctuations influenced by domestic and international factors, the property market continues moving toward stabilization and recovery. He noted that the narrowing declines in both commercial housing sales and residential prices through the first eight months indicate that inventory reduction efforts are showing results.
Diverging Trends Between New and Secondary Markets
The recovery pattern shows significant variation between new and existing home markets, with new properties demonstrating stronger resilience while the secondary market continues facing substantial pressure. This divergence reflects both consumer preferences and the differential impact of recent policy measures across market segments.
New Home Market Leads the Stabilization Trend
First-tier cities showed particular strength in the new home segment, with prices declining by just 0.1% month-over-month, an improvement of 0.1 percentage points from July. Shanghai led the recovery with a 0.4% price increase, followed by Hangzhou and Yichang with similar gains. Other cities including Nanning, Shenyang, Hefei, Xining, and Urumqi also posted positive numbers. Zhang Bo (张波), Director of 58 Anjuke Research Institute, attributed Shanghai’s performance to concentrated launches of high-quality improvement projects in core areas and the relaxation of purchase restrictions in peripheral zones. These factors have effectively activated improvement demand, demonstrating how targeted policy adjustments can stimulate specific market segments.
Secondary Market Faces Continued Challenges
The secondary market presented a less optimistic picture, with prices declining 0.6% month-over-month in August, worse than July’s 0.5% drop. All tiered cities showed negative momentum, with first-tier cities down 1.0%, second-tier cities declining 0.6%, and third-tier cities falling 0.5%. Beijing led the declines with a 1.2% drop, followed by Shanghai (-1.0%), Guangzhou (-0.9%), and Shenzhen (-0.8%). Despite these challenges, several leading indicators suggest potential improvement ahead. Data from 58 Anjuke shows the real estate brokerage industry prosperity index rose 2.8 points to 47.26 in August, marking the largest monthly increase this year. Both new and existing home search activity increased slightly from July, suggesting growing buyer interest.
Policy Measures Driving Market Transformation
Recent policy optimizations in first-tier and strong second-tier cities appear to be gradually transmitting positive effects to the market. These measures, including relaxed purchase restrictions and reduced mortgage rates, represent the government’s calibrated approach to supporting the property sector without reigniting speculative bubbles.
Targeted Interventions Showing Results
The varying performance across city tiers and market segments highlights how tailored policy approaches are producing differentiated outcomes. First-tier cities have responded more positively to policy support due to their stronger economic fundamentals and continued population inflow, while lower-tier cities continue facing structural challenges related to oversupply and weaker demand fundamentals. Cao Jingjing (曹晶晶), General Manager of Index Research at China Index Academy, notes that although secondary market inventory remains high in the short term, transaction cycles and negotiation margins are expected to improve in core cities driven by policy support and price adjustments. This improvement in market efficiency could help facilitate the stabilization and recovery process.
Industry Challenges and Corporate Resilience
Despite signs of market improvement, the property sector continues facing significant headwinds. According to the latest China Index Academy report, the average brand value of Chinese real estate enterprises declined by 7.6% year-over-year to 33.37 billion yuan in 2025, marking the fourth consecutive annual decrease.
Developer Adaptation to New Market Reality
The brand value decline reflects multiple challenges including sales contraction, reduced city presence, and weakened revenue generation capabilities. However, leading developers such as Poly (保利) and China Overseas Land & Investment (中海) showed relatively smaller declines, demonstrating stronger resilience during the market adjustment period. This divergence highlights how well-capitalized developers with strong balance sheets are better positioned to weather the current downturn and potentially gain market share as consolidation continues. The industry’s adaptation to the new market reality will be crucial for achieving sustainable stabilization and recovery.
Golden September, Silver October: Critical Test for Market Recovery
The traditional peak sales season represents a crucial test for whether recent improvements can translate into sustained recovery. Market participants are closely watching whether transaction volumes can reverse their downward trend and establish a foundation for broader market stabilization.
Seasonal Factors and Policy Support Creating Opportunities
Zhang Bo anticipates that September may mark the end of the downward trend that began in June, with transaction volumes potentially bottoming and beginning to recover. The combination of seasonal factors and policy support creates favorable conditions for market activity to pick up, providing an important opportunity for achieving stabilization and recovery. Developers are accelerating launch schedules in core cities, particularly for new regulation-compliant projects that can effectively stimulate improvement demand. This increased supply of quality inventory could help activate pent-up demand from upgraders who have been waiting on the sidelines.
Long-term Structural Reforms and Market Outlook
Beyond the immediate seasonal factors, longer-term structural reforms are expected to provide additional support to the market. The acceleration of relending programs for affordable housing and demand released through monetized安置 (resettlement) in urban village redevelopment projects could inject new momentum into the sector.
Balancing Short-term Support with Long-term Sustainability
Fu Linghui emphasized that while recent policy adjustments in some cities are beginning to show effects and market transactions are improving, continued efforts will be required to promote real estate stabilization and recovery. This balanced approach recognizes that sustainable recovery requires both cyclical support measures and structural reforms addressing fundamental market imbalances. The government’s focus on promoting healthy development of the property sector while preventing excessive speculation suggests policy support will remain targeted and measured. This approach aims to achieve stabilization and recovery without recreating the excesses that previously plagued the market.
Investment Implications and Market Opportunities
For investors and market participants, the emerging signs of stabilization present both opportunities and challenges. The differentiated performance across cities and market segments requires careful analysis of local supply-demand dynamics and policy environments.
Navigating the Recovery Process
First-tier cities and strong second-tier cities with better economic fundamentals and continued population growth are likely to lead the recovery process. Within these markets, quality projects from developers with strong financial positions may offer relatively better risk-adjusted returns as the market works toward stabilization and recovery. The secondary market may present opportunities for value investors willing to accept higher risk, particularly as transaction cycles improve and negotiation margins become more favorable. However, this segment will likely require more time to achieve meaningful recovery given current inventory levels. The ongoing market adjustment represents a structural transformation that will create both challenges and opportunities. Investors who understand the new market paradigm and can identify quality assets in well-located markets may benefit as the sector continues its journey toward stabilization and recovery.
