BAKU, Azerbaijan, February 25. China’s real estate sector has entered a prolonged phase of correction, with data from November 2025 to February 2026 confirming that the downturn is not only persisting but, in certain areas, intensifying. At the same time, the government is increasingly signaling its intention to move away from the previous growth model for the sector, instead steering it towards a potentially new structural framework.
According to the National Bureau of Statistics (NBS), prices for newly constructed homes in 70 major cities declined by 2.4% year-on-year in November, followed by a 2.7% drop in December, and a 3.1% decrease in January 2026. The January decline marked the steepest drop since June of the previous year. On a monthly basis, the decrease has consistently remained at -0.4% for three consecutive months.
Even in first-tier cities - Beijing, Shanghai, Guangzhou, and Shenzhen - dynamics remain subdued. In January, new home prices there fell by 0.3% compared to the previous month and by 2.1% year-on-year. Shanghai remains an exception, posting 4.2% annual growth, although the pace is slowing. The secondary market is experiencing more pronounced pressure: in Beijing, prices for existing homes have dropped by as much as 8.5% year-on-year, and in Guangzhou by 7.8%.
Real estate investment declined by 17.2% in 2025, totaling 8.28 trillion yuan. The total floor area of newly sold housing fell by 8.7%. December showed a 15–23% drop in new home sales across certain segments. Analysts at S&P Global Ratings expect primary home sales to decline by another 10–14% in 2026, with prices falling by 2–4%. Other estimates suggest an additional decrease of 2–3%.
Behind these dry figures, however, a deeper transformation is becoming visible. Authorities are gradually moving away from the previous paradigm of stimulus through large-scale lending to developers. The strict “three red lines” policy has effectively been rolled back, but instead of returning to earlier schemes, a so-called “new development model” is being introduced.
Its key elements are relatively straightforward.
First, the “white list” mechanism. Banks are lending not to companies as a whole, but to specific projects included in approved lists. Priority is given to completing projects that buyers have already paid for. This reduces social risks and strengthens consumer confidence.
Second, the state purchase of unsold housing. Local authorities, through state-owned companies, are buying apartments from private developers to convert them into social and rental housing. This approach simultaneously provides liquidity support to developers and addresses the need to expand the supply of affordable housing.
At the company level, the situation remains uneven. Contracted sales of the top 100 developers fell by about 27% year-on-year in January 2026. The sector’s expected total losses for 2025 exceed 240 billion yuan. Private players continue to restructure their debt. China Vanke forecasts a loss of around 82 billion yuan and remains under pressure from obligations exceeding $50 billion, although it has formally avoided default. Country Garden has completed the restructuring of its offshore debt and continues operations despite a significant drop in sales. Evergrande is in liquidation.
At the same time, state-owned and quasi-state developers - Poly Developments, China Overseas Land & Investment, China Resources Land, and others - are demonstrating greater resilience, focusing on projects in major cities and in the upgraded housing segment.
The economic significance of these developments is hard to overstate. About 70% of Chinese household savings are invested in real estate. Falling prices create a so-called “negative wealth effect”: consumers become more cautious in their spending. Regional budgets are also under additional pressure, as up to 40% of their revenues previously came from land sales to developers. The slowdown in land transactions is creating fiscal gaps that require new balancing mechanisms.
Nevertheless, February brought the first signs of stabilizing activity in first-tier cities. In Beijing, the number of secondary-market transactions increased by 15% compared to the previous month; in Shanghai, they rose by 26.7% year-on-year. The secondary market now accounts for about 65% of total transaction volume. Although it is too early to speak of a reversal, the growth in transaction activity points to a gradual adaptation of buyers to the new price environment.
Potential positive opportunities are linked precisely to this restructuring phase. The reduction of excess supply, a shift toward more balanced construction, and the expansion of affordable and rental housing segments could form a more sustainable demand structure. Market concentration around financially stable players reduces systemic risks. For households, falling prices improve housing affordability in major cities.
The year 2026 is unlikely to witness a rapid recovery in China’s real estate market. Instead, it may evolve into a phase of stabilization, characterized by ongoing price corrections and a gradual stabilization of transaction volumes.
The key question remains: which trajectory will the market follow? One possibility is a prolonged, moderate adjustment, with a gradual reduction in inventory levels and a strengthening of consumer confidence. Alternatively, the sector may transition more swiftly to a new model, one in which real estate plays a less dominant yet more sustainable role within the broader economy.
At present, the market is still in search of equilibrium. The eventual outcome will largely hinge on a combination of consumer expectations, the financial discipline of developers, and the effectiveness of future regulatory measures. While the structural transformation is still unfolding, it is premature to draw final conclusions. However, it is precisely in this moment that the foundational parameters for the next phase of the world’s largest housing market are being established.