China’s property sector is facing a prolonged decline made worse by a shrinking and ageing population that threatens residential housing demand for years to come. Despite repeated government support, new home prices dropped for a second month in May, with investment down more than 10% in the first five months of 2025. Goldman Sachs predicts annual demand for new homes in urban China will remain under 5 million units – just one quarter of the 20 million unit peak seen in 2017.
Worsening demographics are a key factor. China’s population has shrunk for the third consecutive year, with urbanisation slowing and birth rates at historically low levels. This has trimmed the number of first‑time homebuyers and undermined confidence in the traditional presale model that developers rely on. With youth unemployment near 16.5%, many young adults feel unable or unwilling to purchase a home.
Structural oversupply persists, especially in lower‑tier cities where housing inventories remain stubbornly high. Analysts estimate as many as 90 million homes still stand empty, reflecting a glut that limits price recovery. In contrast, tier‑one cities are seeing merely a modest pullback in prices and a fragile rebound in resales.
Despite policy efforts – such as mortgage rate cuts, down‑payment relief and affordable housing schemes – the root causes remain demographic decline and waning demand. Average home prices are about 30% below their 2021 peak, and these price cuts have not yet restored buyer confidence in the market.
For investors, lenders and developers, this signals a long haul ahead. Traditional residential property is no longer a reliable growth engine and long‑term returns may be subdued outside top cities. Institutions will need to adjust by focusing on rental platforms, repurposing excess inventory, or pivoting towards commercial and industrial real estate where demographic trends offer more stability.
