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China's housing market remained under pressure as new home prices continued to decline in February, reflecting the prolonged stress in the country's property sector. Official data showed prices fell both annually and monthly, while most cities recorded declines. Although some top-tier cities such as Beijing and Shanghai showed slight improvement, demand remained weak in many lower-tier markets due to high inventory and slow economic sentiment. The downturn, which began after stricter borrowing rules for developers, continues to affect consumer confidence and economic activity. Policymakers are focusing on stabilising the sector through structural reforms rather than returning to debt-led growth.
China's housing market continued to show signs of weakness in February as new home prices extended their decline, highlighting the ongoing challenges facing the country's property sector. Advertisement
Data released recently by the National Bureau of Statistics showed that new home prices across China fell by 3.2 percent compared with the same period a year earlier. The decline was slightly steeper than the 3.1 percent fall recorded in January and marked the sharpest annual drop in around eight months, based on Reuters calculations.
On a monthly basis, prices declined by 0.3 percent, an improvement from the 0.4 percent fall seen in January. Analysts noted that while the pace of the monthly decline slowed slightly, the housing market continues to remain under pressure.
Zhang Dawei, an analyst at Centaline Property, stated that the slower pace of the monthly fall could be seen as a positive sign but added that the market is still going through an adjustment phase.
The recovery across the country has remained uneven. Major projects in large cities have shown more stability, while lower-tier cities continue to face weak housing demand and a large volume of unsold inventory. This imbalance has prevented a broader recovery across the sector.
The real estate slowdown has been ongoing for nearly five years and continues to weigh on China's economy. Falling property prices have reduced household confidence and spending, creating additional pressure on economic growth.
The sector's problems began after the government introduced stricter regulations in 2020 aimed at controlling excessive borrowing by property developers. These measures tightened liquidity in the market and left several developers struggling with debt obligations and unfinished housing projects that had already been sold to buyers.
Out of the 70 cities surveyed by the National Bureau of Statistics, 53 reported a decline in new home prices compared with the previous month. This was slightly better than January, when 62 cities recorded price drops.
Some large cities showed limited improvement. Beijing and Shanghai were among the few locations where prices rose on a monthly basis, each recording a modest increase of 0.2 percent. The data suggested that demand in top-tier markets remains relatively more stable compared with other regions.
However, the resale housing market remained weak across the country. Prices in the secondary housing segment declined across tier-one, tier-two and tier-three cities on both monthly and annual bases, indicating that overall buyer sentiment remains subdued.
Authorities have introduced several supportive policies in previous years to stabilise the housing sector, but the government has recently avoided announcing major nationwide measures to boost the market. Policymakers appear focused on reducing financial risks and preventing the sector from returning to its earlier model of rapid expansion driven by heavy borrowing.
China's recently announced 15th Five-Year Plan for the period between 2026 and 2030 outlines a new framework for improving property development, financing and sales systems. The plan emphasises supporting reasonable financing needs for developers, promoting the sale of completed housing projects and aligning land supply with housing inventory levels and demographic trends.
Huang Yu, an analyst at the China Index Academy, indicated that the housing market remains in a phase where developers and authorities are trying to reduce excess inventory. According to the analyst, a sustained recovery would require stronger prices in the secondary housing market in major cities along with improvements in employment conditions and household income expectations.
Market forecasts also suggest that challenges could continue in the near term. A recent Reuters poll of analysts indicated that home prices may fall at a faster pace than previously expected before stabilising around 2027 as developers continue to deal with large housing inventories.
Separate government data also showed that property investment dropped by 11.1 percent during the first two months of 2026 compared with the previous year. During the same period, housing sales measured by floor area declined by 13.5 percent, reflecting continued weakness in market activity.
Source Reuters
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