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China’s residential property market remained under pressure in May, with new home prices recording a steeper monthly decline as demand continued to stay weak despite signs of stability in some major cities. Data showed that property sales, investment, construction activity and developer financing all weakened further during the first five months of the year. While top-tier cities such as Shanghai, Shenzhen and Guangzhou posted modest price gains and resale housing markets showed some improvement, smaller cities continued to face oversupply challenges and slower inventory absorption, keeping overall market sentiment subdued.
China’s new home prices continued to decline in May, highlighting the ongoing challenges facing the country’s property sector despite signs of stabilisation in several major cities.
Data released by China’s National Bureau of Statistics showed that new home prices fell 0.2% month-on-month in May, compared with a 0.1% decline recorded in April. On an annual basis, new home prices were down 3.5%, matching the year-on-year decline seen a month earlier.
The figures indicate that the country's property market is still struggling with weak buyer demand after a prolonged downturn that has lasted for nearly five years. The sector, which once accounted for roughly a quarter of China’s economic activity at its peak, has experienced significant stress, leading to financial difficulties for several major developers and reducing household confidence and spending.
Despite the continued decline in prices, market participants noted that the sharp correction phase may be easing. Zhang Dawei, an analyst at Centaline Property, said the period of steep home price declines across China had largely passed and the market was not facing the risk of a rapid deterioration. According to him, the market continues to show clear differences across city categories, with stronger resilience in tier-one cities, mixed performance in tier-two cities and ongoing pressure in tier-three cities.
Official data also showed broader weakness across the property sector. Property sales, real estate investment, new construction activity and funds raised by developers all registered sharper declines during the January-May period, indicating that recovery remains fragile.
Investor sentiment reflected these concerns. China’s real estate stock index declined 1.2% in morning trading, while shares of mainland property developers listed in Hong Kong fell by around 3%.
At the same time, some major urban centres continued to show encouraging signs. Prices in China’s largest cities increased 0.2% in May after rising 0.1% in April. Shanghai, Shenzhen and Guangzhou all recorded price gains, suggesting that demand in key metropolitan markets is proving more resilient than in smaller cities.
Local authorities have also stepped up support measures to stimulate housing demand. Guangzhou recently introduced additional incentives for homebuyers, including subsidies for residents purchasing a new home while selling an existing one. The city has also encouraged state-owned enterprises to acquire second-hand housing inventory.
The resale housing segment presented a mixed picture. Prices of second-hand homes in the largest cities rose for a third consecutive month, indicating improving demand in these markets. However, resale home prices continued to fall in smaller cities compared with the previous month and remained lower across all city categories on an annual basis.
Analysts noted that supply conditions remain an important factor. According to a research note from CITIC Securities, second-hand housing listings have generally continued to increase, reflecting cautious household expectations. In contrast, new housing supply has fallen significantly because of tighter land supply controls and reduced development activity.
The report added that weak household sentiment has kept second-hand housing supply elevated, particularly outside major cities. Analysts expect tier-two and tier-three cities to face longer inventory-clearing cycles, with prices likely to remain under pressure until excess housing stock is absorbed more effectively.
A Reuters housing market survey conducted during the past month indicated that home prices are expected to continue falling at a slower pace than previously forecast before gradually returning to growth in 2027, suggesting that any recovery in China’s housing market is likely to remain gradual and uneven.
Source Reuters
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