2025 China Real Estate Market Status, Investment Value, and Strategy Analysis

• From January to November 2025, the cumulative price of second-hand residential properties in 100 cities fell by 7.46%. The decline further expanded in the fourth quarter; monthly housing prices in 70 cities have all declined, with greater pressure in third- and fourth-tier cities. Although new housing prices in first-tier cities rose slightly, second-hand housing prices are still in a downward channel month-on-month [1]. At the same time, real estate development investment and commercial housing sales continued to decline by double digits year-on-year. The annual investment scale is likely to fall below 8.5 trillion yuan, and land sales revenue has also contracted significantly, indicating that deleveraging and cautious land acquisition on the development side are still ongoing [2]. These data show that the industry as a whole is still in a dynamic process of ‘adjustment-bottoming-out-relaunch’.

• The market supply-demand structure is gradually adjusting. The proportion of second-hand housing transactions has increased significantly; first-tier and key second-tier cities have entered the ‘stock-dominated’ stage. The simultaneous promotion of rental and purchase, affordable housing, and high-quality projects have received positive feedback in local markets, and improvement and high-end projects still have support from high-net-worth and improvement demand [1]. In terms of policies, local governments continue to roll out combined interest rate and purchase incentives. Some cities’ high-end quality projects have good absorption rates, indicating that demand is not completely imbalanced but is concentrating on high-quality regions/products [1][2].

• Ordinary Household Perspective: Considerable Returns
  
  Referring to the current policy orientation, the Loan Prime Rate (LPR) has dropped to the range of 3.0% for 1-year and 3.5% for 5-year terms. Some banks’ mortgage rates are expected to enter the ‘2.x% range’, meaning first-home rates may approach below 2.9% [4]. In contrast, large-denomination deposit rates have declined, and the returns on current/short-term deposits of most banks are below 3%. Against the backdrop of housing prices being ‘60% of their peak’, even with a conservative assumption of annual growth of 4%~6%, the actual home purchase return rate can cover financing costs and is better than current deposit alternatives. This makes rigid/improvement demand still attractive for ‘value preservation + counter-cyclical’ allocation; especially in high-rent cities, the improvement in rent-to-sale ratio also provides an underlying logic for long-term holding.

• Macro Perspective: Structural Reconstruction
  
  Falling housing prices have alleviated systemic contradictions such as local government debt, export competitiveness, population, and wealth gap to a certain extent: low prices have prompted local governments to be cautious in land acquisition, deleverage, and accelerate industrial transformation. In addition, lower housing costs help stimulate consumption and fertility intentions, promoting the balance of population and economic ‘dual circulation’. This also provides a foundation for the ‘Silver 15 Years’ (i.e., long-term value return). If first-tier core cities maintain population inflow, stock housing replacement, and improvement demand, they will still have resilience in the medium and long term.

• Allocation Opportunities from Regional/Product Differentiation
  
  The current market has evolved from ‘comprehensive bubble’ to ‘differentiated opportunities’. First-tier cities (Beijing, Shanghai, Guangzhou, Shenzhen) and some strong second-tier cities still have relatively stable price floors and investment appeal due to concentrated population, scarce land, and long supply cycles; some key cities’ improvement and high-quality projects have performed well in absorption [1]. In contrast, third- and fourth-tier cities face inventory pressure and population outflow issues, with weak sustainability in the short term. Therefore, investment should focus on core cities, high-quality assets (such as improvement-type projects, urban renewal projects) or rental self-holding logic, while avoiding areas with high inventory and low demand.

• Positive Factors
  : At the policy level, the simultaneous promotion of rental and purchase, reduction of financing costs, and parallel development of affordable housing and high-end projects continue. At the same time, the proportion of second-hand housing transactions has increased, and transaction structures are shifting to high-total-price improvement projects; second-hand housing transactions are concentrated in certain regions, meaning the market is operating on the path of ‘de-stocking + upgrading’ and has certain resilience [1]. If credit and fiscal support continue, coupled with the concept of ‘good housing’ and subsequent demand from urbanization, the real estate industry can gradually shift from investment/speculation to use/improvement, enhancing sustainability.

• Risk Points
  : The deep decline in sales and investment highlights the dual challenges of capital chains and confidence (development investment decreased by 15.9% year-on-year, commercial housing sales decreased by 11.1% year-on-year) [2]. The number of second-hand housing listings has hit a high, and transaction differentiation is large; if economic growth slows, population continues to decline negatively, or employment pressure increases, the demand side may further shrink. Reduced fiscal revenue of local governments may also weaken the progress of urban renewal and old community renovation. In addition, if the financing environment rebounds or policies suddenly tighten, the expectations supported by ‘low interest rates + price adjustments’ will be re-pressured.

1. Layered Allocation
   : Focus on targets in high-quality core areas of first-tier and strong second-tier cities. Consider projects with strong rental demand (talent introduction, industrial supporting facilities) or urban renewal expectations, and avoid inventory-surplus regions in central and western China.

2. Focus on Leverage and Cash Flow
   : Pay close attention to land transfer revenue, debt repayment capacity of real estate enterprises, changes in new construction/completion rhythms, as well as financing costs and default events of key real estate enterprises to prevent liquidity risks from spreading to the investment side.

3. Observe Policy and Financial Rhythms
   : On one hand, pay attention to the central government’s ‘stability-oriented’ signals, such as LPR cuts and credit disbursement rhythms; on the other hand, monitor the capital supply of local financing platforms and shantytown renovation to ensure sustainable project operation.

4. Establish Exit and Rent Support Lines
   : Develop a reasonable ‘rent-to-sale ratio + cash flow’ evaluation system to avoid over-reliance on price increases; when land value and improvement demand support are limited, stable returns can be achieved through rent coverage or long-term holding income.

If you need further quantitative models (such as comparison of return rates in specific cities, financial health of different real estate enterprises, rent coverage analysis), it is recommended to enable the

to obtain richer city-specific real estate financial data and high-frequency sales and financing indicators to assist in forming more refined investment judgments.

[1] “Huang Yu: Big Data Predicts 2026 China Real Estate Market Trends and ‘14th Five-Year’ Housing Demand Space”, Tencent News, 2025-12-12, https://news.qq.com/rain/a/20251212A03UQS00
[2] “First Time This Year! Real Estate Drops by Double Digits”, Sina Finance, 2025-12-15, https://finance.sina.com.cn/roll/2025-12-15/doc-inhawiai2012434.shtml
[3] “Beike Listings Reach 6.5 Million Units; Official Statistics Show Second-Hand Housing Prices Continue to Decline Across the Board”, Caixin.com, 2025-12-15, https://companies.caixin.com/2025-12-15/102393576.html
[4] “Another Rate Cut! Mortgage Rates Are Expected to Enter the 2.x% Range~”, Tencent News, 2025-12-12, https://news.qq.com/rain/a/20251212A0467B00