S&P Glimpses China Property Market Bottom as Secondary Sales Boost Sentiment

China’s property sector may have reached a bottom, according to S&P Global Ratings, which expects surging sales of used homes to help stabilise the market towards the second half of 2025.

Sales activity in the secondary housing market jumped in first- and second-tier cities during the fourth quarter of 2024 after the government enacted property stimulus measures in September, the rating agency said in a report released Wednesday. The policy moves included cutting interest rates on existing mortgages and easing down-payment requirements for second homes.

In Beijing, more than 20,000 second-hand homes changed hands in December, the highest such volume in more than 20 months. The uptick in China’s second-largest housing market signals that appetite for homes remains sound and that government policies are resulting in a sequenced recovery, S&P said, with richer, upper-tier cities turning around first and eventually boosting confidence and demand in more peripheral regions.

“While growth is skewing toward the secondary market, which is of little help to developers, we believe the gains are a harbinger of improving sentiment,” said credit analyst Esther Liu. “This should eventually translate into rising primary sales and better credit metrics for our rated entities.”

Upgraders and Premium Buys

The September policy action, which relaxed the rules on purchases of both entry-level and premium residences in higher-tier cities, unlocked demand from people who were previously restricted from buying homes, according to the rating agency. New demand is emerging from buyers upgrading their homes, as lower down payments and mortgage rates and a significant cut to secondary transaction taxes have made upgrade purchases more affordable.

Demand for premium housing is clearest in Shanghai, which last year saw primary and secondary sales totalling 3,100 homes worth more than RMB 30 million each, S&P said. The commercial capital generated more than half of 2024’s sales of premium homes in China by unit count. Among premium sales in Shanghai, 80 percent were primary transactions, a welcome sign for developers.

China’s new home sales climbed 7.1 percent in October compared with year-earlier levels to reach RMB 435.5 billion ($61.2 billion), marking the first year-on-year increase of 2024, according to China Real Estate Information Corp. New home sales in terms of gross floor area rose on a year-on-year basis in November — a first since June 2021 — and were up again in December, S&P said.

S&P expects primary and secondary transactions to generate RMB 17 trillion in total sales in 2025, in line with prior-year levels. The view assumes a stabilisation of prices in higher-tier cities and a general rise in sales volume. The primary market is seen generating RMB 8 trillion to RMB 8.5 trillion in sales, compared with RMB 9.7 trillion in 2024, with the secondary segment becoming a bigger component of the overall market.

“We offer two important caveats,” Liu said. “The first is that, if the policies rolled out in September 2024 are weakened without any follow-up measures, this recovery may falter. The second is that a default by a surviving Chinese developer this year may hit sentiment before any rebound truly takes hold.”

Fitch Cautious

In its own outlook for the world’s biggest housing market, Fitch Ratings predicts new home sales in China to fall 15 percent to RMB 7.3 trillion in 2025, driven by a 10 percent drop in gross floor area sold and a 5 percent decrease in average selling prices.

Despite the government’s supportive policies, the sustainability of any short-term recovery is fraught with uncertainty caused by structural issues like high unsold home inventory, uncertain employment and low housing affordability, Fitch said.

The company forecasts annual new housing demand to average 800 million square metres (8.6 billion square feet) in gross floor area during 2024-40, with private housing supply at 600 million square metres annually. Higher-tier cities with strong economic prospects and relaxed purchase restrictions are expected to perform better.