China's Major Cities Could See Real Estate Recovery by 2027

2026-10-08 global

Beijing, Thursday, 8 October 2026.
S&P Global forecasts property market recovery in major Chinese cities by 2027, driven by sharp supply reductions and government mortgage subsidies stabilizing residential home prices.

S&P Global Revises Forecast for Major Cities

S&P Global Ratings distributed a report on Thursday, 8 October 2026, indicating that an end to China’s yearslong property market slump is in sight [1]. The credit rating agency forecasts that residential real estate prices may hit a bottom in the third quarter of 2028, but prices in major metropolitan areas such as Beijing and Shanghai could recover as early as 2027 [1][4]. This projection marks a significant shift from February 2026, when S&P stated that high levels of unsold housing kept a property market recovery out of reach [1]. Residential real estate prices have fallen by 22% since their 2021 peak, a decline that has dragged down national economic growth and rattled foreign investor confidence [1][4].

Historical Context and Market Severity

To contextualize the magnitude of the downturn, China’s 22% price decline is being compared to historical housing crises in other major economies [1]. For instance, Japan’s prices fell by 67% after 1991, while the U.S. experienced a 26% drop during the financial crisis [1][4]. The difference between the U.S. financial crisis decline and China’s current decline is 4 percentage points, suggesting a potentially less severe contraction if stabilization holds [1][4]. However, some social media commentary continues to highlight the crisis, noting housing starts down 60% and persistent ghost cities as developers face bankruptcy [2]. Despite these challenges, S&P analysts suggest that supply contraction is occurring earlier and with greater magnitude than anticipated, which may facilitate a faster stabilization in tier-one cities [1].

Policy Interventions Drive Holiday Surge

Government intervention has accelerated recently, with Beijing announcing new restrictions on developers selling unfinished properties on 29 August 2026 [1]. On 28 September 2026, Chinese Premier Li Qiang announced policies to stabilize the real estate sector, followed by a mortgage rate subsidy launch on 30 September 2026 for first-time homebuyers [1]. These measures appear to have influenced market activity during the National Day holiday from 1 October to 6 October 2026, where sales of existing homes in 25 cities rose 50% year-on-year [1][4]. In Shenzhen, transaction volumes for second-hand homes at partner stores rose 23% year-on-year between 1 October and 5 October 2026 [3].

Regional Performance and Buyer Sentiment

Specific data points indicate stabilization in key markets, with Beijing existing home prices rising 1.4% from a January 2026 low [1][4]. In Guangzhou, property developers reported significant sales during the holiday, including 80 million yuan for a new project in Haizhu district on 1 October 2026 [3]. However, buyer sentiment remains cautious; a potential homebuyer noted that while supportive policies exist, there is no rush to buy due to plenty of choices [3]. Morgan Stanley analyst Stephen Cheung stated on 7 October 2026 that current mortgage subsidies will likely accelerate existing purchase plans rather than generate substantial new long-term demand [1].

Supply Dynamics and Developer Health

Supply reduction is identified as the major factor in helping stabilize China’s home prices over the next one to two years [1]. Edward Chan, a credit analyst at S&P Global Ratings, noted that developers will be very cautious in buying land, which helps the oversupplied property market despite potentially lower revenue [1]. Meanwhile, the market has shifted to an existing-home era, where second-hand transactions exceeded 50% of total deals in the first eight months of 2026 [5]. China Vanke A stock surged over 40% between 18 September and 30 September 2026, despite the company reporting a net loss of 14.951 billion yuan in the first half of 2026 [5].

Broader Economic Implications

The real estate sector’s performance is critical for broader macroeconomic stability and global demand for industrial commodities [1]. While the property sector adjusts, China maintains economic growth via export subsidies and a weak renminbi, which has depreciated over 14% in inflation-adjusted terms against a broad basket of currencies since early 2022 [6]. European officials arrived in Beijing during the week of 5 October 2026 to confront Chinese authorities regarding a trade deficit exceeding $1.1 billion per day [6]. Analysts are monitoring performance in Shanghai, Shenzhen, and Guangzhou through November 2026 to determine if the current rebound is sustainable [1][4].

Sources

Real estate China property