Housing inventory logs 1st annual drop in 4 years; top 4 cities see rising prices

A wave of renewed activity is sweeping through China's property market, led by a recent surge in secondhand home sales in major cities such as Beijing and Shanghai — a sign that homebuyer confidence is gradually returning after a multiyear downturn, analysts said.

In the near term, analysts expect the divergence to persist — prime locations in major cities will continue to outperform, while peripheral areas and smaller urban markets struggle to clear excess supply. The overall recovery, they added, will hinge on broader economic conditions and household income expectations.

New home prices in China's first-tier cities — Beijing and Shanghai, as well as Guangzhou and Shenzhen in Guangdong province — rose 0.2 percent in March from the previous month, snapping a flat reading in February, while secondhand home prices in these four major cities climbed 0.4 percent, reversing a 0.1 percent decline, said the National Bureau of Statistics.

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Transaction volumes in the secondary market — often seen as a barometer of underlying demand — stood at or near five-year highs in both Beijing and Shanghai, comfortably above the critical threshold for a healthy market, said Pu Zhan, deputy director of the policy research center at the Ministry of Housing and Urban-Rural Development.

China's commercial housing inventory posted its first year-on-year decline in more than four years in March, signaling that long-running efforts to reduce property stockpiles are finally taking hold.

According to NBS data, the floor space of unsold commercial housing stood at about 786 million square meters as of end-March, down 0.1 percent from a year earlier — the first such decline since the indicator began a 51-month streak of year-on-year growth starting in July 2021.

"What makes this recovery different from previous ones is the accompanying price rebound. Price recovery will strongly drive the rebound in market expectations and enhance confidence," Pu said.

Beijing and Shanghai both saw secondhand home prices turn positive in February, with March figures showing continued gains of 0.6 percent and 0.4 percent, respectively.

Guangzhou and Shenzhen also joined the upward trend, posting month-on-month price increases of 0.2 percent and 0.4 percent, respectively, in March, ending a nearly year-long streak of declines that began in April 2025.

Goldman Sachs said in a research note earlier this month that more tier-one and tier-two cities were likely to achieve housing price stabilization over the next one to two years, with Shenzhen and Shanghai leading the way.

But it said there was no quick fix for smaller urban housing markets, citing elevated inventories, population outflows and weak fiscal fundamentals.

In second-tier cities, new home prices dropped 0.2 percent month-on-month in March, the same margin as in February. Third-tier cities saw a 0.3 percent decline, also unchanged from the previous month, data from the bureau showed.

Secondhand home prices in second-tier cities fell 0.2 percent in March, an improvement from February's 0.4 percent drop. In third-tier cities, the decline narrowed to 0.4 percent from 0.5 percent.

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"The foundation of the recovery has yet to be consolidated, with sharp divergences between major cities and smaller markets persisting," said Yan Yuejin, deputy head of the Shanghai-based E-House China R&D Institute.

Looking ahead, China's core urban housing markets are likely to see sustained transaction volumes in the second quarter, supported by the launch of "quality home" projects and the traditional peak season, said a report by the China Index Academy in April.

However, full-fledged price stabilization will depend on meaningful improvements in household income expectations and a substantial recovery in home price outlooks, the academy said.

Contact the writers at wangkeju@chinadaily.com.cn