Since 2022, the real estate market in china has officially entered a deep restructuring phase. Initially, housing prices in secondary and tertiary cities, such as tianjin, zhengzhou and ishibao, began to slacken, and market sentiment grew stronger. In 2023, even shanghai, shenzhen and guangzhou, previously strong front-line cities, were unable to survive, and housing prices went down the road, exclaiming the ruthlessness of the market. To date, the national average has fallen by more than 30 per cent, which sounds alarming. The city, which is far worse off, has fallen by more than 60 per cent, and many investors' dreams have suddenly been lost. There are indications that the large pattern of the domestic housing market is clear and that the trend towards adjustment is difficult to reverse。
So what is the reason for the drop in housing prices everywhere? In my view, there are three main factors behind this. On the one hand, the bubble in the real estate market is not small - in cities on the 2nd and 3rd line, the income from house prices is generally 20 to 25 times higher than in cities on the 2nd and 3rd line, while the first line is more exaggerated, reaching more than 40 times. This means that ordinary households cannot buy a flat without eating or drinking for decades, which is a heavy burden, and that high housing prices are clearly not sustainable in the long term and, ultimately, must converge with the real income levels of the population。
On the other hand, in recent years, the real economy has been depressed, many people have lost their incomes and even lost their jobs, and ordinary people have lost their wallets. The return to rationality of home prices has been gaining momentum. Moreover, housing prices fell for four years in a row, investment in property was no longer as steady as it had been before, and many firecrews had either moved away or watched in their pockets and market liquidity had been significantly reduced. It is not a good thing that the retreat of speculative demand has allowed the house to slowly return to its original identity. A lot of people are now speculating about how the 2026 house price will go. In fact, next year's market trend can be seen in four major signs。
01 housing prices have also been adjusted in the heart of major cities
You have to admit that it's kind of hard to accept that even the hard cores of big cities that we've always stood up for are no longer a piece of steel. In the past, anyone who referred to the northward and deep core, the word “stable profits” appeared in their minds. It is as if the houses in these places are born with some kind of magic, and the wind and the rain, the price only goes up。
Now what? Realistic slaps us. Take shanghai for example, a friend of mine bought a suite in huangpo district two years ago, when the average price went to over 90,000 square metres, and he thought it was the smartest investment in life. And guess what? Recently, he occasionally went to see the price on the perimeter, and his heart went cold -- the same area, and now the average price dropped to over 60,000, down by over 30%! It's not a remote suburbs. It's a real city heart。
What does this change mean? It means that even the most resistant areas are starting to fail. Just like the domino, when the strongest card starts to shake, the back card is just a matter of time. You might think that the core has fallen a little bit slower than the three or four-line city. But don't forget, this kind of slow fall is more tormenting -- it's not straight up and down like a roller coaster, it's like a warm water to boil frogs, and it's just a little bit of a grinder of confidence。
When i spoke to the agency, i heard a number of cases in which some owners had been living in houses for more than half a year, and prices had dropped and few people were looking at them. That kind of anxiety and impotence can only be felt by people who experience it. So, don't look at the drop now as if it were mild, but next year this adjustment will probably accelerate. The house price is like a bubble-filled leather ball with a slow air and a two-shot ball; it's so fast that it's on the ground. Now it looks like the balloon's air valve is slowly ripping open。
02 china has entered an ageing society
Seriously, it's a bit heavy, but you have to face it. China had moved to a fully ageing society, with an increasing number of older persons and fewer young people. By the end of last year, the number of people over 60 years of age had surpassed the 300 million mark. What is the concept? Almost one in five is elderly. It is even more alarming that by 2035 this figure is expected to rise to over 400 million. Imagine walking down the street, probably full of silver hair。
The impact of ageing on housing prices is particularly direct. The older generation, for the most part, has had their own house, some of them even more. Instead of having to buy another house, they may have to consider how to dispose of surplus property. And the young? The number is decreasing, which means that the number of people who have just bought a house will naturally shrink. When my niece got married this year, the two of them had no intention of buying a house at all — each parent had an empty house, so just pick one, why take a mortgage? This phenomenon is now becoming more widespread. Many of the young people who grew up in the city had no need to worry about the house, and the estate left by their fathers and even their ancestors was enough for them to live in peace。
Speaking of which, there may be a counter-argument: "the young people who go into town have to buy a house." yes, but the problem is that the rate of entry is slowing. Moreover, young people have changed their attitudes and are more willing to spend their money on experience, rather than spending half their lives on a house. Some of the “90s” i know would rather rent a comfortable apartment than travel abroad twice a year. This change in life attitudes is also undermining the demand for housing。
The speed of securing access to the city is increasing
In retrospect, in 2024, an ambitious plan was clearly put forward at the highest level: over the next five years, a total of 6 million sheltered housing units will be introduced, with an average of 1. 2 million units going to the market each year. The central aim of the initiative is to address the housing challenges of low-income urban groups and to make housing more accessible. The prices of secure housing are generally significantly lower than those of the surrounding commercial housing, which will undoubtedly significantly reduce the burden on many households, especially those with limited incomes。
As these secure housing units continue to be marketed, they not only provide more housing options, but may also have some impact on the existing market for commercial housing. Consider that when people have more affordable options, interest in high-priced commodity houses naturally diminishes. It's like in supermarkets, when a new batch of high-priced goods is suddenly added, the original high-priced goods may have to be sold at a discount。
As a result, it is expected that in the coming years the speed of securing housing supply will gradually divert the demand for commercial housing, putting downward pressure on the price of housing in 2026. This change is not an overnight event, but a long-term trend of policy orientation, which reminds us that the market is no longer a “sliding-up” but a greater focus on equity and sustainability。
The second-hand-room market has also been squeezing
After entering 2025, there has been an alarming increase in the number of second-hand house listings nationwide, with data showing a total of over 7. 3 million units. In the cities in particular, chengdu is leading with 270,000 units, wuhan with 194,000 units and beijing with 160,000 units, respectively, and behind these figures are the anxiety and choices of countless homeowners。
Why this surge? There are two main reasons for this: the first is that investors who used to be eager to fire houses now have less confidence in the market. They realized that the era of skyrocketing house prices might not return, and then they tried to cash the surplus property and avoid being locked in. The second is the rapid contraction in the number of people who need to buy a home, which means that fewer people actually need to buy a house to live in, which may be due to increased economic pressure or a change in the perception of young people. As a result, the supply of housing far exceeds demand, and the second-hand market is like a crowded market with fewer customers and natural price pressures. This situation not only leads to headaches for sellers, but also makes the overall market climate more cautious, further exacerbating the possibility of lower housing prices。
Taken together, the four major indicators above provide a picture of the challenges that housing prices may face next year. This does not mean that the market will collapse, but rather suggests that the market is moving towards a more rational stage. In the past, speculative-driven booms were cooling down, replaced by more demand-driven policy adjustments。
This may be good news for ordinary households because housing affordability is expected to increase; but for investors, risk needs to be reassessed. In short, the direction of housing prices is no longer a single factor, but rather a combination of policy, supply and demand, and market psychology. We will see, but it is wise to remain focused and ready to respond to change。
