Key facts
- China's property crisis has been designated the top priority for resolution in 2026 by Beijing's Central Economic Work Conference.
- The strategy includes controlling new supply, reducing inventories, and optimizing offerings based on local market conditions.
- China has 27 months of housing inventory, with Tier 3/4 cities having 40 months of supply.
- Local government debt has risen to $18.9 trillion, with two-thirds of new debt used to pay off old debt.
- Home prices are in freefall, and construction, previously 29% of GDP, is in crisis.
- Evergrande, with $300 billion in debt, was wound up earlier this year.
Beijing has identified stabilizing the real estate market as its top priority for 2026, according to reports from the Central Economic Work Conference. The strategy aims to 'control new supply, reduce inventories and optimize offerings' based on specific local market conditions.
The property crisis in China has been building for years, with inventory levels significantly increasing. Secondary market home transactions have surpassed new residential builds in volume. Tier 1 cities currently have 17 months of inventory, Tier 2 cities have 23 months, and Tier 3/4 cities face 40 months of inventory, a stark contrast to the typical 47-62 days to sell a home in the US or six months in the UK, Germany, and Japan. The ratio of housing starts to sales has fallen to 59.5%, the lowest level since records began in 2000.
This crisis has profound implications for local government finances, which historically relied on land sales for 40% of their revenue. Local government debt has surged to $18.9 trillion, with two-thirds of new debt being used to service existing obligations. Developers still hold 22,000 hectares of land purchased before the crisis, which will likely need to be written off.
Home prices are reportedly in freefall, and the construction sector, which once accounted for 29% of GDP, is in crisis. Major developers like Evergrande, with $300 billion in debt, have been wound up, while others like China Vanke are struggling to reschedule debts. Many unsold homes are only half-built, and a significant portion of new homes delivered this year have been rated as poor quality.
The crisis is also linked to China's demographic challenges, including a low fertility rate and a skewed sex ratio at birth, which are expected to impact future demand for housing.