Dr. Henry Hao from Commerzbank argues that five years after the Evergrande crisis, the Chinese housing market is structurally stagnant. Domestic prices follow an L-shaped path, with a K-shaped divergence between tier 1 and lower tier cities. Weak demand, tighter financing and demographics mean real estate will no longer be China’s main growth driver as Beijing redirects capital to modern sectors.

L-shaped prices, interrupted construction cycle

“China’s real estate crisis will celebrate its fifth anniversary in July 2026. Despite local price stabilization in key cities, the country’s housing market remains stagnant. Our analysis of the construction cycle indicates that structural stagnation will continue as Beijing turns to new growth drivers.”

“Real estate investment is at just 53 per cent of its July 2021 high. Residential starts are down to just 24 per cent of previous levels, ensuring the sector remains an economic drag. Housing completions are showing a relative resilience of 55 per cent, but this is entirely due to politics.”

“Beijing’s policies are aimed at containing the decline rather than triggering a major rebound. Authorities have lowered mortgage rates, reduced down payments and encouraged local governments to buy unsold homes. But structural constraints limit these effects.”

“Most importantly, this structural job reduction is being blocked by demographic forces. The historic wave of rural-to-urban migration has actually peaked, and falling birth rates are reducing the pool of first-time buyers. Compared to historical crises, China reflects Spain’s long digestion period rather than a quick recovery.”

“The era of real estate as the main engine of growth is definitely over. As a result, Beijing has shifted capital towards new productive forces such as green technologies, electric vehicles and advanced industrial equipment.”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor. Find out more.)