China’s Falling House Prices an Expected Adjustment as Economy Develops, Says Analyst

By Wang Xiaoqing, Wang Rui and Denise Jia

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A residential project under construction in Huaian, Jiangsu province, on July 15, 2024.

The fall in Chinese property prices is a normal and expected adjustment in the broader economic development process, similar to trends seen in global markets, said Yang Fan, head of China and Hong Kong research at the investment group CLSA.

After three years of sustained decline, China’s real estate market continues to struggle, with house prices in some third- and fourth-tier cities falling by more than 40% since August 2021, according to Yang. The drop mirrors trends seen in “catch-up” economies such as South Korea, Brazil and Japan, where rapid growth is followed by significant market corrections.

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China's real estate market has seen a 17.9% overall price drop since August 2021, with smaller cities experiencing more than a 40% decline.
Government initiatives include buying surplus properties for affordable housing, supported by 300 billion yuan ($42 billion), to help stabilize the market and reduce inventory.
Despite falling housing prices, urbanization and service consumption (e.g., tourism and culture) are expected to grow, mirroring trends in South Korea, Brazil, and Japan.

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Who’s Who

CLSA: CLSA is an investment group specializing in China and Hong Kong market research. Yang Fan, head of its research, provided insights on China's real estate market adjustments, comparing them to global trends. CLSA's analysis indicates that China's property price corrections are part of a natural economic development process, supported by government policies aimed at stabilizing the market and converting excess housing into affordable units.

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What Happened When

August 2021：: China's house prices start to decline by more than 40% in third- and fourth-tier cities.

Since August 2021：: Overall drop in China's housing prices stands at 17.9%, with some smaller cities experiencing a decline of more than 40%.

2023：: China’s service consumption rate was 45.2%.

July 2024：: The area of unsold commercial housing reached 739 million square meters, a 14.5% increase from a year ago.

July 2024：: The Chinese government introduces a policy to convert excess housing into affordable units, involving the government buying surplus properties.