China’s housing market flashes signs of life in core cities

(By Caixin journalist Chen Bo)

On 3 May the banquet hall of a Hilton Garden Inn in Shenzhen was filled to capacity. Within 40 minutes, buyers had snapped up all 92 apartments at Longhu Guancui, a newly launched residential project, making it the city’s first development in 2026 to sell out on its opening day.

Such scenes have been rare in China’s property market in recent years. But since March, transaction activity has shown signs of a sudden revival in core metropolitan areas, particularly in the country’s four tier-one cities. The localised rebound has exceeded many industry expectations, raising hopes that China’s deepest and longest property downturn in recent history may be nearing a floor.

Prices, the clearest gauge of market sentiment, are also showing tentative signs of stabilisation. According to the National Bureau of Statistics, existing-home prices in tier-one cities — Beijing, Shanghai, Guangzhou and Shenzhen — rose 0.4% in April from the previous month, while new-home prices edged up 0.1%.

The synchronised monthly rise in both new- and existing-home prices began in March, marking a break from more than a year of declines. The improvement came as the Communist Party’s Politburo pledged in late April to continue efforts to stabilise the property market.

A 13 May report by UBS reflected the improving sentiment. Lin Zhenhong, head of China real estate investment research at the bank, said a recovery in industrial profits and a positive turn in the producer price index could help support underlying housing demand. He also noted that declines in existing-home listings and suburban vacancy rates in tier-one cities since the start of 2026 suggest that hidden inventory is gradually being absorbed.

UBS expects home prices in China’s largest cities to stop falling on a year-on-year basis in 2026, while prices in tier-two cities are forecast to decline 5%. By 2027, the bank expects tier-one city prices to rise 2%, with tier-two markets stabilising.

Still, analysts caution that the recovery remains highly uneven. “The real estate market has shifted from broad-based rises or declines to structural divergence,” Lin Bo, a research manager at China Real Estate Information Corp. (CRIC), told Caixin.

A divided market

The rebound has been most visible during what Chinese developers often call “little spring”, the March-April period that traditionally marks a peak season for home sales. This year, the momentum in top-tier cities has proved unusually resilient.

New-home transaction volumes in China’s four tier-one cities jumped 210% month-on-month in March and remained 4% higher year-on-year in April, even as sales across 50 major cities fell 20% from a year earlier.

But the recovery has been sharply uneven. High-end projects in prime areas of Hangzhou, Shanghai and Shenzhen have drawn strong demand, as have mass-market developments offering unusually attractive pricing or design advantages. In Shenzhen, two luxury projects — China Merchants Haiyan Mansion and Guanchao Mansion — each recorded sell-through rates of about 90% on their April launch days, despite prices of around 130,000 RMB (US$19,130) per square metre.

By contrast, mid-tier projects in non-core areas remain under pressure, with many selling less than 30% of their units at launch. Industry sources say buyers are gravitating toward two ends of the market: scarce premium locations with long-term value, and discounted or upgraded projects that stand out on affordability. Longhu Guancui, for instance, benefited from compliance with upgraded 2025 national building standards, offering nearly 100% usable floor space while pricing below nearby comparable projects.

“It is still too early to conclude that the new-home market has reached a turning point based solely on a few hot-selling projects,” Lin said, pointing to the sector’s increasingly divided performance.

Bargain hunters drive sales

The secondary market has shown similar resilience, though much of the activity has been driven by lower prices.

In March, existing-home sales in Shanghai reached 31,000 units, the highest level in five years, while Beijing recorded nearly 20,000 transactions, a 15-month high, according to the China Index Academy. Trading volumes in both cities remained strong through April and the early May holiday period.

But the rebound in volume has come at a cost. In Shanghai, existing-home prices fell a cumulative 15% between March and December 2025. This year, deeply discounted listings have released pent-up demand from first-time buyers and homeowners looking to upgrade.

Prices of older, smaller homes in core districts have stopped falling and, in some cases, edged slightly higher. In Shenzhen, homes priced below 3 million RMB now account for more than half of all transactions. Industry insiders say rental yields on compact units in prime districts have risen above 2%, exceeding bank deposit rates and helping establish a price floor for such properties.

The shift follows a July 2023 Politburo directive that acknowledged a major change in supply-demand dynamics, as China’s housing market moved from overheating and undersupply to weak demand and excess inventory. Since then, policymakers have focused on destocking and improving the structure of supply.

Progress has been slow but visible. By the end of April, the area of unsold commercial housing nationwide had slipped 0.5% year-on-year to 778 million square metres. Even so, the estimated inventory-clearance cycle across 50 representative cities had lengthened to 24.1 months, underscoring the scale of the overhang.

That pressure has kept developers cautious. National real estate investment fell 13.7% in the first four months of 2026, while land purchases have been dominated by a small group of state-owned developers. These firms are demanding strict profit margins of about 15%, building in a safety cushion against further market weakness.

Instead of amassing large land banks, developers are increasingly focusing on “small and beautiful” parcels in core urban areas. Such sites require less upfront capital and offer more manageable sales cycles, reflecting a broader industry shift away from scale-driven expansion toward tighter operations, faster turnover and greater market discipline.

Gauging the recovery path

Investors and researchers are watching closely to see whether the recent momentum can be sustained.

Goldman Sachs projected in April that housing markets in Shanghai and Shenzhen could bottom out by late 2026, rebounding six to 24 months ahead of other major Chinese cities, supported by stronger demographics and improved affordability.

Guo Kai, executive dean of the China Finance 40 Forum, said China’s property correction has been substantial by international standards in both duration and depth. “As long as the adjustment goes far enough, the housing market will eventually stop falling,” Guo said.

Domestic industry analysts remain more cautious, warning that the current thaw is still highly localised. A report by CRIC said the market is undergoing a slow transition from “stopping the decline” to “stabilising”, marked by a weak recovery and widening polarisation.

Whether the recovery can broaden will depend largely on the strength of China’s wider economy and on how the real estate sector adapts to the long-term, structural challenge of China’s ageing population, analysts said.

This article was first published by Caixin Global as “In Depth: China’s Housing Market Flashes Signs of Life in Core Cities”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

Related: [Video] Evergrande crashes: What happens next? | [Vox pop] Can young people in China afford a home today?