A Market in Search of a Bottom
If you have been following China's property market over the past three years, you have heard the narrative: prices falling, sales volumes contracting, developers defaulting, and a once-unshakeable belief in real estate as a one-way bet irrevocably broken. That narrative was, and largely remains, correct. But the first half of 2026 has introduced a new chapter — one in which the market may finally be finding its floor.
According to data from China Index Academy (Zhongzhiyuan), the first half of 2026 saw the total transaction area of new commodity housing in 100 key cities fall by approximately 12% year-on-year. That is still a contraction, but the rate of decline has moderated. More tellingly, the second quarter showed clear marginal improvement, with first-tier cities returning to year-on-year growth in transaction volumes.
Policy as the Floor
The shift did not happen by accident. In April 2026, the Politburo of the Chinese Communist Party issued a directive to "strive to stabilize the real estate market." Those words, brief as they were, signaled a clear policy intent. Previous rounds of property-market tightening — aimed at curbing speculation and reducing leverage — had achieved their objectives. Now the priority was stability.
The policy toolkit has been deployed with some precision. Mortgage rate ceilings have been adjusted in several cities. Housing provident fund policies have been relaxed, making it easier for first-time buyers to access low-cost financing. Some cities have introduced subsidies for home purchases or allowed "old-for-new" housing exchange programs, where buyers can trade in an existing home as part of purchasing a new one.
On the supply side, local governments have moved to control the pace of new land sales, effectively reducing the inventory overhang. Acquisitions of existing commercial housing for conversion to affordable housing or other public uses have also been expanded.
The Tale of Two Markets: New vs. Resale
One of the most structurall significant trends in China's property market is the growing divergence between new homes and the resale (secondary) market. In the first half of 2026, resale home transaction volumes in key cities grew by approximately 6% year-on-year, while new-home sales continued to contract.
This is not a short-term blip. Resale homes now account for 51.5% of total home transactions (new + resale) nationwide, up from 2025. In 18 provinces, resale transaction area has surpassed that of new homes. In 30 key cities tracked by China Index Academy, the resale share reached 69% in the first five months of 2026.
Why are resale homes outperforming? Several factors:
- Price adjustment: Resale homes have seen sharper price corrections, bringing them within reach of budget-constrained buyers, particularly first-time purchasers.
- Supply constraints in new homes: Many developers, facing financing constraints, have slowed new project launches. The new homes that are available are increasingly positioned as high-end "quality" products, leaving the mass market to resale inventory.
- Location preferences: Resale homes tend to be in mature neighborhoods with established amenities (schools, transit, commerce). New developments are often in suburban or emerging areas.
Price Trends: The Downturn Is Moderating
China's 100-city resale home price index fell by 2.49% in the first five months of 2026. That is still a decline, but the month-on-month rate of decline has been narrowing. Shanghai has seen consecutive months of month-on-month price increases — a clear outlier that suggests certain prime markets may have already found their floor.
New-home prices, by contrast, have shown slight increases in the 100-city index (up 0.42% in January-May 2026), driven by the launch of high-quality "good house" projects in core cities. This is a reminder that the Chinese property market is not monolithic: price trends vary dramatically by city tier, district, and product type.
Land Market: Less Quantity, More Quality
The land market tells its own story. In the first half of 2026, the transaction area of residential land in 300 key cities fell by 24% year-on-year, and land-sale revenue dropped by 31%. However, since May, revenue from land sales has shown sequential growth, and the year-on-year decline has narrowed.
Developers are no longer bidding aggressively for land across the board. Instead, they are concentrating their acquisitions in core cities where absorption rates are healthier and price resilience is greater. Shanghai, Shenzhen, and Hangzhou have seen the most competitive land auctions. Central state-owned enterprises (SOEs) and local state-owned developers have been the dominant buyers, providing a "ballast stone" function that prevents the land market from collapsing entirely.
What to Expect in the Second Half
The consensus among Chinese property analysts is that the market will remain in a bottoming process for the remainder of 2026. Several factors will shape the trajectory:
- Policy continuity: Expect further marginal easing of mortgage policies, additional housing subsidies in tier-1 and strong tier-2 cities, and continued support for the "old-for-new" programs.
- Inventory digestion: The inventory overhang (measured by the "sell-through cycle") remains elevated at 23.5 months for 50 key cities. Bringing this down will require either stronger sales or further supply restrictions.
- City-tier divergence: Tier-1 cities and a handful of tier-2 cities with strong population inflows and dynamic economies will likely see continued stabilization. Smaller cities with weak demographics and oversupply will continue to face downward pressure.
- Developer consolidation: The era of massive, highly leveraged private developers is over. The market is moving toward a model dominated by SOEs, a smaller number of disciplined private firms, and specialized affordable-housing providers.
Investment Implications
For investors looking at Chinese real estate exposure, the key is nuance. The blanket "avoid China property" thesis that made sense in 2022-2023 is increasingly due for refinement.
Opportunities exist in:
- High-quality residential projects in tier-1 city cores (these are selling, albeit at lower volumes than the 2015-2021 peak)
- Industrial and logistics real estate (driven by e-commerce and manufacturing upgrade demand)
- Selected property-management companies (recurring revenue, less capital-intensive than development)
Avoid: highly leveraged developers with concentrated exposure to lower-tier cities; commercial real estate in oversupplied markets; and any investment predicated on a return to the pre-2021 price-appreciation regime.
The Long Game
China's property market is undergoing a structural transition — from an era of speculative excess and breakneck volume growth to one of measured demand, quality-focused supply, and policy-managed stability. That transition is painful, but it is also necessary. The alternative — perpetuating an unsustainable boom — would have stored up even greater risks for the financial system.
The bottom may not yet be fully in for every city and every segment. But the combination of policy support, marginal demand recovery, and the natural correction of oversupply is creating conditions for a gradual stabilization. For buyers with a long-term horizon and the ability to be selective, 2026 may come to be seen as the year the Chinese property market finally found its footing.