S&P Global Ratings has reduced its projection for China's property sales in 2026, saying it now expects sales to fall between 10% and 14% compared with its October forecast of a 5% to 8% decline.
"This is a downturn so entrenched that only the government has capacity to absorb the excess inventory," S&P analysts wrote in a Sunday report. The agency said the state could step up purchases of unsold homes to convert them into affordable housing, although it noted that existing efforts so far have been limited.
China's real estate sector, which at one point accounted for more than 25% of the economy, has experienced a marked contraction. Annual sales volume has been halved over four years as a result of the sector's deterioration. The initial slump followed Beijing's clampdown on developers' high-leverage expansion strategies, and demand from homebuyers has remained subdued.
S&P highlighted persistent oversupply as a central problem and said it expects prices to decline another 2% to 4% this year, after similar drops in 2025. "Falling prices erode homebuyers' confidence," the report said. "It's a vicious cycle with no easy escape."
The ratings agency called attention to the worsening price picture in several large cities during the fourth quarter of 2025. Beijing, Guangzhou and Shenzhen all recorded home price declines of at least 3% in 2025. By contrast, Shanghai was the lone major city to post growth, with prices up 5.7% in 2025 versus 2024.
Despite weakening sales, developers kept up construction activity. That combination has produced a sixth straight year in which newly completed homes remain unsold, according to S&P.
The deterioration of the property market accelerated through 2025. S&P's outlook shifted over the year: in May it forecast a 3% decline in sales, revised that in October to an 8% fall, and actual sales ultimately fell 12.6% to 8.4 trillion yuan, or $1.21 trillion. That outturn is less than half the 18.2 trillion yuan in annual sales recorded in 2021.
Implications
S&P's downgrade signals further stress for developers, construction firms and related financial institutions, while the broader economy faces headwinds given the sector's sizable share of GDP. The agency's emphasis on government capacity to absorb inventory underscores the limited role private demand currently plays in restoring balance to the market.
Where recovery is possible depends heavily on policy action and the pace at which excess supply can be brought into use or removed from the market.