Real Estate Crash Weighs on China’s Economic Growth

Falling apartment prices have erased the savings of millions of Chinese households, but exports lifted the economy to 5 percent growth last year.

In China, new home sales have dropped to their lowest level in more than 15 years and prices for existing apartments are plummeting. Millions of households, stung by their homes’ declining value, have curbed spending. Local governments, which rely heavily on real estate for revenue, are struggling to pay their civil servants.

At the start of last year, many in China worried that a trade war with President Trump might be the economy’s biggest challenge. However, China’s overall trade surplus climbed last year, while the real problem for Beijing proved to be a housing market crash that began four years ago and has worsened with each passing month.

For all the economic woes unfurled by the country’s slow-moving housing market crash, China’s statisticians continue to report predictably steady economic growth, powered by a boom in exports that produced another record trade surplus in 2025. On Monday, the National Bureau of Statistics said that China’s economy grew 5 percent last year, meeting the government’s target, set in March, for growth of about 5 percent for a second year in a row.

The Chinese economy expanded from October through December at a pace that, if extended for a full year, would represent a growth rate of 4.9 percent.

The weakness reflects lackluster spending from both urban and rural households. In November, retail sales barely grew from a year earlier. It was the worst monthly performance in consumer spending since the Covid-19 pandemic.

Some Western economists now say that the economy’s actual growth may be half of what official statistics indicate. Rhodium Group, a New York-based research firm specializing in China, estimates that the country’s economy grew 2.5 to 3 percent last year and will slow further this year.

Construction and other real estate activities had represented roughly a quarter of China’s economy through 2021. So the sector’s sharp slowdown has hurt households and industries across the country.

“The sharp decline in the real estate sector can almost entirely explain the lackluster economic performance over the past three years,” Zhu Tian, an economics professor at the China Europe International Business School in Shanghai, wrote in an analysis published in November.

The downturn has also prompted buyer’s remorse. Zoe Zhao, a 27-year-old civil servant in Xi’an, a city in central China, bought a home with her parents in October 2024, after prices there had tumbled, only to see prices fall further.

“It’s hard to say that I don’t regret it, but I can at least console myself that this apartment is for me to live in,” she said. “I’m just glad we didn’t buy at the peak.”

Official data show that prices have fallen by a fifth since 2021 — roughly the same as the average nationwide decline in the United States during the housing market crash from 2008 to 2010. Unofficial data, however, indicate that price declines in China are at least twice as steep.

The number of transactions has stalled, particularly for newly built apartments. A report last month by the China Index Academy, a real estate research firm, said that homes listed for sale now remain on the market for an average of 22.2 months before closing.

Buyers have been demanding discounts of up to 80 percent from the market peak in 2021. Sellers have balked at accepting such heavy losses, causing the apartment market to freeze up in many cities.

Sam Radwan, chief executive of Enhance International, a real estate consulting firm in Chicago, said that in 45 years of following real estate markets in more than two dozen countries, he had never seen homes sit unsold as long as they do now in China. During his recent travels in the country, he said real estate professionals remained extremely pessimistic.

“You talk to everybody, and they know there’s no solution,” Mr. Radwan said. “It’s not going to go away in the next decade.”

The crash in prices has rattled confidence in real estate, once considered the safest place to park household savings. China’s leaders are now seeking to restore faith in the market.

Government authorities began heavily censoring pessimistic online posts about the real estate markets in Beijing and Shanghai late last year. Public release of the best-known private-sector apartment price indexes has also been suspended.

Some Chinese real estate experts contend that an improvement could come as soon as this year. Meng Xiaosu, a popular analyst in China nicknamed the “godfather of real estate,” predicted in recent online commentaries that prices would begin recovering this year.

“If measures arranged by the central government — such as converting the purchase of existing housing into affordable housing — can be implemented in certain areas, that would also signal stabilization,” he said.

Mr. Meng has long been a cheerleader for the real estate market, stating in 2016, “It has never fallen even in a year — how can it be a bubble?”

Local governments have tried to acquire unsold apartments from struggling developers to turn them into affordable housing. But falling revenues from taxes and land sales mean that local governments cannot afford to subsidize these transactions.

Without major markdowns — something developers are reluctant to do — local governments will incur heavy losses from renting out the apartments, Mr. Radwan said.

Underlying the real estate market’s troubles is a vast supply of newly built housing coupled with a decline in the number of marriages and births each year, which has slowed the impetus to buy new homes.

China had about 440 square feet of housing for each man, woman or child living in cities in 2024, up from 340 square feet only 15 years earlier.

It was less than 100 square feet per person before Mao Zedong’s death in 1976.

Ruoxin Zhang contributed research.

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