Analysis: Will China’s Major Cities Propel a Housing Market Recovery?

China's property market prospects in 2025 heavily rely on the performance of its first-tier cities, such as Beijing, Shanghai, Guangzhou, and Shenzhen, due to their robust economies, talent attraction, and global competitiveness [para. 1]. As of January 2025, the property market in these cities has shown a notable recovery with 2.88 million square meters of new homes sold, demonstrating a 16% year-on-year increase when adjusted for the Spring Festival events. Shanghai achieved the highest sales, with 1.08 million square meters sold [para. 2]. However, February witnessed a 10% decline in new home sales compared to 2024, although Shenzhen and Shanghai continued to display growth with 37% and 4% increases, respectively, while Beijing and Guangzhou experienced reductions of 24% and 26% [para. 3].

The pre-owned home market mirrored this trend of recovery during January 2025, with sales in Beijing, Shanghai, and Shenzhen up 45% year on year, accumulating to 3.36 million square meters. Following the Spring Festival holiday, sales saw a 27% rise from the same period in 2024 [para. 4]. Home prices in these urban hubs are stabilizing with new home prices and pre-owned home prices both increasing by around 0.1% month-on-month in January, marking the fourth consecutive month of price growth [para. 5]. Strong local economies, diverse job opportunities, and access to premium amenities and services continue attracting buyers [para. 6].

Several factors influence demand release including eligibility to purchase, affordability, and willingness to buy [para. 6]. Cities like Guangzhou have relaxed purchase restrictions completely, with others potentially following suit [para. 7]. Affordability heavily depends on credit conditions, such as the lowered down-payment requirements of 15% for first homes and decreasing mortgage interest rates [para. 8]. Buyers' sentiment remains largely positive in cities such as Beijing, Shanghai, and Shenzhen, where pre-owned home prices have been rising since October 2024 [para. 9].

Demand distinction is observed between different market sectors, with larger units becoming more popular in new home sales, whereas smaller units continue to dominate pre-owned market sales [para. 10]. The land supply in first-tier cities diminished in 2024, leading to a significant drop in new home availability despite efforts to address these challenges through government interventions and adjustments [para. 11][para. 12].

Driven by the early-year growth and anticipated seasonal sales peaks, the real estate market is expected to continue its recovery trajectory in 2025, with first-tier cities spearheading stabilization efforts [para. 13].

Relaxation of policies remains a key area for these cities. By reducing purchase restrictions and associated requirements for buyers, these cities could better meet buyers' needs. Particularly, the relaxation of restrictions in late 2024 led to a 45% quarter-on-quarter increase in new residential sales within the next three months [para. 14][para. 15]. Transaction costs, like the personal income tax on pre-owned home transactions, are also being targeted to enhance market flexibility and reduce costs for buyers, paving the way for healthier property market growth dynamics [para. 16].