China Ramps Up Effort to Offload Vast Supply of Unsold Homes

China’s economic policymakers have placed the real estate sector at the forefront of the 2026 economic agenda, pledging to address the nation’s massive surplus of unsold homes as housing inventories in major cities hit unprecedented levels. The Central Economic Work Conference, held last week, emphasized the need to stabilize the property market, mandating officials to manage new housing supply, decrease inventory, and optimize property offerings according to specific local circumstances.3

Yan Yuejin, vice president of the Shanghai E-House Real Estate Research Institute, stressed that the core strategy is focused on “destocking”—reducing the excess supply of homes. He noted that a similar directive was last seen in 2016 when inventories were high in less-developed cities. However, the current scenario is more complex, as the time needed to clear unsold new homes across China’s 100 major cities has risen to a record high, and the surge in second-hand home listings has further complicated the situation.3

Data highlights the scale of the challenge. According to the Shanghai E-House Real Estate Research Institute, as of November, it would take 27.4 months to sell the backlog of new homes in the top 100 cities, far above the generally accepted “healthy” range of 12–14 months. The destocking cycle varies by region: 17.1 months in first-tier cities, 22.6 months in second-tier cities, and a staggering 40.3 months in third- and fourth-tier cities.3

Efforts to reduce housing inventories began in earnest in 2024. In April of that year, the destocking cycle rose to 26.5 months, prompting the Politburo to coordinate inventory reduction and limit new supply. After central government policies were introduced in September 2024, things improved temporarily—the cycle dropped to 21.3 months by January 2025. Yet this progress was short-lived, as the cycle began rising again in the second quarter of 2025. This prompted the Central Economic Work Conference to reiterate the urgency of addressing oversupply.3

A key measure, “controlling new supply,” involves limiting new land sales in cities with severe housing gluts. In May 2024, the Ministry of Natural Resources specified that cities where destocking cycles exceed 36 months should halt new land sales and instead promote the sale of existing housing stock until conditions improve.3

While these curbs are intended to balance supply and demand, they have also dealt a heavy blow to local government revenue. Ministry of Finance data shows land sales revenue plummeted from about 8.7 trillion yuan ($1.2 trillion) in 2021 to 4.9 trillion yuan in 2024, with an additional 7.4% decline in the first 10 months of 2025. To compensate for shrinking revenue, local governments have ramped up bond issuance.3

Luo Zhiheng, chief economist at Yuekai Securities, noted that the dual issues of real estate instability and local government debt remain the primary challenges to China’s economic growth. Both were highlighted as areas for “active and prudent risk resolution” at the 2025 Central Economic Work Conference.3

The policy agenda also includes measures to optimize property offerings, such as repurposing unsold homes for affordable housing. Additionally, reforms to the housing provident fund system began in early 2025, incorporating over 260 new policies nationwide aimed at increasing loan quotas, broadening loan usage, and streamlining access across regions.3

Experts project that stabilizing the real estate market will remain a top policy goal for 2026, with ongoing adjustments in restrictive policies, especially in tier-one cities, and further innovation in financial and land use policies. Nevertheless, market institutions remain cautious: a 2026 outlook from the China Index Academy forecasts that the area of new homes sold, newly built area, and total real estate investment will fall by 6.2%, 8.6%, and 11% respectively in 2026.3