Commentary: How China Can Engineer a Soft Landing for Its Property Market
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For more than two decades, China’s real estate industry operated on a simple, perilous premise: high debt, high leverage, and rapid turnover. As long as property values climbed, underlying operational risks were masked. Today, that era is definitively over. As China begins implementing the recently released proposals for its 15th Five-Year Plan (2026-2030), the focus has shifted entirely to de-risking the sector and engineering a fundamentally new development model.
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- China's real estate crisis is a balance sheet recession; new model emphasizes de-risking via project ring-fencing, lead bank system (7T yuan loans by Sep 2025 for 20M homes), phasing out presales (completed sales rose to 36% in 2025).
- Expand social housing (30% new builds), broaden 11T yuan provident fund use, subsidize multi-child mortgages (200B yuan for 1T yuan consumption).
- Stabilize market with high-tier easing, special bonds for inventory, REITs amid -17.2% investment drop.
1. China's real estate industry, reliant on high debt and leverage for over two decades, has ended its era as property values decline amid the 15th Five-Year Plan (2026-2030) focusing on de-risking and a new model [para. 1].
2. The crisis is a balance sheet recession with falling valuations against rigid debts, prompting developers to minimize debt over profits by cutting investments [para. 2].
3. Policymakers must prevent systemic crisis from collective asset fire-sales by trading time for space, isolating risks from local governments and financial institutions [para. 3].
4. New rules include project-based structures to ring-fence funds, stopping headquarters from diverting cash from healthy projects [para. 4].
5. A "lead bank" system ensures closed-loop funds; by September 2025, "white list" loans exceeded 7 trillion yuan ($1.02 trillion), aiding delivery of nearly 20 million homes and sharing risks [para. 5].
6. Phase out presales: completed homes in sales rose from 12.7% in 2020 to 36% in 2025; shift to "what you see is what you get" and asset-light management [para. 6].
7. Expand social housing like Singapore's model, mandating 30% of new construction for it to address shortages and idle inventory, with tiered supply [para. 7].
8. Redefine real estate to boost consumption; high costs cause excessive savings. Housing provident fund's 11 trillion yuan unused balances could fund healthcare, eldercare, education, releasing billions in spending [para. 8].
9. Align policies with demographics: subsidize multi-child family mortgages; 200 billion yuan for one million three-child families yearly could spur 1 trillion yuan in housing and demographic gains [para. 9].
10. Stabilize market short-term after 17.2% investment drop and 8.7% sales fall last year; high-tier cities lift restrictions to unlock demand [para. 10].
11. Use special sovereign bonds for local buys of idle land/inventory into affordable housing; accelerate REITs and securities to monetize assets and cut liabilities [para. 11].
12. Stabilize now, build regulations for tomorrow; refocus housing on living to defuse risks, improve life, support high-quality growth [para. 12]. Sheng Songcheng is the author, former PBOC official [para. 13][para. 14].
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