From S&P Global, October 9:
This report does not constitute a rating action.
Key Takeaways
- China's property market is still searching for a bottom. We estimate nationwide primary property sales will fall 8% in 2025 and 6%-7% in 2026.
- The declines are accentuating polarization trends, where rated state-owned firms' funding advantages are pulling them ahead of rated private developers; the state-owned entities have the capital to buy land in healthier, upper-tier markets.
- A meaningful overshoot in land acquisitions combined with weaker sales in 2025-2026 than we now expect could present risk to some developers' credit profiles.
- The rating triggers of some developers in the 'BBB' category, and all in the 'BB' category, could be breached if sales dropped 10 percentage points below our base case.
As Chinese developers enter the fifth year of a grinding downturn, clear coping strategies have emerged. All are adapting to a polarized market, broadly split between upper and lower-tier cities, and privately owned and state-owned property firms.
Most rated state-owned entities (SOEs) are accumulating market share and replenishing land banks in upper-tier markets where prices and volumes are more resilient. Rated private firms are largely pulling back on residential development, doing their best to conserve cash. Entities' success in implementing these strategies will say much about their credit health as this downturn plays out.
Table 1
Rated developers' strategies to cope with a polarized market Issuer Strategy State owned* COLI COLI will remain a market leader in China's tier-one cities. Controlled land spending and stabilizing margins will support deleveraging in 2026. CR Land CR Land will continue to focus on property development in higher-tier cities. Disciplined land spending combined with growth in rental income from shopping malls will help control leverage. Poly Poly will continue to clear low-margin inventories in lower-tier cities. To support its profitability and scale, Poly will continue to buy land in higher-tier cities. The company's sufficient interest coverage ratio will help support its credit profile. COGO COGO will continue to focus on mid and lower-tier cities. Its focus on acquiring land at core locations in such cities, and a shared brand with COLI, will support its project sell-through and profitability. Controlled land spending and margin recovery will support deleveraging. Jinmao Jinmao's renewed focus on land acquisitions in higher-tier cities should support its contracted sales. A recovery in margins and control on debt will help lower the financial leverage. Yuexiu Property Yuexiu Property will focus on property development in tier-one cities and a handful of second-tier cities where demand is more resilient. This will support the company's project sell-through. Greentown Greentown's focus on higher-end properties in higher-tier cities should support its project sell-through. The company will selectively buy land that balance sell-through and profitability. Privately owned developers Longfor Longfor's property development margins will stay low while it continue to focus on clearing inventory. Non-property development businesses such as shopping malls will support its operating cash flow and asset-pledged financing. Seazen Seazen's contracted sales will continue to fall. The performance of the company's shopping malls remains satisfactory, underpinning their quality for asset-pledged financing. Seazen will likely continue to pledge its investment properties for loans to repay debt over the next 12 months. China Vanke China Vanke's liquidity will remain weak amid deteriorating contracted sales. The company will continue to replenish its liquidity by obtaining shareholder loans and selling assets. We believe the company will make minimal land purchases. This would undermine its competitiveness. *Entities that we view to have state-owned parents under our group rating methodology. See table 3 for the full names of entities. Source: S&P Global Ratings. The Property Market Is Still Searching For A Bottom
We now estimate nationwide property sales for 2025 to total renminbi (RMB) 8.8 trillion to RMB9.0 trillion, down about 8% from the prior year. This is weaker than our previous base-case expectation for a 3% drop (see "China Property Watch: Rebooting An Economic Engine," May 11, 2025).
This estimate tracks official data. In the year through end-August, nationwide property sales fell about 8% to RMB5.5 trillion, according to China's National Bureau of Statistics.
Previously, we expected the government to roll out major additional demand-stimulating measures to support the property sector--this assumption was part of our original base case. Without such measures, we had assumed that nationwide sales in 2025 might drop 7%-8%. Government measures have indeed fallen short of our expectations, and the subsequent sales drop is in line with what we had projected for this scenario. For example:
- China's five-year loan prime rate, a reference for most of China's mortgage lending, has only moderately declined by 10 basis points in the year to date in 2025. This contrasts with a 60 basis-point drop in 2024;
- A relaxation of home-purchasing restrictions for three of the four tier-one cities (Beijing, Shanghai and Shenzhen) only happened in mid-August;
- Moreover, these relaxations were partial; for example, the relaxation of the Beijing and Shanghai restrictions mainly covered the city outskirts.
Chart 1
Homebuyers' confidence remains fragile. As such, we expect the government could roll out further measures to support demand. However, additional supportive measures may only come gradually, and on a city-by-city basis, in our view. For example, apart from the partial relaxation of home-purchasing restrictions, the Shanghai government in mid-September suspended the property tax for the first purchase of primary homes for Shanghai residents who met certain requirements.
Forecasts for 2025 and 2026
In contrast to our previous expectation that China's nationwide property sales may approach stabilization toward the latter part of 2025, we now believe China's nationwide property sales will continue to moderately decline in 2025 and 2026.
Table 2
Our 2025 and 2026 forecasts (YoY change, %) 2025e 2026e Primary housing prices (3.5) - (2.5) (2.5) - (1.5) Tier 1 markets (1.0) - (0.5) (0.5) - 0 Tier 2 markets (3.0) - (2.0) (2.0) - (1.0) Tier 3 or below markets (5.0) - (4.0) (4.0) - (3.0) Secondary residential housing prices* (7.0) - (5.0) (5.0) - (4.0) Area sold (primary housing sales volume) (5.5) - (4.5) (5.0) - (4.0) Overall primary sales (tril. RMB) 8.8 tril. - 9.0 tril. 8.1 tril. - 8.5 tril. *Forecast based on government data covering 70 cities. e--Estimate. RMB--Renminbi. Source: S&P Global Ratings. Sales performance will continue to diverge among Chinese cities, with selected higher-tier cities performing better than the rest of the nation.
According to China Real Estate Information Corp. (CRIC), a private researcher, aggregate primary sales volume (in square meters) for the four tier-one cities rose 2% year on year during January-August 2025. This compares with an overall decline of 5.4% in sales volume on a nationwide basis during the same period, according to the National Bureau of Statistics....
....MUCH MORE
