China’s Housing Sector Faces Ongoing Challenges Despite Planned Reforms

China’s housing sector continues to struggle, raising concerns among policymakers as they prepare for this month’s Politburo meeting. Analysts suggest that more measures may be introduced to revive both the property market and the broader economy. Despite these anticipated measures, many experts believe that the property sector will remain a significant drag on economic growth, largely due to lackluster consumer confidence and weak domestic demand.

The recent third plenum meeting, which set the economic agenda for the next five years, indicated that the central government is committed to reforming the housing sector. Plans include changes to financing methods, improvements to the presale system, and adjustments to the property tax. Additionally, the government highlighted the importance of integrated urban-rural development, with potential implications for reforms to household registration systems. These changes are aimed at building a new real estate model that prioritizes affordability and addresses the needs of the mass market.

Experts have warned that the shift in the sales model, from preselling properties to selling completed units, is financially challenging for developers who are still managing significant pressures. Urbanization is expected to provide opportunities for growth, but tangible improvements in the housing market are not expected in the near future. Goldman Sachs has reduced its forecast for the property sector’s contribution to China’s GDP, underscoring the deepening concerns over the impact of declining house prices on consumer confidence and overall economic performance. The analysts suggest that it might take years for the real economy to fully recover from these effects.