According to reports, S&P Global Ratings has further downgraded its assessment of the Chinese real estate market in its latest review: the agency expects real estate sales in 2026 may decrease by 10%–14% year-on-year, which is more pessimistic than the "-5% to -8%" forecast given in October last year.
Reasons for the Further Downgrade: Deeper Recession, Slow Demand Recovery
S&P analysts believe this round of adjustments has shown "deep and persistent" characteristics, with a continued lack of warming in home-buying demand. The agency pointed out that the decline in home prices directly weakens potential buyers' confidence, and the weakened confidence in turn further reduces transactions, forming a negative feedback loop that is difficult to break quickly.
Deleveraging Inventory Becomes Key: S&P Suggests Greater Government Role
In the context of supply-side pressures not having noticeably eased, S&P proposed a more targeted approach to reducing inventory: only the government has the capability to absorb excess stock on a wider scale, such as acquiring more completed but unsold homes for use in social housing and other public purposes. However, the report also mentioned that the scale of existing related measures remains limited.
Differentiation of Home Prices and Cities: First Tier Under Pressure, Shanghai Relatively "Holding Up"
Regarding price trends, S&P expects home prices in 2026 may fall another 2%–4%, similar to the decline in 2025. Of particular concern is that the downward trend in home prices in major Chinese cities showed signs of acceleration in the fourth quarter of 2025: Beijing, Guangzhou, and Shenzhen are expected to see a full-year decline of at least 3% or more; relatively speaking, Shanghai continues to rise among major cities, with a 5.7% increase in 2025 compared to 2024.
Supply Side Not Contracted: Inventory Increases for the Sixth Consecutive Year
The report also emphasized that "supply exceeds demand" has not subsided: despite continued sluggish sales, construction activities by developers are ongoing, leading to an increase in inventory of new homes completed but unsold for the sixth consecutive year, further increasing the difficulty of market clearance.
Looking Back at 2025: Sales Decline Exceeds Expectations, Full Year Sales Less Than Half of 2021's
S&P's assessment of 2025 was also proven optimistic. Initially in May 2025, the agency only expected a sales decline of 3%, revised up to a decline of 8% in October, but the final data showed that 2025 sales actually fell by 12.6% to 8.4 trillion yuan (approximately 1.21 trillion USD), which is less than half of the peak of 18.2 trillion yuan in 2021.
