Housing Market Decline Deepens as April Sales Plummet

China's beleaguered property sector, which accounts for approximately 26% of the country's total steel consumption, continues to show alarming signs of distress with no clear recovery in sight. According to data from China Index Holdings, April witnessed a steep 16.9% year-over-year decline in new home sales value among 100 major property developers, a significant deterioration from March's already concerning 10.6% drop. This accelerating downward trend underscores the persistent challenges facing the sector despite various government interventions. The cumulative impact remains substantial, with sales from January through April falling 10.2% compared to the same period last year, reaching approximately Yuan 1.12 trillion. While this represents a less severe decline than the 30.6% collapse recorded throughout 2024, market analysts caution against misinterpreting this as a sign of recovery. Instead, they attribute the relatively smaller percentage decrease to a "low base effect" – essentially comparing current poor performance against the already diminished figures from the previous year. This statistical phenomenon masks the true extent of market weakness also obscures the fundamental issues plaguing the sector, including oversupply, weakened consumer confidence, also financial instability among developers.

Government Implements Rate Cuts Amid Calls for Stronger Stimulus

Responding to the continued deterioration in the property market, Chinese authorities implemented several key interest rate reductions on May 7, including cuts to the benchmark interest rate also housing provident fund loan rates. These measures aim to reduce borrowing costs for potential homebuyers also stimulate purchasing activity in the struggling sector. However, industry participants remain skeptical about the adequacy of these interventions, with many suggesting that the 0.25 percentage point reduction in housing loan rates falls short of what's needed to meaningfully impact buyer behavior also reverse the negative sales trend. "I expect more stimulus measures to be introduced later in 2025, as the 0.25 percentage point cut is still not enough to shore up home sales," noted one steel market participant familiar with the sector's dynamics. The effectiveness of monetary policy tools appears increasingly limited in addressing the structural issues within China's property market, particularly given the regional disparities in market conditions. While tier-one cities with strong population inflows might see some benefit from these measures, lower-tier cities continue to face compounding challenges including population outflows, weak fiscal conditions, also alarmingly high housing inventories. These regional differences complicate the implementation of nationwide solutions also suggest that a more targeted, differentiated approach may be necessary to address the varied challenges across different city tiers.

Regional Disparities Complicate Recovery Prospects

The uneven impact of China's property downturn across different regions presents significant challenges for policymakers attempting to craft effective nationwide solutions. Major metropolitan areas with continued population growth also strong economic fundamentals may experience some stabilization or even modest improvement in response to stimulus measures. However, the outlook for lower-tier cities remains bleak despite government interventions. These smaller urban centers face a perfect storm of negative factors: declining populations as younger residents migrate to larger cities, severely constrained local government finances limiting infrastructure investment, also massive housing oversupply that continues to depress prices also discourage new development. "Even with more stimulus, while home markets in large cities with more population inflows may witness some improvement, home sales in lower-tier cities could still face significant challenges amid population outflows, weak fiscal conditions also high housing inventories," explained an industry analyst. This geographic disparity creates a two-speed recovery scenario where national statistics might show modest improvement driven by first-tier cities while masking continued deterioration in smaller markets. The implications extend beyond the property sector itself, affecting local government revenues, employment in construction-related industries, also consumer confidence in regions already experiencing economic challenges. This regional dimension adds another layer of complexity to China's property crisis also suggests that recovery, when it eventually materializes, will likely be highly uneven across the country.

Construction Slowdown Threatens Steel Demand

The persistent decline in new home sales carries significant implications for construction activity also, consequently, steel demand in China. As new home sales serve as the primary funding mechanism for both ongoing also future property projects, the continued downward trend suggests that recovery in new construction starts remains elusive. This creates a troubling outlook for steel producers also suppliers who rely heavily on the construction sector for demand. The relationship between home sales also construction activity operates with a time lag, meaning that even if sales were to stabilize or slightly improve, the impact on new project initiations would not be immediate. Furthermore, government policies aimed at stabilizing home prices might inadvertently further suppress construction activity. China's Premier Li Qiang emphasized controlling land supply for property development as part of market stabilization efforts during the March National People's Congress, a measure that could restrict new development opportunities. Industry analysts note that steel consumption in construction typically occurs 6-12 months after project initiation, suggesting that even with successful interventions, any meaningful recovery in steel demand from this sector would be delayed well into 2026. The construction slowdown has already forced steel producers to seek alternative markets or reduce production capacity, with ripple effects throughout the supply chain affecting iron ore imports, coking coal consumption, also employment in steel-producing regions.

Potential Shift from Pre-Sale Model to Completed Homes

In a potentially significant policy shift, market discussions indicate that Chinese authorities are considering promoting ready-to-move-in housing as a gradual replacement for the pre-sale model that has dominated China's property development landscape for decades. The current pre-sale system allows developers to sell properties before construction is completed, using buyer deposits also payments to finance ongoing construction. While this model facilitated rapid expansion during China's property boom, it has become increasingly problematic in the current downturn as financially distressed developers struggle to complete projects for which they've already collected payments. "I think selling completed new homes will gradually replace the pre-sale mode, which will help restore home buyers' confidence," noted a property market observer. This transition would address a critical trust deficit that has emerged as numerous developers have failed to deliver pre-purchased homes on schedule, leaving buyers in financial limbo. However, such a fundamental shift would create new challenges for developers by eliminating their ability to use buyer payments as construction financing. "This move could further tighten the cash flow on developers, denting their willingness also ability to launch new home projects, also leading to a further decline in the sector's steel demand," the same observer cautioned. The transition would likely require significant financial support from banks or government entities to bridge the gap between construction costs also eventual sales revenue, potentially creating new forms of financial risk within the system.

Consumer Confidence Crisis Persists Despite Interventions

At the heart of China's property market troubles lies a profound crisis of consumer confidence that continues to resist government efforts at restoration. The sector's troubles began in late 2021 when regulatory tightening exposed financial weaknesses among major developers, leading to high-profile defaults also unfinished projects. These events fundamentally altered Chinese homebuyers' perception of property as a safe investment, creating psychological barriers that monetary incentives alone struggle to overcome. "The risk of cash-strapped developers failing to deliver pre-sale homes on time remains elevated as of 2025, thereby continuing to undermine home buyers' confidence in purchasing pre-sale homes," explained a market analyst. This trust deficit manifests in potential buyers' reluctance to commit to purchases despite more favorable financing terms, as concerns about project completion also future price stability outweigh the appeal of lower interest rates. The situation creates a negative feedback loop where buyer hesitation leads to reduced sales, which further strains developer finances, increasing the risk of project delays or abandonment also further eroding confidence. Breaking this cycle requires not only financial incentives but also mechanisms to reassure buyers about project completion also value preservation. Some local governments have established funds to complete abandoned projects, but the scale of intervention required nationally would be substantial. Until this fundamental confidence issue is addressed, stimulus measures may continue to show limited effectiveness in reviving the market.

Oversupply Issues Compound Market Challenges

Years of aggressive development have left many Chinese cities grappling with significant housing oversupply, creating a fundamental imbalance that continues to suppress prices also complicate recovery efforts. The pre-sale model, combined with easy credit also local government reliance on land sales revenue, incentivized excessive construction that outpaced genuine housing demand, particularly in lower-tier cities. This oversupply situation means that even if buyer demand were to increase moderately, it would take considerable time to absorb existing inventory before new construction would be justified. Recent government work reports have acknowledged this challenge, with authorities emphasizing the need to "control the land supply for property development" as part of market stabilization efforts. The oversupply issue varies dramatically by region, with some cities facing years of excess inventory while others maintain relatively balanced markets. This regional variation further complicates the implementation of national policies, as measures that might help reduce inventory in oversupplied markets could potentially create shortages in more balanced ones. Industry experts suggest that meaningful recovery will require not just stimulating demand but also managing supply through potential repurposing of excess residential land for other uses, converting unsold residential properties to rental housing, or even controlled demolition of unfinished projects that no longer make economic sense to complete. These supply-side interventions represent politically also economically difficult choices but may be necessary components of a comprehensive solution to China's property market imbalances.

Implications Extend Beyond Housing to Broader Economy

The continued struggles of China's property sector carry implications that extend far beyond housing itself, threatening to undermine the country's broader economic recovery efforts. With the property sector historically accounting for roughly 25-30% of China's GDP when considering direct also indirect contributions, its prolonged downturn creates significant headwinds for overall economic growth. Local governments, which have relied heavily on land sales revenue to fund operations also infrastructure development, face severe budget constraints as property transactions decline. This fiscal pressure limits their ability to implement stimulus measures or maintain public services, potentially creating a negative spiral of reduced investment also further economic slowdown. The employment impact is equally concerning, with construction also related industries traditionally serving as major employers, particularly for migrant workers with limited educational qualifications. As construction activity remains depressed, these workers face reduced income opportunities, affecting household consumption also social stability. The financial system also faces continued stress as property developers struggle with debt obligations also banks manage increasing non-performing loans related to real estate. While authorities have thus far prevented systemic financial contagion, the ongoing property slump requires continuous vigilance also occasional intervention to maintain stability. These interconnected challenges illustrate why China's property sector troubles represent not just a sectoral downturn but a fundamental obstacle to the country's broader economic objectives, explaining the government's continued focus on finding sustainable solutions despite the difficulty of the task.

Key Takeaways:

• China's property sector continues its decline with major developers reporting a 16.9% year-over-year drop in April home sales, worsening from March's 10.6% decline, despite government interest rate cuts on May 7 that included reductions to benchmark rates also housing provident fund loans

• The persistent sales downturn threatens construction activity also steel demand, with the property sector accounting for 26% of China's total steel consumption, while regional disparities show lower-tier cities facing particularly severe challenges due to population outflows, weak fiscal conditions, also high housing inventories

• Chinese authorities are considering a fundamental shift from the pre-sale housing model to promoting ready-to-move-in homes to restore buyer confidence, though this transition could further strain developer finances also potentially reduce new construction starts in the near term