China's Property Slump May Be Nearing Its Bottom, S&P Says

S&P Global Ratings says a recovery in the housing markets of China's largest cities could arrive as early as next year. If it does, it would mark a welcome break from a property downturn that has dragged on for much of the past several years. The stakes are high, because real estate has long been one of the biggest drivers of China's economy, feeding into construction, local government revenue, bank lending and household wealth.

The slump has been difficult to shake. After the sector's heavy reliance on debt unraveled, developers struggled to finish projects and repay creditors, and many buyers stopped trusting that new homes would be delivered on time. Prices and sales fell across much of the country, and families who had put most of their savings into apartments watched that wealth shrink. Weakness has been widespread, but it has not been uniform, and the largest cities have generally been seen as the most resilient part of the market.

The timing of any rebound will depend on several factors. Policymakers would need to keep supporting the sector, household incomes and confidence would have to improve, and the stock of unsold homes would have to be absorbed. A rating agency's outlook is an assessment, not a promise. Forecasts for China's property market have been revised many times since the downturn began, so investors and buyers will likely look for confirmation in monthly sales volumes and price data before drawing firm conclusions.

For now, the tone is cautiously optimistic. A stabilization in the top-tier cities would not automatically lift smaller markets, where oversupply is more pronounced, and any recovery that starts from depressed prices is likely to be gradual. Still, a credible turn in the country's most important housing markets would be a significant change after years in which hopes for a bottom kept fading.