S&P is already predicting China's property slump will be worse than it expected this year

• China's property sales fell 12.6% in 2025 to 8.4 trillion yuan ($1.21 trillion), less than half the 18.3 trillion yuan peak in 2021, with the market having accounted for over a quarter of the economy
• Prices are expected to drop another 2-4% in 2026 following similar declines in 2025, with major cities like Beijing, Guangzhou, and Shenzhen reporting at least 3% price declines last year
• Four of the 10 Chinese developers rated by S&P could face downward rating pressure if sales fall 10 percentage points below the base case forecast for 2026-2027

Summary: S&P Downgrades China Property Market Forecast for 2026

Key Developments:

S&P Global Ratings has significantly worsened its outlook for China's property market, now forecasting primary real estate sales will decline 10-14% in 2026, compared to its October 2025 prediction of a 5-8% drop. This marks the second downgrade in just months—S&P initially predicted only a 3% decline in May 2025 before revising to 8% in October.

Market Performance:

• 2025 actual sales fell 12.6% to 8.4 trillion yuan ($1.21 trillion)—less than half the annual sales from four years ago
• Home prices expected to drop another 2-4% in 2026, following similar declines in 2025
• Major cities (Beijing, Guangzhou, Shenzhen) saw price declines of at least 3%; only Shanghai posted gains (+5.7%)

Critical Issues:

S&P identified an "entrenched downturn" driven by massive oversupply, with six consecutive years of completed but unsold housing inventory. The firm expressed particular concern that China's largest cities, previously viewed as healthy markets and potential recovery leaders, experienced worsening price declines in Q4 2025.

Analysts warned of a "vicious cycle" where falling prices erode homebuyer confidence, further suppressing demand.

Sector Impact:

If sales fall 10 percentage points below S&P's base case, four of ten rated Chinese developers face potential downgrades. China Vanke, formerly among the country's largest developers, has already requested debt repayment delays.

Policy Response:

The government's efforts to purchase unsold inventory for affordable housing remain "piecemeal." Authorities continue prioritizing high-tech industries over real estate support ahead of upcoming parliamentary meetings.