China: Stagnation to persist as growth model shifts – Commerzbank

Commerzbank’s Dr. Henry Hao argues China’s housing market remains in structural stagnation five years after the Evergrande crisis. National prices follow an L-shaped path, with a K-shaped divergence between Tier-1 and lower-tier cities. Weak demand, tighter funding and demographics mean real estate will no longer be China’s primary growth engine as Beijing redirects capital to new sectors.

L-shaped prices, fractured construction cycle

"China's property downturn marks its fifth anniversary in July 2026. Despite localized price stabilization in top tier cities, the national housing market remains locked in stagnation. Our analysis of the construction cycle indicates structural stagnation will persist as Beijing pivots toward new growth drivers."

"Real estate investment sits at just 53 percent of its July 2021 peak. Housing starts have plummeted to a mere 24 percent of their former levels, guaranteeing the sector will remain an economic drag. Housing completions show relative resilience at 55 percent, but this is entirely policy driven."

"Beijing's policies aim to manage the decline rather than spark a major rebound. Authorities have lowered mortgage rates, reduced down payments, and encouraged local governments to buy unsold homes. Yet, structural constraints limit these impacts."

"Crucially, this structural downsizing is locked in by demographic forces. The historic wave of rural to urban migration has effectively crested, and declining birth rates shrink the pool of first-time buyers. Compared to historical crises, China is mirroring Spain's long digestion period rather than a rapid rebound."

"The era of real estate as a primary growth engine is definitively over. Consequently, Beijing has shifted capital toward new productive forces, such as green technology, electric vehicles, and advanced industrial equipment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)