China’s residential real estate market has extended its downward trajectory through the first half of 2026, held back by widespread buyer hesitation that stems from widespread expectations of further price declines. With both transaction volumes and average values continuing to drop, market analysts see almost no evidence that a near-term turnaround is on the horizon.
New data published Wednesday by the China Index Academy offers a clear snapshot of the current downturn: across 100 major Chinese cities, secondary-market residential prices fell 0.42% month-over-month in June, pushing the national average to 12,639 yuan (approximately US$1,750) per square meter. Price drops were far more common than gains, with 88 of the 100 tracked cities recording lower values and just 12 seeing minor increases.
The slump in the resale market cuts across all city tiers. Year-over-year data for June shows first-tier city prices fell by 6.95%, while second-tier centers fared worse with an 8.21% annual drop. Smaller third- and fourth-tier cities, which have shouldered heavy oversupply for years, recorded a 7.48% year-over-year decline.
Among China’s 10 largest cities, Nanjing and Wuhan saw the steepest annual drops, with resale prices falling 11.45% and 10.89% respectively. Beijing, Tianjin, Guangzhou and Chongqing all recorded declines between 8% and 10%, while Hangzhou, Shanghai, Chengdu and Shenzhen saw drops ranging from 5% to 8%. Shenzhen outperformed its peer major cities, posting the smallest annual decline at 5.27%.
Market commentators across China broadly agree that first-half data confirms the downward trend has not yet hit bottom, with most predicting further price drops through the second half of 2026. One Henan-based columnist, writing under the pen name Qingjin Wenwang, highlighted the stark shift in negotiating power between sellers and potential buyers over just a few months.
“A friend of mine began house-hunting for marriage in late 2025. Back then, sellers were confident and refused to budge on asking prices,” he shared. “By June 2026, when he returned to the same district to view comparable properties, most sellers had softened their stance and were constantly pressing him to sign a deal as soon as possible.”
Even with more flexible sellers, the columnist noted that the experience left his friend more cautious than ever: the visible shift in market conditions only reinforced his fear that prices would continue to fall even after he completed a purchase, leaving him with an underwater asset.
Citing earlier data from the National Bureau of Statistics (NBS), Qingjin Wenwang outlined four core factors that continue to block a sustainable market recovery: First, prices have not yet stabilized: in May, only 16 out of 70 major cities recorded month-over-month new home price gains, and just 10 saw resale price increases, with declines accelerating in smaller third-tier markets. Second, buyer demand remains muted: new home sales dropped 10.8% year-over-year by floor area and 13.5% by value through the first five months of 2026, with millions of households delaying purchases indefinitely. Third, developer activity continues to contract: real estate investment fell 16.2% year-over-year between January and May, new construction starts dropped 22.6%, and project completions declined 23.4%. Fourth, confidence in the resale market has deteriorated sharply, with market price benchmarks shifting lower across most cities, and cautious buyer psychology takes significant time to reverse once it sets in.
Official NBS data from June 16 reinforces this grim outlook: across 70 major cities, only four recorded year-over-year new home price increases in the first five months of 2026. No city recorded year-over-year resale price gains over the same period, with most cities seeing annual declines between 5% and 8%.
A Guangdong-based property columnist noted in a Wednesday analysis that China’s property market has undergone a dramatic structural shift since 2021, when new home sales peaked at 1.79 billion square meters. Sales have declined every year since that peak, falling below 1 billion square meters in 2025. In dozens of cities across the country, prices have fallen more than 40% from their 2021 peak, with some markets dropping more than 50% – a contraction that qualifies as severe by any global standard, he emphasized.
He outlined three long-term structural drivers behind the ongoing downturn that cannot be addressed with short-term stimulus: first, China’s population entered negative growth in 2022 and has continued to shrink, a trend that international experience shows is extremely difficult to reverse, and one that will keep long-term housing demand muted. Second, the era of rapid urbanization that drove decades of explosive housing demand has largely drawn to a close, after decades of mass rural-to-urban migration pushed prices steadily higher. Third, after decades of rapid construction, overall national housing supply is no longer scarce, with only a small number of major cities and prime urban districts facing tight supply.
In late April, a wave of viral online commentary drew widespread public attention to a startling trend: after adjusting for inflation and currency depreciation, four years of continuous declines have pushed inflation-adjusted national home prices back to levels last seen around 2006. The claims drew on data compiled by the Bank for International Settlements (BIS) and sparked fierce debate across Chinese social media about the true health of the property sector.
The Federal Reserve Bank of St. Louis visualized BIS data to track China’s home prices against a 2010 baseline index of 100. A first chart tracking nominal residential prices shows China’s index climbing from 78 in 2006 to a peak of 145.9 in 2021, before sliding back to 114 in the first quarter of 2026. When adjusted for inflation and currency depreciation, however, the picture is far more stark: the index rose from 88.5 in 2006 to a peak of 113 in 2021, then fell to 85.1 in Q1 2026, putting real home prices lower than they were two decades ago.
This adjustment works the same way as the distinction between nominal and real GDP growth: stripping out the impact of price changes to show the actual change in asset value.
Not all analysts agree that the national average data applies uniformly across the country. Jiangsu-based commentator Duanwei Liwen pointed out that top-tier markets remain far more resilient than smaller urban centers. “Home prices in Beijing, Shanghai and Shenzhen are still extremely high, and there is no sign they have returned to 2006 levels,” she noted. “You cannot use a single national average to describe the situation in every Chinese city.”
Duanwei added that while first-tier cities have held their value far better, most of the downward pressure is concentrated in third- and fourth-tier cities, where real prices have indeed fallen back to levels not seen in a decade or more. She emphasized that the real value of the BIS data is as a warning to buyers who try to time the market and bet that prices have hit bottom.
“Over the past few years, many people have already fallen into this trap,” she said. “They see a small price pullback and assume the floor has been reached, or they see a minor policy easing and conclude a rebound is coming. Then prices keep falling, and they are stuck with assets they cannot sell.”
A writer for Beijing-based financial outlet Sina Finance pushed back on the inflation-adjusted framing, arguing that nominal prices are far more relevant for most household buyers, since household incomes and everyday living costs are not adjusted for inflation. Using the BIS nominal price index, he noted, it is undeniable that national average prices have returned to 2016 levels.
Any reliable forecast for future price trends, he added, must weigh a full range of interconnected factors, including demographic shifts, rental yields, income inequality, and the evolving balance between housing supply and buyer demand.