How did China’s property market, once a symbol of the country’s economic miracle, become one of its biggest headaches? The answer lies in a perfect storm of falling prices, too many empty homes, and families struggling with debt that’s making economists nervous about deflation.
China’s property boom turned bust through oversupply, plummeting prices, and crushing household debt threatening nationwide deflation.
Beijing’s housing market tells the story clearly. Second-hand home prices dropped 1.1% in just one month during July 2025, marking the steepest decline nationwide. Shanghai, Shenzhen, and Guangzhou weren’t far behind, with their second-hand prices tumbling between 28% and 32%. It’s like watching dominoes fall as tier-one cities dragged smaller cities down with them.
The problem isn’t just falling prices – it’s that buyers have practically vanished. Transaction volumes plummeted by 35% in major urban areas, leaving the market feeling like a ghost town. Imagine a shopping mall where everyone suddenly stopped shopping; that’s China’s property market right now.
Oversupply is the villain in this story. Cities are drowning in empty apartments while developers desperately cut back on new projects. Shanghai saw luxury home sales crash by over 50% in the second quarter of 2025. Even tier-three cities like Beihai and Tangshan watched new home prices sink by around 6.5% to 6.7%. China’s central bank has limited tools to combat this crisis compared to developed countries, facing challenges from currency pressures and the need to balance interest rate policy with other economic priorities.
The construction industry reflects this chaos. Residential project starts fell 22.55% in 2024, and completions dropped 25.81%. The government tried throwing CNY 4 trillion in special loans at the problem to finish stalled projects, but it’s like trying to fix a leaky boat with duct tape. Approximately 48 million pre-sold homes across China are awaiting completion as major developers struggle with mounting debts.
Here’s where things get truly worrying: household debt tripled from under 20% of GDP in 2008 to over 60% by 2023. Many families bet everything on real estate, and now they’re watching their wealth disappear. Outstanding housing loans reached RMB 37.7 trillion as borrowing fueled the property boom before its dramatic collapse.
China’s former finance chief warns this property crisis is fueling dangerous deflation that could spread throughout the economy.
The regional divide makes matters worse. While some southern cities stay stable, tier-three cities face acute challenges as young people leave for better opportunities elsewhere. China’s property miracle has become a cautionary tale about what happens when building outpaces actual demand.
