China’s real estate crisis could still get worse, Goldman Sachs says

China’s property crisis is in its fourth year, and the market is still far from a bottom, Goldman Sachs analysts wrote in a report on Wednesday.

Home prices have fallen 20% over four years and could decline another 10% before bottoming out in 2027, they wrote.

Goldman Sachs’ report was based on an analysis of housing bust episodes across 15 economies since 1960, which found that the median housing price correction is 30% over six years. Goldman Sachs defines housing busts as a decline of 20% from cyclical peaks.

“Given the durability of housing stock and stickiness of house prices, it may take years for housing busts to finally find a bottom,” the analysts wrote.

China’s property market showed some green shoots earlier this year, with slowing price declines, but recent months saw renewed weakness in both prices and activity. In May, new-home prices in 70 cities posted their biggest decline in seven months, while used-home prices witnessed their sharpest fall in eight months.

“The unfolding housing market correction in China represents one of the decade’s most significant economic events,” wrote the analysts.

The crisis began in 2021, when Beijing implemented higher lending curbs for both developers and buyers to rein in excessive borrowing by property developers and reduce systemic financial risk in the real estate sector.

The curbs triggered a sharp slowdown in China’s decades-long housing boom — once a key economic engine — and compounded the pain from strict pandemic restrictions.

China’s economy — the world’s second largest — is not just dealing with its long-drawn property crisis. It’s also facing high youth unemployment, deflationary pressures, and weak consumer sentiment.

Despite mounting pressure, Chinese policymakers have remained cautious in rolling out monetary and fiscal support, which is “in sharp contrast to other countries’ reactions to significant housing downturns,” wrote the analysts.

“Insufficient cyclical easing is likely to result in sustained weakness in confidence and private demand as well as prolonged deflation,” they wrote.

The analysts expect the Chinese government to move to ease policy should property prices fall sharply, exports slow, or unemployment rise.

“China’s limited policy response relative to historical norms suggests more policy easing remains necessary to prevent the housing downturn from causing entrenched demand weakness, though political willingness rather than capacity usually poses the main constraint,” they added.

Top-tier cities are likely to lead the recovery from around late 2026, they added.

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