FALLING property sales over the first five months of 2025 show how China’s economically important real estate market remained stuck in a slump this year despite signs of heat in the markets in higher-tier cities.

Cumulative sales of China’s top 100 property developers from January to May fell 7.1 per cent year on year to 1.3 trillion yuan (S$233.2 billion), accelerating from the 6.7 per cent drop for the January-to-April period, according to figures published Saturday (May 31) by China Real Estate Information Corp (CRIC).

The CRIC report measures sales from projects directly managed by the top 100 developers, excluding projects including those run by external partners.

Figures released by another data provider for the industry, China Index Holdings (CIH), painted a similar picture.

Total sales of the top 100 property developers for the first five months were down 10.8 per cent year on year to 1.4 trillion yuan, according to a recent CIH report. In the CIH report, sales included revenue from projects managed by both developers’ in-house sales teams and those outsourced.

For May alone, sales by top developers fell 8.6 per cent year on year to nearly 295 billion yuan, although the total was up 3.5 per cent on a month-on-month basis, according to CRIC figures. The CIH data showed an even steeper year-on-year sales drop of 17.3 per cent for May, with the decline widening from 16.8 per cent in April.

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To put the scale of the downturn in perspective, sales of 1.3 trillion yuan amount to less than 30 per cent of the total made over the first five months of 2021, before the slump began.

Bifurcated market

The May sales figures offer a broader view of a national real estate market that has grown increasingly bifurcated. Analysts have been highlighting the difference in demand between metropolises such as Beijing and Shanghai and in lower-tier Chinese cities.

In Shanghai, demand looks to be heating up. According to a report by EH Consulting, a real estate industry research institute, multiple residential projects managed to sell out in a single day in May.

In one example, a local subsidiary of developer Greentown China Holdings sold all 120 units of a project on the same day it was put on the market, the report said. The homes sold for 195,000 yuan per square metre, generating nearly seven billion yuan in revenue.

It’s a different story in some of China’s lesser-known and less wealthy cities. The vast majority of property developments in third and fourth-tier cities have far more supply than demand, said a senior sales executive at a leading property developer who did not wish to be named.

Two factors have long helped drive China’s property market: the need for new homes and the belief that housing was a sure-fire investment.

Since the downturn, however, residential property has lost its appeal as an investment in many third- and fourth-tier cities, the executive said. In addition, basic housing needs have already been met in those areas.

With the populations of many of the cities already starting to shrink and with the average household already owning two or three homes, a slowdown in home sales was inevitable

“In the long run, we believe the property market will eventually stabilise,” the executive said. “But in the near term, market divergence will persist.”

Changes to government policy

Addressing the disparity requires tackling the problem from both the supply and demand sides, market insiders said. The CRIC report noted that the current new housing supply has fallen significantly, particularly in hot markets such as Shanghai, Shenzhen, Hangzhou and Chengdu. The situation has limited the potential for a surge in sales volume in those cities.

Changes to government policy could help. The EH Consulting report recommended shifting from broad-based stimulus to more targeted, nuanced regulation over the property market. That would help different parts of the market achieve a better balance between supply and demand that would eventually stabilise prices.

CIH expects housing market policy to remain accommodative in June.

With the mid-year sales window approaching, property developers are likely to accelerate project launches and increase their marketing efforts, the report said.

It added that the market in core cities is expected to continue its recovery, although divergences between cities are likely to continue. CAIXIN GLOBAL