A floor in four cities: what China's housing stabilisation really is

In November 2024 China's statistics bureau produced the number its policymakers had spent years waiting for. Prices of second-hand flats in the four giant cities — Beijing, Shanghai, Guangzhou and Shenzhen — rose 0.4% in October from September, reversing a 1.2% drop the month before and posting the first monthly gain in nearly thirteen months. Even so they remained 9.6% cheaper than a year earlier, with new homes down 4.6%. The moment mattered, because a genuine bottom in Chinese housing would lift the biggest single weight on the world's second-largest economy, and a false one would leave it there. Nearly two years on, the evidence says the turning point was real, narrow, and owed more to policy than to price discovery.

The policy came first. On September 26th 2024 China's Politburo, its top decision-making body, used a rare meeting to call for halting the property market's decline. Within days the central bank ordered banks to cut the interest rates on all existing mortgages in batches before the end of October, and Beijing, Shanghai, Guangzhou and Shenzhen scrapped most home-purchase restrictions and slashed down-payment demands. Transactions surged; prices followed.

The rebound has since stretched into a run. New-home prices in the four cities rose for a fourth straight month in June, and resale prices kept climbing in July, when the official series put first-tier second-hand prices up 0.2% on the month. But the same arithmetic that produced the October happy headline also describes the country around it. National new-home prices fell 0.1% in July and were 3.2% lower than a year earlier. Breadth is the giveaway: in June prices of previously owned homes fell in 88 of the 100 cities tracked by the China Index Academy, a research firm, and in the first five months of this year no large city recorded a year-on-year rise in resale prices — only four did so for new homes. Sales are still shrinking too: new-home sales by value dropped 13.5% in January-May, and Fitch Ratings expects full-year sales to fall 11-13%. In short, a plateau in four rich cities surrounded by a market that is still leaking.

The plateau rests on three layers of state support. In May 2024 the central bank set up a 300bn-yuan relending facility so that state-owned companies could borrow cheaply to buy unsold apartments and convert them into affordable housing. Commercial banks have approved more than 7trn yuan of "whitelist" loans to keep work going on unfinished projects, with maturities rolled over when needed. State firms have become the most active bidders at foreclosure auctions, buying at discounts of 19-43% below appraised values, often as the only bidder in the room. Developers meanwhile face tight limits on how far they may cut list prices. The state has, in effect, made itself the market's buyer of last resort. The latest instalment of support, announced this month, offers Shanghai households subsidies of up to 80,000 yuan to trade up.

It is buying into enormous stock. Unsold housing covers an area estimated at roughly 3,000 square kilometres, almost twice the size of Greater London, and most of it sits in smaller cities where the buyers have decided to wait. Even at auction it does not clear: of 719,000 properties put up for sale last year, just 169,000 sold. The official price indices flatter the position too; measured values are held up by the discount ceilings. The statistics bureau's new-home index is down about a fifth from its 2021 peak, but analysts suspect the true decline is near twice that. In inflation-adjusted terms the national index has fallen back below where it stood twenty years ago, about a quarter beneath its peak, according to Bank for International Settlements data.

Who pays for the plateau determines how long it lasts. China's banks carry property loans worth about 38% of their assets. Local governments have lost half their land-sale revenue, which fell from 8.49trn yuan in 2021 to 4.15trn in 2025, and the construction industry has shed 16.8m jobs since 2023. The logic of the managed approach is visible in these numbers: let prices fall to where a market would clear them and the losses would hit banks, local budgets and household wealth simultaneously. Japan chose the cushion instead, and its prices took nearly two decades to find a bottom — the comparison most analysts reach for.

Beijing's own researchers are more optimistic than the history books. Those at CF40, a policy institute, expect the fall in sales, prices and starts to narrow to within 5% this year and to end thereafter — but only in first-tier, "new" first-tier and strong second-tier cities, with the rest of the country still adjusting. Developers on the ground sound a cautionary note: the pattern of policy, executives say, is "support, not stimulus"; bank credit to private builders remains scarce, and they expect prices to fall further this year even as the flagship cities firm. Two of the household names are beyond practical help: Evergrande is in liquidation, Country Garden has restructured its offshore debt and Vanke is deferring repayments.

The freshest policy move suggests where all this ends. On August 28th three ministries ruled that presale projects cannot be marketed until buildings have "topped out", pushing the industry toward selling completed homes. Presales — collecting buyers' deposits years before delivery — were the fuel of the boom and the chief source of the unfinished-apartment crisis that broke buyer trust. Replacing them will squeeze developers' cash flow for years; it is also the only fix that makes the market honest. Beijing is choosing trust over leverage, and slowly.

For an American investor the direct positions are mostly a dead end, and the indirect ones are easy to misread. The developers are Hong Kong-listed, in distress or both. Money has been leaving broad China funds: FXI, one of the largest US-listed Chinese-equity ETFs, has seen net redemptions of about $1.6bn this year against some $4.2bn of assets. The meaningful channel runs the other way, through the world economy. With households at home reluctant to spend, China is exporting its way out of the slump: exports now outstrip imports by an ever wider margin, with the current-account surplus climbing from 0.7% of GDP in 2019 to 3.7% in 2025, and Western governments are again denouncing a "China shock". A weak housing market is the quiet engine of that shift.

Hold the October headline that way: it was true, and it signalled less than it seemed. The four-city floor is a spending decision, reviewed monthly, in a country that has chosen to slow the adjustment rather than absorb it at once. When tempted to read "first-tier prices rise" as "the property bust is over", check the breadth first — how many cities, how much volume, how long the inventory would take to clear (eight months in Shanghai, nearly seventeen in Beijing). The floor will hold as long as the government pays for it; that is the point of the policy. Investors should treat the price print as a measure of official resolve, not of where supply and demand would meet. China's leaders have decided how long the bust lasts. The market still gets a vote, slowly, and for years.