UBS Forecast: The Real Bottom of China's Property Market Has Not Yet Arrived!

Will the real estate market recover? This is the hardest question to answer in 2025. With policies continuously intensifying and interest rates steadily declining, we should have seen a market upturn. Yet reality tells a different story: homes remain difficult to sell; land parcels continue to go unbid; and market confidence remains frozen at rock-bottom levels. In its latest research report, UBS candidly admits: the true 'bottom' has yet to arrive—and this recovery will be farther away and slower than anticipated. I. First Half of 2025: Brief Heat, Then Rapid Cooling—Ultimately Settling into 'Wait-and-See' UBS notes that the property market experienced a short-lived rebound early in 2025, primarily driven by the密集 (intensive) stimulus measures rolled out since September 2024. Yet this 'heat' did not last long. By April, the market clearly cooled, and a pervasive wait-and-see sentiment quickly spread. More critically, UBS’s assessment is unequivocal: ・Residential sales value in 2025 is projected to decline by 5% year-on-year; ・New construction starts are expected to fall by 10%; ・Real estate investment will continue its downward trend. In other words, despite numerous policy interventions, homes remain unsold, developers still hesitate to acquire land, lack funds to commence new projects, and possess little confidence to invest. Those voices proclaiming 'market recovery' at this juncture resemble fireworks in the dead of night—brilliant but fleeting. II. Abolishing the Pre-sale System: A 'Fatal Blow' or 'Pain of Rebirth'? There is another issue—far graver than most realize: the pre-sale system may soon be abolished. At its core, this system allows developers to collect full payment before construction completion—a mechanism that has long sustained developers’ cash flow and underpinned the entire real estate value chain. Yet authorities are now actively debating whether to phase it out entirely in favor of 'ready-to-move-in' sales. If implemented, the impact on the market would be profound: ・Developers’ cash flow would tighten sharply, drastically reducing their willingness and ability to acquire land or launch new projects; ・Local governments’ land-related fiscal revenue would shrink, straining municipal finances; ・Construction cycles would accelerate, simultaneously escalating quality-control and cost pressures. Should abolition proceed, the rhythm of new-home supply, the logic of land transactions, and even local economic operations would all be fundamentally reshaped over the next two to three years. This is no ordinary policy adjustment—it is a 'structural earthquake' with the potential to upend the industry’s entire operating model. III. The True 'Iceberg': Five Years’ Worth of Unsold Inventory UBS estimates that current new-home inventory in China would take 31 months to absorb—well above the normal level of 25 months.

UBS: The Downturn Is Lasting Longer Than Expected

Although Beijing has lifted purchase restrictions within the Fifth Ring Road, below is UBS’s latest view on the persistently weakening market. UBS Group was among the few institutions previously bullish on China’s property market—but it has now pushed back its forecast for the sector’s full recovery. Due to persistently weak sales in Q2 2025, UBS believes a comprehensive market recovery may be delayed until mid-to-late 2026—unless the government introduces significantly stronger stimulus measures. John Lam, UBS’s Head of China & Hong Kong Real Estate Research, stated in March this year that first-tier city home prices would stabilize by early 2026. He now acknowledges, however, that if sluggish sales persist, the recovery timeline must be further postponed. 'Sales momentum has clearly weakened over recent months,' Lam said. 'Without additional stimulus policies, recovery will be substantially more delayed than originally anticipated.' Lam attracted market attention in early 2021 when he downgraded China Evergrande’s credit rating—11 months before the company’s actual default. Last year, while most analysts remained bearish, he took the rare step of turning optimistic on the sector. Today, however, persistently weak market performance has once again forced him to revise his outlook. 'Weak demand has significantly extended the inventory absorption cycle,' Lam noted.

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