Analysts at Morgan Stanley see China’s housing slump continuing this year, with experts from the US investment bank predicting that new home prices could drop another 2 to 3 percent as the government continues to take a reactive approach to policy fixes and consumers remain timid.
With official data showing average home prices in China having declined 2.4 percent in November from the same month a year earlier, the forecast puts 2026 roughly in line with the past year’s experience. With home prices having now declined 12.1 percent from their peak in 2021, the country has now experienced four straight years of market decline, according to a Morgan Stanley research note released before the holidays.
Hong Kong-based Morgan Stanley analysts Stephen Cheung and Cara Zhu attributed the duration of the slump in part to caution on the part of policymakers, who have so far taken an incremental approach to fixing in the market and preferred reaction over reform, with those tactics likely to continue this year.
“We think the narratives on housing policy in 2026 will be similar to those in 2025, with risk mitigation rather than GDP growth remaining the top priority of regulators, Cheung and Zhu said in the note. “Roll-out of any meaningful fiscal-backed stimulus may stay reactive and measured, and is likely to lean towards 2H, to cushion the pace of home price declines.”
Slump Not a Crisis
Prices for new homes in 70 major Chinese cities fell 0.39 percent in November compared to October, according to the most recent data from China’s National Bureau of Statistics. Prices for second-hand homes have been under greater pressure, declining 0.66 percent in November, and are now down 20.8 percent since 2021, according to an analysis by European bank ING.
With the home price slide dragging on, the value of developer sales of new homes in the January to November period fell 11.2 percent compared to the same period in 2024, according to official data.
With China’s real estate industry having gone through multiple years of decline, Morgan Stanley pointed out that the significance of the housing market to the country’s macroeconomy has been significantly reduced, making officials less likely to intervene.
“This is consistent with the fact that incremental nationwide policy easing on the property market was muted in 2025 given no new social and financial risk emerged in the year,” Cheung and Zhu said.
Lower levels of worry among policymakers may also explain the lack of official moves to support struggling developers,
Read more from original article, all rights reserved Morgan Stanley Says China’s Property Prices Could Drop Another 3 Percent in 2026
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