For years, the narrative surrounding China’s property sector has been one of unrelenting decline. However, a recent forecast by Goldman Sachs has injected a rare dose of optimism into the discourse, suggesting that the housing markets in Shanghai and Shenzhen could reach a bottom by late 2026. The investment bank anticipates a 15% price recovery between late 2025 and 2028, positioning these tier-one hubs as the vanguard of a national stabilization effort.
This optimistic outlook contrasts sharply with the current balance sheets of China’s 'Big Six' state-owned banks. By the end of 2025, these financial giants reported a collective decrease of approximately 700 billion RMB in personal mortgage balances. This contraction highlights a persistent 'early repayment' trend among Chinese households, who remain wary of long-term debt amid fluctuating income expectations and a lack of immediate capital gains in the housing market.
Despite the banking headwinds, structural shifts in supply suggest that the market’s floor may finally be within reach. National Bureau of Statistics data reveals that the inventory of unsold residential property decreased in March, marking the first decline in 51 months. This contraction in supply, coupled with a significant surge in secondary market transactions in Shanghai and Shenzhen, suggests that the 'wait-and-see' attitude of buyers is beginning to thaw in the country's most resilient urban centers.
Goldman Sachs analyst Yi Wang points to a tightening spread between rental yields and mortgage rates as a critical driver for this recovery. While rental yields remain lower than borrowing costs, the gap is at its narrowest point in a decade. Furthermore, the potential wealth effect from a rebounding stock market—similar to the recovery pattern seen in Hong Kong—could provide the necessary liquidity to trigger a more robust residential rebound in these primary markets.
Banking executives remain cautiously optimistic but are pivoting their strategies toward a 'de-real-estatization' of credit. Many lenders are shifting their focus to manufacturing, infrastructure, and green energy while tightening credit standards for new property projects. This shift reflects a systemic effort to reduce exposure to real estate risks, even as they prepare for a potential stabilization of mortgage demand in late 2026.
The debate is now shifting toward the role of government subsidies to accelerate this transition. Drawing on international models from the United States, Japan, and Hong Kong, analysts are discussing the implementation of mortgage interest subsidies to alleviate the burden on homeowners. While currently being tested in smaller pilot cities, the broader adoption of such tactical tools may be necessary to transform the current 'pulse-like' market recovery into a sustained upward trend.