China’s housing slump drags on into 2026, with no quick fix in sight
China’s residential construction sector is showing few signs of recovery in 2026, with investment in residential buildings continuing to contract sharply. According to the National Bureau of Statistics (NBS), total investment in residential real estate development fell by 11.7% year-on-year in March 2026, worsening from a 9.6% drop in February. On a cumulative basis, the decline stood at 10.6% for the first three months of the year. This follows a 16.5% plunge in 2025, after annual contractions of 9.3% in 2024 and 16.7% in 2023.
The persistent weakness is being driven by a toxic mix of falling new home prices, mounting developer debt, and fragile confidence among private-sector firms. GlobalData expects residential construction output to shrink by a further 1% in real terms in 2026, following a 4.1% contraction the year before. The broader construction industry is being dragged down as a result.
NBS data shows that the total floor space of new residential construction starts fell by 22.3% year-on-year in the first quarter, while the floor space of residential buildings under construction dropped by 12%. Meanwhile, a report from the China Index Academy reveals that the top 100 developers spent just 146.5 billion yuan ($20.5 billion) on land acquisitions between January and March 2026 — a steep 49.4% decline from a year earlier, even though the pace of decline eased slightly by 3 percentage points from the previous month. “Developers are still extremely cautious,” said Li Wei, a Shanghai-based property analyst. “They’re not rushing to buy land because they don’t know when demand will come back. It’s a waiting game, and that directly hits future construction.”
Local governments are also pulling back. In the first quarter of 2026, the planned construction area of residential land across 300 cities fell to 64.72 million square meters, down 23.8% year-on-year. Actual land transactions dropped to 58.93 million square meters, a 25.9% decline. Land transfer fees — a key revenue source for local governments — plunged 45.7% to 215.4 billion yuan. “The land market is basically frozen in many places,” said Zhang Min, a real estate economist in Beijing. “When local governments stop selling land and developers stop buying, you have a pipeline problem. Fewer new projects today means less construction output tomorrow.”
The impact varies by city tier. In first-tier cities like Beijing and Shanghai, the land market held up relatively well, with transaction areas falling just over 10% year-on-year, though land transfer fees dropped nearly 50% due to a high base effect. In second-tier cities, activity was far weaker — except in Hangzhou and Chengdu — with land transfer fees falling more than 60% year-on-year in most cases. Third- and fourth-tier cities continued to struggle, with both supply and transactions down around 20%.
Still, there are faint glimmers of hope. According to the China Index Academy, total sales by the top 100 developers reached 900.45 billion yuan between January and April 2026, with the rate of decline easing by 3.8 percentage points compared to the first quarter. This marks two consecutive months of improvement. Policy measures in key cities — including easing purchase restrictions, offering housing subsidies, and raising public housing fund limits — have helped boost activity in the secondary housing market and are gradually supporting demand for new homes. In April alone, the year-on-year decline in sales among the top 100 developers narrowed by 14.5 percentage points compared to March. Some major players, including Poly Developments, China Overseas Land & Investment, China Resources Land, China Merchants Shekou, China Jinmao, Jianta Real Estate, and Poly Property, even posted notable sales growth during the month.
“These numbers are a relief, but they don’t signal a turnaround,” said Chen Yuxuan, a 34-year-old homebuyer in Shenzhen who has been watching the market for over a year. “Prices are still falling in many areas, and developers are still desperate to offload inventory. I’m not convinced things are getting better — it feels more like a temporary sugar rush from government policies. Until people feel confident about their jobs and incomes, no one’s going to rush into buying.”
Behind the headline numbers, the industry is undergoing a structural shift. Developers are moving away from the “high costs, high prices, high risks” model that defined the boom years, and are instead focusing on financial stability and project quality. This transition is taking place alongside a major market correction: by 2025, national sales of commercial housing had fallen by more than 50% from their 2021 peak. At the same time, the share of second-hand home transactions rose to nearly 45% in 2025, up 17 percentage points from 2021, further reducing demand for new construction.
Looking ahead, policy support is expected to continue. The government has placed “high-quality real estate development” at the center of the 15th Five-Year Plan (2026–2030), with total urban housing demand estimated at around 4.98 billion square meters over the period. Growth will likely be driven more by demand for better-quality housing, urban renewal projects, and services related to existing buildings, rather than large-scale new construction. “In the short term, the construction industry will remain weak because land investment and new projects are still falling,” said Zhang Min. “But over time, government support, demand for better housing, and urban redevelopment should help stabilize the market and support a gradual recovery from 2026 onward.”
This article was originally published by World Construction Network, a GlobalData-owned brand.