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Alex Lo

A close mainland relative cried her eyes out while video-calling with my wife and me recently. Like many in China who have bought property since the late 2010s, she is sitting on a big loss with her flat outside downtown Chongqing.
The city saw sales pick up around the time of the Spring Festival, traditionally an off-season. But when she tried her luck, the offers from potential buyers were brutal, and she called off the sale.
Knowing that I work for an English-language newspaper in Hong Kong and may have access to market intelligence – I don’t – she asked for my opinion. What do I know about real-life investment?
But I did not want to disappoint her. So I quoted an analysis by UBS Group AG, which predicts a rebound soon, and one by Bloomberg, which argues for a medium-term recovery starting next year. I did not have the heart to show her a new paper co-written by Kenneth Rogoff, a prominent Harvard economist and former official of the International Monetary Fund (IMF) and the US Federal Reserve Board, which compares China’s real estate slump with Japan’s “lost decade”.
“A Tale of Two Countries: The Real Estate Crises in 1990s Japan and Contemporary China” is published by the Brookings Institution. In it, Rogoff and IMF economist Yuanchen Yang argue that China’s property downturn, now into its sixth year, “appears to be in the middle stages of a multi-year correction”.
The property market “has exerted such substantial contractionary effects” on the broader economy. The authors point out that real estate – which is linked to sectors such as building materials, furniture and utilities – and infrastructure cover almost one-third of economic demand in China. Moreover, mainland households allocate nearly 70 per cent of their wealth to housing, far more than major economies such as Japan and the United States.
China’s ongoing crisis resembles Japan’s real estate collapse from the late 1980s. Two striking similarities are that both countries suffer from a rapidly ageing population and oversupply in the property sector.

“If China’s adjustment unfolds in a similar way as Japan’s, it would mean China has not gone halfway through the transition,” the economists wrote.
Bank failures and credit crunches further drive the real estate market’s down cycle. The persistence of the downturn negatively impacts investment, consumption and sentiment. Cities with the most oversupply are experiencing an investment overhang that could suppress new construction for a long time, while sharp property price declines depress consumption and undermine household and commercial investment confidence.
“In the absence of comprehensive social safety nets, housing wealth is a form of precautionary savings; when housing values decline, households tend to scale back spending to offset losses and … try to build up savings even more,” the authors wrote.
I did not show my relative their paper. I hope she won’t read this column, look it up and get all depressed. In any case, such analyses offer a macro view. Who knows what will happen to real estate in her neighbourhood?

But, as stated earlier, I did show her a more optimistic prognosis. Two weeks ago, Bloomberg Economics argued against what it called “the Japanification thesis” in an analysis headlined, “Light at End of the Tunnel for China’s Property Slump.”
Note that there isn’t a weasel-out question mark at the end, so it’s a definite statement. It reckons China’s property slump could bottom out in 2027.
China’s property construction peaked at 1,565 million square meters in 2021. But a 40 per cent drop in property investment means the adjustment is roughly 70 per cent done, with the remaining 30 per cent to be finished within two years, that is, by 2027.
“China’s property downturn will have lasted around six years from a 2021 peak to a 2027 [trough],” it said. “That’s roughly the same duration as the US housing downturn from 2006 to 2012 and way shorter than the two-decade downturn seen in Japan. So much for the Japanification thesis.”
However, Bloomberg Economics is explicit that it “isn’t calling for a rebound either,” only stabilisation of the market. John Lam, UBS’ head of China property research, has been the most optimistic. Having given up on earlier bullish calls, he nevertheless seems to think a rebound will come within a few years. Earlier in 2025, he had predicted home prices could “turn stable” as soon as this year.
So, we have covered all our bases: imminent recovery, near-term stabilisation and more pain to come. I hope that helps, no?


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Opinion

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China

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China Economy

Economic Indicators

While some economists draw parallels with Japan’s ‘lost decade’, others note key differences when it comes to China’s sluggish recovery


While some economists draw parallels with Japan’s ‘lost decade’, others note key differences when it comes to China’s sluggish recovery.


Asia housing and property

Japan

China consumption

China's economic recovery

United States

Global Financial Crisis of 2007-2008

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

As I see it

Helpful analysts predict China property recovery now, soon and much later

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}While some economists draw parallels with Japan’s ‘lost decade’, others note key differences when it comes to China’s sluggish recovery

While some economists draw parallels with Japan’s ‘lost decade’, others note key differences when it comes to China’s sluggish recovery