IMF Staff Country Reports

This Selected Issues paper analyses China’s property sector transition. The Chinese authorities have taken resolute actions to address the risks from the property sector since the start of the pandemic. The key challenge now is to smooth the transition of the sector to a smaller, more sustainable size amid unresolved financial distress among developers, weakened homebuyer confidence, and a backdrop of large inventories and structurally declining demand. Key policy priorities should be to expedite the resolution of underlying supply-side imbalances, most importantly by restructuring nonviable developers; support and de-risk surviving developers; and take steps to contain the build-up of risks in the property market. This paper projects the path of real estate investment in China over the medium term and considers policies that will help ease the transition. New housing construction is set to fall significantly in the coming decade. This reflects a likely slowdown in urban household formation and urban redevelopment activities, amid an expected gradual contraction in the overall population. Construction will also face a significant drag from excess developer inventories and rising secondary market supply of previously vacant homes.