China residential property market Report Interpretation

Overview

This macro update reviews July price and activity indicators for China’s 70-city residential property market. Goldman Sachs sees some improvement in new-home pricing, particularly in higher-tier cities, but continued and sequentially worsening weakness in the secondary market.

Core views

Goldman Sachs estimates that the population-weighted average price of new homes across the NBS 70-city sample fell 0.8% month-on-month annualized after seasonal adjustment in July, an improvement from a 1.0% decline in June. The year-on-year decline also narrowed modestly, to 3.2% from 3.3%. Shanghai, Hangzhou and Hefei continued to post year-on-year gains of 3.0%, 2.6% and 0.3%, respectively. The report cautions that new-home prices tend to be less volatile because of local-government price management, so primary-market data should not be read as a complete picture of housing-market conditions. The improvement in new-home prices was concentrated in higher-tier cities. Tier-1 prices rose 1.3% month-on-month annualized in July, although this was slower than the 1.8% gain in June; Shenzhen led the Tier-1 gains. Tier-2 prices returned to positive growth, rising 0.1% after a 0.3% decline in June. Tier-3 prices remained under pressure but their decline narrowed to 2.8% from 3.1%. Despite these tier-level improvements, the share of cities recording sequential price increases fell in both the primary and secondary markets during July. Secondary-market indicators were weaker. Goldman Sachs estimates that the 70-city weighted average secondary-home price fell 1.9% month-on-month annualized in July, compared with a 1.4% decline in June, while the year-on-year decline was 5.1% versus 5.5% in June. NBS and available third-party series indicated secondary-market price declines of 5–8% over the past year. This contrast with the primary market is central to the report’s assessment: new-home price pressure eased, but resale-market conditions remained materially soft. Activity and inventory data provided a mixed additional signal. Goldman Sachs’ high-frequency tracker showed 30-city new-home transaction volume below year-ago levels in mid-August, potentially owing to typhoon and flooding disruptions. Meanwhile, sellable inventory in major cities, measured as sellable gross floor area divided by trailing 12-month gross floor area sold, fell to 27.1 months in July from 27.5 months in June. The reduction was led mainly by Tier-2 cities, indicating some inventory improvement even as transaction conditions remained weak.

Analysis framework

The report uses NBS 70-city price data, calculates population-weighted averages rather than simple city averages, and applies Goldman Sachs seasonal adjustments to sequential changes. It compares primary and secondary markets, breaks results down by city tier, and cross-checks prices with high-frequency transaction and inventory indicators.

Methodology notes

• Industry Analysis

  Population-weighted, seasonally adjusted housing-price tracking by market and city tier

  Goldman Sachs weights the 70-city data by population and seasonally adjusts month-to-month changes, then compares new-home and resale-market pricing across Tier-1, Tier-2 and Tier-3 cities.

• Industry AnalysisSupply-demand framework

  Inventory-months measure

  The report defines inventory months as sellable gross floor area divided by the trailing 12-month gross floor area sold, using the change in this ratio to assess housing supply relative to sales.

Key data

• 70-city primary-market price change-0.8% mom annualized; -3.2% yoyJuly, seasonally adjusted by Goldman Sachs; versus -1.0% mom annualized and -3.3% yoy in June.
• 70-city secondary-market price change-1.9% mom annualized; -5.1% yoyJuly, seasonally adjusted by Goldman Sachs; versus -1.4% mom annualized and -5.5% yoy in June.
• Tier-1 primary-home price change+1.3% mom annualizedJuly; slower than +1.8% in June.
• Tier-2 primary-home price change+0.1% mom annualizedJuly; turned positive from -0.3% in June.
• Tier-3 primary-home price change-2.8% mom annualizedJuly; decline narrowed from -3.1% in June.
• Major-city inventory months27.1 monthsJuly, down from 27.5 months in June, mostly led by Tier-2 cities.

Impact & implications

The report portrays an uneven housing backdrop: primary-market price declines moderated and higher-tier cities improved, but resale prices weakened sequentially and mid-August new-home transactions were below year-ago levels. Falling inventory provides a partial offset, especially in Tier-2 cities.

What to watch

• Whether new-home transaction volumes recover after the reported typhoon and flooding disruptions.
• Whether the decline in major-city inventory months continues, particularly in Tier-2 cities.
• Whether secondary-market price declines stabilize after worsening sequentially in July.