In China, vast numbers of vacant buildings can be seen everywhere, standing like rows of tombstones—an eerie and shocking sight. (Screenshot from video)
[People News] On the night of September 5, 2025, at 11 PM, the Shenzhen housing market was abruptly awakened by a midnight alarm. The Shenzhen Municipal Bureau of Housing and Urban-Rural Development, along with the People's Bank of China Shenzhen Branch, jointly announced a new policy that lifts the purchase restrictions on the Shenzhen housing market, offering a lifeline to the struggling real estate sector. This follows similar actions in Guangzhou, Beijing, and Shanghai, as authorities attempt to provide a lifebuoy to the real estate market that has been in free fall, aiming to inject a stabilising force into the declining housing market.
Under the new policy, families with local household registration in Shenzhen, as well as eligible non-resident families (those who have paid social insurance or individual income tax in Shenzhen for at least one year), will no longer face purchase limits when buying commercial housing in areas such as Luohu, Bao'an, and Longgang. In Yantian District and Dapeng New District, the qualification review for home purchases has been completely eliminated. The new policy also allows enterprises and institutions throughout the city to buy homes, and the credit policy will no longer distinguish between first and second homes, with interest rates set independently by banks.
The notice specifies that the new policy will take effect on September 6, meaning it was announced just one hour before its implementation. This urgent policy shift highlights the critical state of the Shenzhen housing market, akin to providing a ventilator to the sector, with fears that a delay of even one minute could lead to catastrophe. Consequently, the four major first-tier cities in the country have completed their emergency measures to lift purchase restrictions, but the effectiveness of these groundbreaking policies and market rescue efforts remains to be seen.
Let's examine the alarming statistics. Data released by the Shenzhen Le You Jia Research Centre indicates that in August 2025, the total number of online signed contracts for new and second-hand residential properties in Shenzhen reached 6,326 units, reflecting a month-on-month decline of 13.5% and a year-on-year drop of 10%. Additionally, the Shenzhen Beike Research Institute reported that 3,309 new homes were sold in Shenzhen during August, marking a month-on-month decrease of 12.3%. Throughout this year, the transaction volume of second-hand homes in Shenzhen has consistently declined. According to the Shenzhen Real Estate Brokerage Association, from March to August, the transaction volume of second-hand homes plummeted from 7,703 units to 5,267 units, a staggering decrease of 32%, with prices continuing to trend downward.
As the frontrunner in the real estate market among China's first-tier cities, why is Shenzhen struggling to maintain its position? The answer lies in the fact that homeowners in Shenzhen are facing an unbearable financial burden.
Data reveals that by the end of 2024, approximately 640,000 households in Shenzhen are encumbered by mortgage loans, with an average loan amount of 4.17 million yuan per household. If the loan term is set at 25 years, the monthly repayment amounts to 20,100 yuan; if the term is reduced to 15 years, the monthly payment surges to 29,100 yuan. This implies that at least 20,000 yuan of these households' monthly income is directly allocated to bank repayments, which translates to an obligation of 700 yuan owed to the bank every single day upon waking.
What does a monthly mortgage payment of 20,000 yuan signify for most families in Shenzhen? In 2024, the per capita disposable income in Shenzhen is projected to be 81,000 yuan, which translates to a total of 240,000 yuan for a family of three. This amount would cover their mortgage without any spending on food, clothing, or other essentials, assuming all three family members have stable jobs. However, if one person loses their job, they would risk defaulting on the mortgage. What is the unemployment rate expected to be in Shenzhen in 2024? In July 2024, the South China Morning Post reported on data from the Shenzhen Municipal Bureau of Human Resources and Social Security, which revealed that the number of newly registered unemployed individuals in Shenzhen reached 40,221, marking a 40% increase year-on-year and a 15% increase month-on-month. Some media outlets suggest that the unemployment rate in Shenzhen could soar to 40% in 2024. This indicates that even in Shenzhen, the pioneering city of China's reform and opening-up, residents are struggling under the burden of their mortgage payments.
The resilience of the Shenzhen housing market until now is indeed a remarkable feat among the four first-tier cities. Guangzhou, on the other hand, fully lifted its purchase restrictions on September 30, 2024, becoming the first first-tier city to do so. Despite a year of relaxed policies, the Guangzhou housing market remains as cold as ever. According to monitoring data from CRIC, by the first half of 2025, the available inventory of commercial residential properties in Guangzhou stood at 14.47 million square meters, with 7.42 million square meters being completed properties and 7.05 million square meters still under construction. For the first time, the inventory of completed properties has exceeded that of properties under construction. This situation does not suggest that the market has chosen to cool down; rather, it reflects that consumers are financially constrained and are left with no choice but to remain silent. If completed properties are not selling, who would still be interested in purchasing properties that are still under construction?
Following Guangzhou, Beijing and Shanghai have also faced significant market challenges, adjusting their policies on August 8 and August 25 respectively to lift some purchase restrictions. According to the latest report from the China Index Academy, titled 'China Real Estate Index System 100 Cities Price Index,' the average price of second-hand residential properties across 100 cities in August was 13,481 yuan per square meter, reflecting a month-on-month decline of 0.76% and a year-on-year drop of 7.34%. First-tier cities are also under considerable market pressure, unable to maintain an aloof stance, and have resorted to drastic measures to stimulate the market. However, whether these actions will effectively halt the decline remains uncertain, and the market outlook is not optimistic.
Despite the dramatic downturn in China's real estate market in recent years, likened to a kite falling from the sky, current housing prices still appear astronomically high for most families when compared to their incomes. The price-to-income ratio, which is the median housing price divided by the median annual household income, serves as a measure of affordability; a higher ratio indicates greater financial strain on potential buyers. Internationally, a price-to-income ratio of 3-6 times is generally considered reasonable. In the United States, this ratio hovers around 4 times, while during the peak of the Chinese Communist Party's real estate boom, it soared above 40 times. Even in 2024, amidst a rapid decline in the housing market, the average price-to-income ratio in first-tier cities stands at 26.1 times.
One of the primary reasons for the excessively high housing prices in China is the generally elevated rent-to-sale ratio in urban areas, which averages over 50 years for a return on investment, far exceeding the internationally accepted range of 1:100 to 1:200 (approximately 16-17 years). This suggests that the investment value of real estate in most domestic cities is underestimated, with housing prices being disproportionately high relative to rental prices.
Recent rental yield rates indicate that the average for the top 50 cities in China is about 2.08%, with first-tier cities at 1.85% and third- and fourth-tier cities at 2.58%. All of these figures are significantly lower than the internationally recognised reasonable investment return rate of 5%. A healthy rental yield rate (or its inverse, the rent-to-sale ratio) is generally accepted to be between 1:100 and 1:200, with rental yields ideally above 3% to 5%. Rates that are excessively high (such as over 200 months) suggest that the property bubble has not yet cleared, indicating relatively low investment value. In most cities across China, the rent-to-sale ratio typically exceeds the internationally acceptable range. For instance, in first-tier cities, the rent-to-sale ratio has soared to 1:636, with a sale-to-rent ratio lasting 53 years.
Why does the housing market remain in a bubble? This is closely tied to the land finance policies of the Chinese Communist Party (CCP). In China, real estate serves as a financial lifeline for local governments. During periods of economic growth, real estate also provides banks with a substantial source of risk-free mortgage profits and forms a significant part of residents' wealth. Conversely, during economic downturns, a decline in real estate prices delivers a triple blow to the government sector, the financial and real estate enterprise sectors, and the residential sector. The CCP faces a challenging reality: the downturn in real estate has severely impacted local fiscal revenues, undermined numerous upstream and downstream industries, placed the financial sector at systemic risk, and caused many middle-class families to fall back into poverty overnight, resulting in significant losses of family wealth. This is the fundamental reason why the CCP is determined to maintain high housing prices and prevent any decline.
However, the policies designed to forcibly stop the market decline create a significant disconnect with the actual income of residents and fundamentally contradict the necessary clearing of the real estate bubble. In essence, these measures violate market principles and are bound to be unsustainable. The complex, interrelated, and conflicting factors have turned China's real estate sector into a massive time bomb within the economy, poised for an eventual explosion that could devastate the economic framework of the Chinese Communist Party.
(First published by People News)△
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