Why has the price outlook improved despite the cut to the demand forecast?

  • Goldman Sachs has lowered its forecast for China’s structural housing demand in 2027–2035 by 16% from its previous estimate, but expects a sharp contraction in new-home supply to drive housing prices to stabilize by 2029. The key support for its price outlook is the supply adjustment, not an upward revision to demand.
  • The backdrop to this assessment includes the transition to a model of selling completed homes and a deterioration in the pipeline of inventory available for future sale. Lower demand and price stabilization can occur simultaneously, provided supply contracts enough to shift the balance between supply and demand.

How much have price expectations for Shanghai and Shenzhen been raised?

  • Goldman Sachs raised its forecast for the cumulative two-year increase in average selling prices in Shanghai and Shenzhen from 15% to 20%, an increase of 5 percentage points. This is its price outlook for the two cities; nationally, it expects stabilization by 2029.
  • The recovery path therefore varies by region and over time: Shanghai and Shenzhen have higher expected price gains, while balance in the national market depends on a continued contraction in new-home supply.

When will starts and investment turn around after prices stabilize?

  • Goldman Sachs expects new housing starts and real estate fixed-asset investment to turn around by 2032, driven by accelerating demolition-related demand. On its timeline, the construction-side turning point comes about three years after home prices stabilize.
  • This means that improving home prices and a recovery in construction activity will not occur in lockstep: the former is driven by shrinking supply, while the latter requires support from accelerating demolition-related demand. The 2029 price outlook cannot be applied directly to starts and investment.

What will dominate housing transactions by 2035?

  • Goldman Sachs expects existing homes to account for 75% of housing transactions by 2035. This forecast points to a further shift in the transaction mix toward existing homes, echoing the direction of the contraction in new-home supply.
  • Understanding this adjustment therefore requires looking separately at prices, construction and the composition of transactions: housing prices can stabilize first, starts and investment can turn around later, and transactions can continue to shift toward existing homes.