Goldman Sachs(US:GS) Sou Hu Cai Jing·2025-07-11 15:25Core Viewpoint - Goldman Sachs predicts that China's housing price decline is only halfway through, potentially lasting until the end of 2027, with an overall drop of around 30% in national housing prices [1][3]. Group 1: Market Analysis - The report, led by Goldman Sachs' chief economist for Asia Pacific, Huang Zhuo, analyzes housing price data from 100 major cities, considering population changes, policy effects, and international experiences [3]. - Since the second half of 2021, the current decline in housing prices is just the beginning, with 60% of the decline still to come [3]. - As of May 2025, 58 out of 70 major cities saw a month-on-month decline in new housing prices, with first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen experiencing year-on-year drops of 3% to 7%, while many second and third-tier cities saw declines exceeding 10% [3][5]. Group 2: Contributing Factors - Population decline is a significant factor, with China's population experiencing negative growth since 2022, and only 3.76 million births recorded in the first half of 2025, an 8.9% year-on-year decrease [5]. - By 2027, the primary home-buying demographic aged 25-39 is expected to decrease by 42 million, representing 15% of that age group, leading to reduced demand for housing [5]. - Excessive inventory is another issue, with 689 million square meters of unsold residential properties as of May 2025, resulting in a sales cycle exceeding 24 months [5]. - High household leverage is concerning, with the debt-to-GDP ratio for households reaching 63.5% in Q1 2025, nearing levels seen in developed countries [5]. - The top 100 real estate companies saw a 29.7% year-on-year decline in sales in the first five months of 2025, with 37 listed companies defaulting on debts exceeding 2.7 trillion yuan [5]. Group 3: Economic Impact - The real estate sector and its related industries account for approximately 25% of GDP, meaning a contraction in this sector adversely affects employment, consumption, and investment [7]. - In Q1 2025, the construction industry lost 2.87 million jobs, and prices for building materials like cement and steel fell by over 40% from peak levels [7]. - Government interventions, including over 200 policies aimed at stabilizing the market, have had diminishing returns, with initial measures only providing temporary relief [7][9]. Group 4: Future Outlook - The adjustment cycle in China's real estate market is expected to last longer than previous cycles, with historical data from countries like Japan and the U.S. indicating that such corrections typically take 6-8 years [7]. - Different cities will experience varying degrees of price declines, with first-tier cities potentially seeing drops of 15-20%, strong second-tier cities 20-25%, and weaker third and fourth-tier cities possibly exceeding 40% [9]. - The current market trend shows a continued decline in housing prices, with first-tier cities experiencing an average month-on-month drop of 0.3% and third and fourth-tier cities dropping 0.8% [9].