China Real Estate Demand reawakens: Affordability at a decade-best level

Research evidence excerpt

China Real Estate Demand reawakens: Affordability at a decade-best level

Equities ● REMD

26 May 2026

Limitations of the affordability framework

1. Income proxy and HPF treatment: City-average disposable income likely understates the

income of homebuyers (vs renters). In addition, disposable income excludes Housing

Provident Fund (HPF) contributions, which can offset mortgage payments.

2. Living space: Using a uniform per-capita living-space assumption (2020 National

Population Census) across 2015-25 and all cities ignores variations over time and across

city tiers (typically smaller in tier-1, larger in lower tiers).

Why does affordability become important again?

Taking Shanghai as an example, housing affordability has improved to a level where home

In Shanghai, home ownership

ownership is no longer limited to higher-income households. Lower home prices and mortgageis back within reach for

average-income families – no rates have significantly reduced the monthly repayments, bringing home purchases back within

longer the preserve of high- reach for average-income families, and materially expanding the pool of eligible buyers.

income households

For a typical 70 sqm unit in Shanghai, we estimate monthly mortgage payments under either

pure commercial mortgage or a blended commercial + HPF loan have fallen to below 50% of

average household income. Crossing this 50% threshold is meaningful because banks typically

won’t approve loans if repayments exceed 50% of monthly income.

While our assumptions (a flat rate rather than an LPR-linked floating rate, plus a standard 30%

down payment and a 20-year tenor) may not capture borrower-level heterogeneity and

complexity in practice, the scale and direction of the affordability improvement are clear.