China's Home Price Puzzle

Research evidence excerpt

China's Home Price Puzzle

Where home prices stand now

The official home price index has now returned to levels last seen in 2016 (Fig 3). Alternative indices tell a similar story: Both

Centaline (tier-1 cities) and Bingshan (100 cities nationwide) show home prices have returned to 2016 levels.

Another way is to ask how much of the pre-peak gains have been erased. If we set the 2021 peak at 100, the nominal home

price index would be about 76 in 2011 and 80 in 2025. This implies that the 2022-25 correction has erased about 85% of the

price increase accumulated over the preceding decade: (100-80)/(100-76) ≈ 85%.

• Alternative indices are broadly consistent: the Bingshan Index, covering 100 cities nationwide, shows that 71% of the gains

from the pre-peak decade have been wiped out, while Centaline data indicate a 55% rollback in tier-1 cities.

On this metric, China’s home price correction since 2022 has erased a much larger share of prior gains than the US housing

bust of 2007-11 (about 47% of the previous decade’s gains) and is comparable in scale to Japan’s long downturn over

1992-2012 (around 110%, i.e. more than the entire previous decade’s gains).

In other words, China’s correction is much deeper than it appears at first glance. This is in line with housing new starts data,

which are more comparable across countries than home prices. Housing starts in China have fallen by about 75% from their

peak, a drop similar to the US correction in 2006-09 and much sharper than Japan’s (Fig 4).

Figure 3 - Nominal home prices back to 2016 level Figure 4 - Deep correction in new starts

Source: NBS, WIND, Macquarie Macro Strategy Source: NBS, BEA, Japan Cabinet Office, WIND, Macquarie Macro Strategy

Existing home prices in 70 major cities from the NBS