Home prices in China fall, while retail sales increase

Despite continued government support, China’s housing market remains in trouble, even as consumer spending shows signs of life.

New home prices fell slightly in May last month, extending a two-year slump, down 3.5% year-on-year, according to data released by China’s National Bureau of Statistics. Analysis by Reuters. Real estate investment in January fell 10% from January to 5% compared to the same period last year, and new construction began to fall by about 23%.

Smaller cities and industries feel burning

Analysts say smaller cities are still the most vulnerable, and among cities, house prices are called 3rd and 4th floors – an unofficial but commonly used city ranking that continues to be faster by size and prominence than cities in major hubs such as Shanghai. The weak housing market outside major Chinese cities is a long-term trend Analysts have been following for several years.

Although Beijing has cut tax rates and relaxed some mortgage rules, sentiment remains poor after years of unfinished development and developer defaults. House prices are Now expected to fall nearly 5% this year And stay flat until 2026.

Along with the slowdown in the housing market, Industrial and fixed asset investment Slowing down. In the first five months of 2025, factory output growth fell to 5.8%, down from the previous 6.1%. Overall fixed asset investment, including infrastructure and manufacturing, Up by only 3.7% – Possibly reflecting resistance in the housing sector.

Retail sales offer a glimmer of hope; trends have an impact on the global economy

However, in stark contrast to the slowdown in housing and the industry, Chinese consumers seem to have the motivation to open their wallets and spend on goods. Retail sales rose 6.4% in MayRising from 5.1% in April, the highest expectations and a sharp acceleration. A government transaction program is helping stimulate the purchase of home appliances and other items, providing a much-needed boost to the overall economy.

Economists say that if the Chinese government wants to meet its annual GDP growth target of 5%, mixed data could force the Chinese government to increase fiscal stimulus and lower interest rates further. But with Trade tensions linger Property discomfort deepens, and even a rebound in retail may not be enough to reignite China’s economy.

This has an impact on the global economy. As the second largest economy on the planet, China remains an important growth driver far beyond its borders. What’s happening in its property and consumer sectors has had a ripple effect in global supply chains, commodity markets, and investor sentiment. In short, when China pauses or spends it, the world will feel it. So, it’s no wonder its economy now finds itself under a microscope.