Concerns Over Consumption and the Housing Sector in China May Persist

According to Barclays economists, concerns about China's consumption and housing sector are expected to persist into 2025. Citing a deterioration in the labor market, they anticipate retail sales growth in 2025 to be at 3.0%, compared to the current reading of 3.5%. Economists suggest that policies aimed at boosting consumption have likely brought future demand forward into this year, indicating room for a pullback in 2025.

Due to structural challenges such as a declining population, the downward trend in the real estate market is expected to continue. Companies anticipate an 8% decrease in property sales in 2025, following a forecasted 15% drop in 2024. This forecast assumes a moderate recovery in first and second-tier cities due to the easing of housing policies, while a contraction of 10% to 15% in lower-tier cities is expected due to population outflows and increasing inventories.

The impact of policy easing on real estate investments and new starts is likely to be constrained by existing controls on construction aimed at optimizing current properties.