The current landscape of the real estate market in China reveals a persistent decline in the inventory of new homes across major cities nationwideRecent data shared by market agencies indicates that as of January 2025, the inventory of newly built commercial residences in 100 key cities amounted to approximately 44.737 million square meters, reflecting a month-on-month reduction of 1.2% and a year-on-year decrease of 11.0%. These figures highlight a continuous trend, as the inventory has witnessed a year-on-year decline for the past 24 consecutive months.

Such a decline in stock is not just a product of dwindling supply; several interviewees point to a range of policies aimed at stimulating the market and reducing inventoryWith the relationship between supply and demand beginning to show signs of stabilization, experts predict that the momentum for reducing new home inventory will likely strengthen in the near future.

Looking back over the past decade, the peak inventory of new homes in these 100 cities was reached at the end of 2014, when the inventory approached a staggering 600 million square metersFollowing this peak, a notable decline began in 2017, bringing the inventory levels below 500 million square meters before the fourth quarter of 2020. However, an upward trend in inventory was observed towards the end of 2020, with figures fluctuating above 500 million square meters until 2022. Since the start of 2023, there has been an overarching decline in inventory, leading to the current figures reported in early 2025.

The data breaks down inventory levels by city tiers as of January 2025, with first-tier cities holding 31.25 million square meters, second-tier cities at 214.67 million square meters, and third and fourth-tier cities at 201.45 million square metersThese numbers show a month-on-month decline of 3.0%, 1.3%, and 0.7%, respectively, and year-on-year reductions of 10.2%, 12.0%, and 9.9%. This consistent downward trend underscores a broader adjustment in the market.

"The data for January 2025 reveals a clear decline in new home inventory across all city tiers," says Yan Yuejin, the deputy director of the Shanghai E-House Real Estate Research Institute

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He notes that the month of January coincides with the Lunar New Year, typically resulting in reduced property releases from developersTherefore, the decrease in inventory levels aligns with expectations, while the year-on-year drops suggest that the supply and demand dynamics in various cities are gradually improving.

More specifically, in January 2025, among the 100 cities surveyed, 76 reported a month-on-month negative growth in new home inventory, while 87 cities experienced a year-on-year inventory declineCities like Qingdao, Zhenjiang, Sanya, Shenyang, Zhanjiang, Lanzhou, and Jinan stood out with inventory reductions exceeding 30% year-on-year, indicating significant adjustments in local markets.

As supply diminishes, the supply-demand relationship is showing signs of improvement across these key urban areasAccording to the data from the E-House Research Institute, new home supply in January 2025 was recorded at 10.21 million square meters, reflecting a 44.9% decrease compared to the previous month and a 29.5% drop compared to the same period last yearIn contrast, the transaction volume stood at 15.49 million square meters, down 47.6% month-on-month but only 9.5% lower year-on-year.

Yan further elaborates that while January typically signifies a slack season due to the Chinese New Year, there has been a year-on-year increase of approximately 29% in the supply of new homes when compared to last year's figuresMoreover, transaction volumes surged by about 46% when compared with February 2024, underscoring a more vibrant market with robust inventory reduction potential.

Since October 2024, the supply levels of new homes across the 100 cities have consistently fallen below transaction volumes, with the supply-to-demand ratios displaying a pattern of deficiencyThe ratios from October 2024 to January 2025 were recorded at 0.5, 0.6, 0.6, and 0.7, indicating that demand is outpacing supply.

"This shift signifies a successful alleviation of the existing imbalances between supply and demand, setting a foundation for more balanced future relations in the real estate market," Yan stated

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