The operating environment for Chinese real estate companies will remain subdued in 2025, forecast Tyran Kam, Senior Director with Fitch Ratings’ Asia-Pacific corporate ratings division, focusing on the China properties. He predicted that the total sales of China's newly-built commodity residential property market will sag 15% to about RMB7.3 trillion in 2025, constrained by the double decline in total transaction area and ASP (down 10% and 5% respectively).

A series of government policy combo has boosted recent sentiment in the real estate market to some extent, but there is still a lot of uncertainty as to whether the sector will see long-term improvement given the high inventory, lackluster employment environment and relatively low affordability of homebuyers.

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Chinese property developers were still plagued by stubborn structural problems, including high inventory and declining homebuyers' affordability, said Fitch. Despite recent policies aimed at boosting short-term market sentiment, low rental yields in major cities suggested that there is still further downside for housing prices. Despite the government's initiatives to shore up homebuyer confidence, prices of newly constructed commodity residential properties were predicted to remain under pressure in 2025.

Nearly half of Fitch-rated Chinese real estate issuers had negative rating outlooks. Fitch has reduced the number of downgrades since 2023, since many of the rated issuers were SOEs with higher financial flexibility. However, the continued downturn in the real estate sector exerted pressure on real estate companies' sales, profit margins and cash returns, reflecting the fact that the sales risk for the industry as a whole and for the companies themselves has not been eliminated, despite the government's policy support.