China's Property Outlook 'Bleak,' Despite End of '3 Red Lines'

China’s five-year property decline has continued into 2026, despite reports by local media last month that regulators have ended the infamous “three red lines” policy that placed debt restrictions on developers.

The ‘red lines’ policy imposed in 2020 was designed to rein in excessive lending to developers, but the reaction to this news has been mixed.

Shares of some developers rose marginally, but others have said the rules were relaxed prior to this year and that significant moves are needed to resolve the sector’s long-running debt crisis and encourage buyers for millions of unsold apartments.

ALSO SEE: India’s 20-Year Tax Break For Data Centres Faces Resource Crunch

A Communist Party journal noted early last month that the real estate sector was “undergoing a profound adjustment,” but it urged strong policy moves to help the sector.

There were also reports that China would expand its REIT — Real Estate Investment Trust — markets, and that developers of some favoured projects would get five-year extensions on loans.

But analysts say the sector’s grim outlook is yet to change, because of the prolonged debt crisis and huge amount of unfinished projects, unless more policy support comes from the National People’s Congress and other national leaders’ summits in March and April.

Sales decline continued in January

Sales of new homes continued to fall sharply in January, with the country’s top 100 developers reporting contracted sales of 165.5 billion yuan ($24 billion), which is 27% less than 2025, according to China Real Estate Information Corporation data.

And a report by Barclays said the month-on-month fall in January sales for major developers was even worse — down 44%, with slow sales at new projects and disappointing policy support.

The British bank described the figures as “a bleak start to 2026“.

Nomura said in a note on Tuesday that with contract sales of top developers continuing to drop in January, “it appears that the property market is likely to extend its slide for another year.”

Property executives have also indicated that the outlook remains grim, particularly for private developers, but even state-owned developers are not expecting significant stimulus measures this year.

Reuters said new home prices fell 2.7% year-on-year in December and that other data revealed property investment sank by over 17% last year.

Robert Ciemniak, chief executive of research firm Real Estate Foresight, was quoted as saying he expects the policy-making paradigm to remain “support not stimulus,” although developers could benefit if local governments were helped to buy back land and unsold housing developments to turn them into affordable housing.

State-owned developer China Vanke won approval from creditors recently to defer some repayments, but credit analysts still believe it will eventually have to undergo a debt restructuring, Reuters said.