The View | Trade war under Trump is the last thing China’s housing market needs

In its year-ahead outlook for China’s economy, Goldman Sachs said the “overarching theme” for 2025 will be how policymakers “lean against the wind” in responding to the many domestic and external challenges facing the economy.

The biggest headwind by far is the protracted crisis in the housing market. Since 2022, property and property-related activities have exerted a big drag on growth, amounting to as much as minus 2.1 percentage points this year alone. More worryingly, Goldman Sachs expects the drag from residential real estate to linger until 2030.

Beijing has responded to the downturn in the housing market more forcefully than many analysts expected. Even so, the stimulus measures unveiled by policymakers since late September – which included lowering interest rates on existing mortgages, reducing down-payment ratios for second homes and relaxing purchasing restrictions in many big cities – are not enough to turn around a sector that, as S&P Global Ratings notes, suffers from “too much stock, too little confidence.”

Donald Trump’s victory in the US presidential election, which is expected to unleash a wave of protectionism that could result in a global trade war, puts pressure on Chinese policymakers to lean more aggressively against the winds buffeting the economy.

If Trump follows through with his pledge to impose tariffs of more than 60 per cent on all Chinese goods and end the country’s “most favoured nation” trading status, the odds of a durable stabilisation of the housing market will be even slimmer than they are today. “In the event of a trade war and a much-weakened economy, we assume many buyers would delay their purchases. China’s property sales would likely fall below our base case,” S&P Global Ratings wrote in a report last month.

Trump’s election victory comes just when parts of the property market are beginning to stabilise in response to the stimulus measures. The value of new home sales from the 100 biggest developers rose last month on an annualised basis for the first time this year, with state-owned developers leading the rebound. New home prices, meanwhile, fell at their slowest monthly pace since March. Secondary prices in Tier 1 cities are faring the best, with prices in Shenzhen last month rising the most since February 2021.