What does the adjustment path after the collapse of real estate bubbles in various countries mean for China?

From the perspective of global historical experience, once a real estate bubble bursts, the adjustment is never a short-term event but a long and recurrent process. Whether it is Japan’s property crash in the 1990s or the decline in housing prices after the US subprime mortgage crisis, the apparent “bottoming out” often occurs early, but true clearance can take many years, even over a decade. As a highly leveraged, low-liquidity asset, real estate naturally adjusts at a slow pace, making it difficult to complete a rapid recovery through single policies or short-term stimulus.

Taking Japan as an example, after the peak in 1991, housing prices did not experience a sharp cliff decline but instead went through a prolonged period of decline. Prices occasionally rebounded, but each rebound was suppressed by new inventory and debt pressures, ultimately leading to a structural decline lasting more than twenty years. Similarly, after the 2008 financial crisis, the US exhibited comparable characteristics: although nominal housing prices stabilized relatively quickly, the real prices, adjusted for inflation, also took a considerable amount of time to recover.

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Returning to China, the real estate bubble has entered its fourth year of collapse. Based on current data and market feedback, no clear signs of stabilization have yet appeared. From Q4 last year to Q1 this year, Zhongyuan Leading Index showed occasional slight rebounds, with market sentiment significantly improving, and expectations of “bottoming out and stabilizing” rapidly heated up. Some viewpoints interpret this as a sign that policy effects are beginning to manifest, even seeing it as the start of a new real estate cycle.

However, this optimistic judgment was quickly overturned by reality. After entering Q2, the real estate market not only failed to continue its recovery trend but showed signs of accelerating decline. This change indicates that the previous warming was more a short-term response to policy stimuli rather than a fundamental reversal. Core issues such as inventory pressure, household leverage, and demographic shifts have not been fundamentally alleviated.

From international experience, the true inflection point in real estate is never triggered by emotions or slogans but depends on three key factors: whether inventories have been cleared, whether debts and leverage have been systematically absorbed, and whether there is new structural growth in demand. At least at this stage, these three points are still not simultaneously present in the Chinese real estate market.

Therefore, a more historically consistent judgment is that China’s real estate market is in a long-term adjustment phase. Rather than repeatedly expecting a quick “bottoming out,” it is better to accept the reality that real estate will gradually return to its residential function and diminish its financial attributes. This process will not be easy, but it may be an unavoidable path.