China Is Waking Up From Its Property Nightmare

An ecstatic $48.2 million luxury mansion sale at an auction lights up the market.

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China's economy has been through a stress test in the past six months with the trade war shredding nerves.

The tensions over tariffs are not over yet. On May 29, US Treasury Secretary Scott Bessent said that ongoing talks had "stalled" and US President Donald Trump complained that China "had totally violated" the preliminary agreement to reduce duties reached between the two sides in Geneva on May 12.

Yet even as the trade war staggers on, two things are proving reassuring for China. One is that so far the economy has been resilient. Private sector growth estimates for 2025 remain in the 4 per cent to 5 per cent range. The other is that one of China's biggest economic nightmares seems to be ending: the savage property crunch.

To get a glimpse of that, consider a gated home in Shanghai's Changning district. It has an air of traditional German architecture and a large front garden, a feature of the city's most ritzy neighborhoods.

But what really stands out is the price. On May 27, the property sold for a stonking 270 million yuan (S$48.2 million), creating a sensation in the Chinese press. At 500,000 yuan per sq m, it is one of the priciest home auctions in recent memory. That the wealthy are prepared to pony up such an exorbitant price is being interpreted as a sign that China's huge and interminable property crisis might finally be ending.

Speculation about a turnaround has been building over dinner tables, in boardrooms and at state-planning symposia. The excitement is hardly surprising. Property, broadly defined, contributed about 25 per cent of gross domestic product (GDP) on the eve of its crash in 2020. It now represents 15 per cent or less, showing how the slump has been a huge drag on GDP growth.