China’s residential property prices kept falling this year as a surge in court-ordered auction homes flooded the market with steep discounts, deepening buyer wariness and stalling any signs of recovery in the world’s second-largest economy.
Data from China Index Academy, a real estate research institute, showed the number of properties listed for court-ordered auction across 355 Chinese cities reached 539,000 in the first seven months of the year, up 23.7% from a year earlier.
The flood of discounted properties has depressed auction prices, which fell 9% year-on-year over the same period, as courts and asset managers rushed to offload homes seized from defaulting borrowers.
Media reports said only about one-third of the listed auction homes have found buyers, selling at prices roughly 30% below comparable properties in the secondary market overall. The discount was far steeper in second- and third-tier cities, where a small portion of auctioned homes changed hands at 50% to 60% below secondary-market levels while most others saw no bidders.
The steep discounts have cast a psychological shadow over the wider market, reinforcing a belief among prospective buyers that prices have farther to fall before hitting bottom.
With so much inventory to choose from, buyers are now cherry-picking properties they believe could be resold easily, rather than settling for a discount alone. Demand has concentrated on well-located units in top-tier cities with strong transport links and good schools, leaving remote, aging or rural properties largely untouched.
“Transactions of court-auctioned homes rose 42.7% year-on-year in the first seven months of 2026, which looks impressive,” says Jiang Xiaorong, a Shaanxi-based columnist. “But this looks more like sellers using price cuts to clear a growing backlog, not buyers suddenly turning bullish on housing again.”
“For ordinary secondary-home owners, the real pain usually is not that statistics show prices down a few percentage points,” Jiang says. “It’s that they want to sell but simply cannot, especially for families trying to upgrade to better homes.”
She gives the example of one such upgrading family in need of a 3 million yuan (US$420,000) down payment for a new apartment, but their old home, valued at 2.5 million yuan, has sat unsold for three months despite two price cuts to 2.2 million yuan, leaving them unable to raise enough money before the transaction deadline.
She adds that some families turn to consumer loans or dip into savings meant for elderly care and education, while others just keep cutting prices to force sale. For these families, she says liquidity matters more than paper value, and court-auction data shows an asset is only worth what it can quickly fetch in cash.
“As of April 2026, 8 million people nationwide were officially listed as loan defaulters after they missed mortgage payments,” says a columnist who writes under the pen name Property Observer. “About 60% of these mortgage defaulters are under the age of 35.”
“In one case, a person bought an apartment for 3.48 million yuan with a 2.8 million yuan mortgage,” he says. “A few years later, the property’s value fell to 1.2 million yuan, but the buyer has to keep paying the mortgage. If he stops paying, his home will be auctioned while he will bear a huge debt.”
The columnist says about 45% of families who stopped paying their mortgages had lost their jobs, as industries once seen as safe bets, including catering, real estate and private tutoring, cut staff in recent years. He says giving up a home is rarely a choice – it’s a last resort.
A two-speed secondary market
Home prices in the secondary market in China’s first-tier cities fell 3.7% year-on-year in July, according to the National Bureau of Statistics (NBS). Guangzhou posted the steepest drop among the four top-tier cities at 4.7%, followed by Beijing at 4.5% and Shenzhen at 3.6%, while Shanghai fared best with a 2% decline.
Second-tier cities fared worse, with home prices in the second-hand market down 5.1% year-on-year, while third-tier cities posted the steepest declines at 5.8%.
Chinese commentators say the gap illustrates why liquidity, not price alone, defines China’s secondary housing market. They say top-tier cities are cooling more slowly, as buyers still see enough scarcity and demand to step in, while smaller cities are facing years of oversupply, leaving sellers with far less room to negotiate.
“The secondary market has a shortage of good-quality listings, so some newer homes in good school districts or prime locations can still hold their value,” said Yan Yuejin, deputy director of the Shanghai-based E-house Real Estate Research Institute. “But, overall, sellers in most cities are still cutting prices just to keep transactions moving, and further price adjustments are needed to draw buyers back in.”
Clearance rates in the auction home market, the share of listed properties that actually sell, also show how demand differs sharply across city tiers.
Nationwide, 245,000 residential properties were listed for court auction in the first seven months of 2026, and 89,000 of them found buyers – a clearance rate of 36.2%.
Clearance rates were far higher in top-tier and strong second-tier cities. Ningbo led at 80.8%, followed by Shanghai at 78.5%, Shenzhen at 71.3%, Hangzhou at 70.4% and Guangzhou at 55.6%.
Smaller cities fared far worse. In Luoyang, for example, only 12.87% of auctioned homes found buyers, meaning not even 13 out of every 100 listed properties actually sold.
Auctioned homes nationwide sold for about 73% of their appraised value on average in 2026, a discount of roughly 27%. If a home fails to sell at its first auction, the starting price for the next round can be cut by up to 20%.
A columnist who writes under the pen name Yang Po describes the situation as especially brutal in Shijiazhuang, a second-tier city near Beijing where many homeowners have lost their jobs, their homes and a lifetime of savings during the property downturn in recent years.
She cites the case of a local man surnamed Zhang, who bought a small three-bedroom apartment in 2019 for 1.1 million yuan, with a 350,000 yuan down payment, a 750,000 yuan mortgage and monthly payments of 4,200 yuan. Zhang lost his job in the winter of 2024 and became a food deliverer but could not make ends meet. His home was then listed for court auction, with the starting price set at 660,000 yuan, about 70% of its appraised value. There were no bidders. In the second round, it was sold for 560,000 yuan, meaning that Zhang still owed the bank about 190,000 yuan.
She says the low sale price dragged down valuations in the surrounding neighborhood, adding to the anxiety of other secondary-home owners nearby.
Property developers have also pulled back, slowing new projects as the downturn drags on. NBS said nationwide real estate development investment fell 19.2% year-on-year to 4.3 trillion yuan in the first seven months of the year.
Read: China’s housing market free-falls as buyers wait for floor prices
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More room for growth.