Why Shenzhen may be first to climb out of China’s property slump

Shenzhen’s residential inventory has fallen to a seven-year low, putting the southern technology hub ahead of other first-tier Chinese cities in clearing excess housing stock – a condition investors see as essential for a broader property market recovery.

While inventory had declined across major Chinese cities, analysts said the recovery remained uneven after five consecutive years of weakness in the housing market. A broader rebound across city tiers and property types is likely to take longer.

Over the 12 months to March, 19 Chinese cities recorded housing inventory declines of more than 10 per cent, according to an HSBC report released on Thursday. Shenzhen posted the largest drop among first-tier cities, with inventory falling 17 per cent year on year, while its inventory turnover period fell to 9.5 months.

Investors have long viewed the clearance of China’s housing inventory as a prerequisite for a sustained recovery. HSBC’s supply squeeze model suggested that when the inventory turnover period fell to 14 months or below, home prices were likely to stabilise.

“Price stabilisation in the new-home market should materialise first in upgrader products in top-tier cities,” Michelle Kwok, head of Asia real estate and Hong Kong equity research at HSBC, said in an interview with the South China Morning Post.

“There will likely be an L-shaped recovery, with 2026 as a key inflection year,” she added.