Will house prices in third- and fourth-tier cities continue to rise in 2025? They are currently continuing to fall.

The trajectory of house prices in China's third- and fourth-tier cities for 2025 is unlikely to reverse the current downward trend, with a high probability of continued stagnation or further modest declines. This assessment is rooted in fundamental structural imbalances that are not easily resolved by short-term policy measures. The primary driver is a profound oversupply of housing stock, a legacy of aggressive construction during previous boom periods, coupled with persistently weak local demand. Unlike major metropolitan hubs, these smaller cities lack the sustained inward migration, robust job creation, and premium public services necessary to absorb existing inventory and justify significant new investment. The current price declines are a market correction to this reality, and 2025 will likely represent a continuation of this adjustment phase rather than its conclusion.

The mechanism underpinning this outlook involves several reinforcing factors. Demographically, these cities face net outflows of younger, aspirational populations to regional capitals and first-tier hubs, directly eroding the core base of potential first-time homebuyers. Financially, the financial health of local governments, traditionally reliant on land sales, is constrained, limiting their capacity to fund large-scale urban renewal or infrastructure projects that might temporarily boost sentiment. Furthermore, the "housing is for living, not speculation" policy paradigm remains a central tenet of national regulation, deliberately cooling speculative investment that once fueled markets in these areas. While targeted support measures, such as reduced down payments or mortgage rates, may provide temporary floors under prices, they are insufficient to counteract the deep-seated supply-demand mismatch. The inventory overhang is simply too large, and buyer psychology has fundamentally shifted from viewing property as a guaranteed appreciating asset to seeing it as a consumption good with uncertain value.

Potential implications are multifaceted and significant. For the local economies, a protracted property slump will continue to pressure municipal finances and related sectors like construction and basic materials, potentially leading to tighter budgets for public services. For homeowners, the erosion of household wealth tied to property will likely suppress consumer confidence and spending, creating a deflationary drag on the local economic ecosystem. Developers will face intensified pressure, with a clear strategic shift required away from mass greenfield projects and toward managing existing assets and debt. Notably, this environment may accelerate a long-term differentiation within the tier system itself, where a select few third- or fourth-tier cities with unique industrial advantages or superior livability may stabilize, while the majority continue to grapple with devaluation.

In summary, the prevailing conditions of excess supply, demographic challenges, and stringent policy frameworks create a powerful inertia that short-term interventions in 2025 are unlikely to overcome. The market's direction is set by these structural forces, not by cyclical fluctuations. Therefore, the most plausible scenario for the year is one of continued price softness, characterized by localized variations in the rate of decline rather than any broad-based national recovery for this segment of the housing market. The focus will remain on inventory digestion and market rationalization, processes that extend well beyond a single calendar year.