Rising foreclosures cast shadow over housing recovery
A flood of foreclosed homes is threatening the property market’s fragile recovery.
By the numbers: In the first half of the year, 205,000 foreclosed residential units were put up for judicial auction, according to independent data provider China Index Academy.
- That represents a stunning 64% increase from the same period in 2025.
Why we care: Foreclosed units are typically auctioned at steep discounts, sometimes as much as 40% below market prices.
- Foreclosure sales aren't incorporated into the official price data. Nonetheless, when foreclosed units become available in a neighborhood, they put real downward pressure on the prices of regular listings nearby.
Worse still, the current influx has forced banks to slash auction prices even further to move units.
- In H1, the average transaction price for foreclosed homes came in roughly 7.4% below H1 2025 levels.
- Even at those prices, only around a third of the 205,000 units found buyers after three rounds of auctions.
Get smart: Mounting foreclosures effectively constitute a shadow inventory that threatens to undermine the housing market’s tentative recovery.
Get smarter: Stemming the influx will require banks to show even more forbearance to mortgage holders struggling to make repayments, or for the state to step up efforts to acquire distressed units.