BEIJING — With less than two months until 2026, S&P Global Ratings has cut its forecast for real estate sales in China this year.

The company said on Sunday that primary property sales could fall by 10% to 14% this year, worse than the 5% to 8% sales drop forecast in October for 2026.

“The downturn is so entrenched that only governments can afford to absorb excess inventory,” analysts said in a note. Governments could buy more unsold properties to build affordable housing, but so far those efforts have been piecemeal, they added.

China’s real estate market, which once accounted for more than a quarter of the economy, has now witnessed its glory annual sales Halved in just four years. Beijing’s crackdown on developers’ heavy dependence on debt for growth triggered the initial recession, and consumer demand for housing has yet to pick up.

Economists have long warned of overbuilding in China’s housing market. But developers continued to build despite the sales slump, resulting in the sixth straight year of new homes being completed but not sold, according to the ratings agency.

“China’s oversupply of primary housing has put a real estate market recovery out of reach,” analysts at Standard & Poor’s said. They noted that the oversupply has forced home prices to fall another 2% to 4% this year, following a similar decline last year.

“Falling prices undermine homebuyer confidence,” the S&P report said. “It’s a vicious cycle that’s not easy to escape.”

Of particular concern, Standard & Poor’s said, was the deepening decline in home prices in China’s largest cities in the fourth quarter of last year. “We previously viewed these markets as healthy and likely to be the starting point for any country’s real estate recovery,” the report said.

Housing prices in cities such as Beijing, Guangzhou and Shenzhen fell by at least 3% last year, the report said, noting that Shanghai was the only major city to see housing price increases, with housing prices expected to rise 5.7% in 2025 compared with 2024.

In May, Standard & Poor’s forecast a 3% decline in new home sales, but revised that forecast to an 8% decline in October. Sales ultimately fell 12.6% to 8.4 trillion yuan ($1.21 trillion) – less than half of the full year’s sales It is expected to reach 18.2 trillion yuan in 2021.

This has increased pressure on China’s troubled property developers.

Analysts said four of the 10 Chinese developers rated by the firm could face downgrade pressure if sales end up falling 10 percentage points from S&P’s base case for this year and next.

That excludes Vanke, once one of China’s largest developers, which late last year asked to defer some debt repayments.

Chinese authorities have yet to provide significant new support for real estate, instead stepping up efforts to develop advanced technologies.

Last month, U.S. research firm Rhodium Group said China was moving aggressively into high-tech industries. Not large enough to offset the decline in the country’s real estate marketmaking economic growth more dependent on exports and more vulnerable to trade tensions.

Top policymakers will unveil economic targets for this year at a parliamentary meeting next month.