In December, China’s house price index fell from -2.4% to -2.7%. This new data shows that the housing market is still facing significant challenges. The housing sector is struggling, causing property values to decline continuously. This trend affects both economic growth and financial stability.

Policymaker Responses to Housing Challenges

Steps have been taken to tackle the issues in the housing market. However, the index’s further decline indicates that problems are still ongoing. The property market is a crucial part of China’s economy. Experts are keeping a close watch to evaluate its overall impact. The continued drop in China’s house price index, now at -2.7% in December 2025, shows that the property sector’s problems are getting worse. This suggests that low consumer confidence is likely to continue into the new year. This reinforces a negative outlook on sectors closely related to Chinese construction and real estate. We see this negative sentiment reflected in the equity markets, especially for developers and banks listed in Hong Kong. With the top 100 developers experiencing a more than 30% drop in new home sales year-on-year for much of 2025, it might be wise to consider buying put options on the Hang Seng China Enterprises Index. This allows us to potentially profit from further expected declines in the weeks ahead.

Impact on Industrial Commodities and Global Markets

This housing data directly affects industrial commodities, as China is the biggest consumer. Recently, iron ore futures on the Dalian exchange have fallen below $100 per tonne, a level not seen consistently since early 2025. Traders might want to consider shorting iron ore and copper futures or buying puts on major miners that are heavily impacted by this slowdown in demand. The Australian dollar, often seen as a reflection of China’s economic health, may also come under pressure. We can expect further weakness as the property slump impacts China’s overall growth outlook. Using bearish strategies, like buying puts on the AUD/USD currency pair, might be a smart move. Looking back, we recall the first developer defaults from the early 2020s, which started this long-term slump. Despite several interest rate cuts by the People’s Bank of China in 2025, the market hasn’t responded, suggesting deeper issues. This leads to higher implied volatility, making strategies like long straddles on China-focused ETFs appealing to capture significant moves if Beijing is pushed to make more drastic stimulus measures. Create your live VT Markets account and start trading now.

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