In August, China’s housing slump worsened as property sales fell for the sixth month in a row, with prices also dropping. This decline continues despite recent easing measures in Beijing and Shanghai. Analysts predict more policy changes, with new initiatives expected in September. Data from China Real Estate Information Corp. shows that new home sales among the top 100 developers hit 207 billion yuan ($29 billion), a 17.6% decline from last year. This marks a continuation of the downward trend, which saw sales drop by 24% in July.

The Ongoing Downturn

The housing market has been struggling for five years, and the downturn has intensified since the second quarter. Prices have fallen, reducing the impact of last year’s stimulus and raising concerns about deflation. While Beijing and Shanghai relaxed some home-buying rules in August, analysts noted the effects were only slightly positive. Media reports suggest that authorities might roll out more strategies in September, potentially including faster urban renewal projects. New home sales in China are down 17.6% compared to last year, signaling continued weakness in the industrial metals market. The property sector heavily consumes steel, and this extended slump, which we’ve tracked since early 2020, is diminishing demand. In the coming weeks, we plan to respond by looking at put options on major iron ore producers. Iron ore futures on the Singapore Exchange have already fallen nearly 10% in August 2025 due to weak demand. Historically, stimulus announcements from Beijing, such as those expected in September, can temporarily boost prices, but the fundamentals usually bring them back down. This presents an opportunity to short futures contracts or buy puts on related ETFs after any rally driven by policy changes.

Market Volatility

The Australian dollar, which serves as an indicator of Chinese economic health, has dropped over 2% against the U.S. dollar in the past month. We expect this trend to continue as long as China’s property situation remains poor. Therefore, we are considering short positions on the AUD/USD currency pair, as Australia’s export outlook weakens with declining demand for commodities. The uncertainty around when and how effective the next stimulus package will be is likely to increase market volatility. The Hang Seng China Enterprises Index, which is heavily invested in financial and property firms, will be particularly sensitive to this news. A practical strategy could be to buy straddles on China-focused ETFs, allowing us to benefit from expected price fluctuations without taking a specific directional bet. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now