China’s property market is still facing serious challenges due to high debt levels. In July, new home prices in China fell by 2.8% compared to last year. This is an improvement from June, which saw a 3.2% drop. Month-to-month, prices dropped by 0.3%, similar to June’s decline.

Weakness in China’s Property Sector

China’s new home prices fell by 2.8% year-on-year in July 2025, indicating ongoing problems in the property sector. While this is a small improvement from June’s 3.2% drop, the steady month-to-month decline of 0.3% shows there’s no real recovery in sight. Thus, it’s wise to remain cautious or bearish on assets tied to China. We can see the effects in industrial commodities, as construction is a big part of the demand. Iron ore futures have been struggling, with Dalian contracts failing to maintain the $95 per tonne support level throughout August 2025. Traders might consider buying put options on key mining ETFs or shorting copper futures, expecting demand to stay low in the third quarter. The ongoing property slump is also affecting the Australian dollar since Australia relies heavily on shipping raw materials to China. Recently, the AUD/USD pair dropped below 0.6400, a level we haven’t seen since early 2025. Betting on further weakness in the Aussie dollar seems reasonable, given that the interest rate gap with the US dollar doesn’t provide much support.

Opportunities in Volatility Markets

The ongoing uncertainty is also creating chances in volatility markets. The Hang Seng Mainland Properties Index has lost another 12% so far in 2025, continuing a multi-year downturn. With the chance of sudden government policy changes, purchasing straddles or strangles on broad China ETFs like FXI could let traders profit from significant price swings in either direction. Although the year-on-year price decline has slightly eased, we should be careful not to bet on a major recovery. Stimulus measures from Beijing announced earlier in 2025 have not significantly boosted buyer confidence. Thus, selling call spreads on Chinese real estate stocks listed in Hong Kong may be a wise way to earn premium while betting that any price increases will be limited in the coming weeks. Create your live VT Markets account and start trading now.

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