China Securities released a research report stating that the real estate market is steadily advancing toward the goal of halting declines and achieving stability. Since the beginning of 2026, positive changes have emerged in both transaction volume and prices, particularly in core cities like Shanghai. Drawing on the recovery paths of the U.S. and Japanese real estate markets, differentiation is the main theme, with core cities leading the recovery. For developers, maintaining stable cash flow businesses is key to navigating market cycles. The report highlights three favored sub-sectors within the real estate sector: continued growth in the Hong Kong property market, high-quality operation of commercial real estate, and the early recovery of developers and agencies focused on mainland core cities. Key views from China Securities are as follows:
The property market is moving toward stabilization, with core cities already showing positive changes. Supported by continued central government policies to stabilize the real estate market and following optimizations in housing market regulations in Beijing, Shanghai, Shenzhen, and Guangzhou since the end of 2025, the market is steadily progressing toward the goal of halting declines and achieving stability. Since early 2026, positive changes have emerged in both transaction volume and prices, especially in core cities like Shanghai. These include a narrowing decline in new home sales nationwide and a rebound in some core cities, a recovery in secondary housing transaction volumes, a significant narrowing of the decline in secondary housing listing prices, and early price stabilization in certain core cities. Beyond policy support, three main factors contribute to these positive changes: a contraction in the supply of both new and secondary homes, substantial price adjustments already experienced, and rising price-to-rent ratios in some cities surpassing provident fund loan interest rates.
Differentiation persists within the real estate industry, with three sub-sectors standing out. Referring to the recovery paths of the U.S. and Japanese property markets, differentiation is the dominant trend, with core cities spearheading the recovery. For developers, having stable cash flow businesses is essential for weathering market cycles. Differentiation is a key characteristic of China's current real estate market, with three sub-sectors performing notably well: 1) Driven by population inflow boosting housing demand and increasing asset allocation needs, transaction volumes and prices in the Hong Kong property market continue to rise; 2) Against a backdrop of steady retail sales growth, high-quality branded commercial real estate operators are demonstrating strong operational performance; 3) Sales in mainland core cities, exemplified by Shanghai, are recovering ahead of others.
As the property market gradually stabilizes and internal differentiation continues, high-quality companies in the Hong Kong, commercial real estate, and core city-focused sectors are favored. Within the Hong Kong sector, top Hong Kong developers such as Sun Hung Kai Properties and leading Hong Kong REITs like Link REIT are viewed positively. In the commercial real estate sector, companies with high-quality, well-located commercial assets and strong operational capabilities are favored, including China Resources Mixc Lifestyle Services, China Resources Land, Seazen Holdings, and Longfor Group. In the core city sector, developers with premium land reserves and strong product capabilities, as well as agencies deeply entrenched in core cities, are favored. These include China Jinmao, China Overseas Land & Investment, C&D International Group, Greentown China, Binjiang Group, and KE Holdings.
Risk analysis includes: 1) Sales falling short of expectations; 2) Revenue recognition lagging forecasts; 3) Slower-than-expected credit repair for developers; 4) Risks associated with macroeconomic fluctuations.
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