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Huatai Securities Co., Ltd. (601688) believes that the 828 New Policy reshapes the supply logic, and developers' land acquisition amounts will decline by 33% to 41%, with the land market continuing to shrink in volume; the 929 interest subsidy lowers the first-home mortgage rate to a historic low of 2.05%, and for homes below 1.5 million yuan, "monthly payment lower than rent" is the first to be established; the decline in rents across 100 cities narrows, and second-hand home prices in first-tier cities all turn positive. With the three forces of supply contraction, demand activation, and rent balance resonating, housing price stabilization in 2027 is expected to spread from individual cities to city clusters.
Summary
Since the end of August, the central government has introduced nationwide real estate policies twice in succession: the 828 New Policy announced the official transition of the industry's sales system, and on September 29, the first central interest subsidy for residential mortgages in recent years was launched. We believe the two rounds of policy lead to the same destination, pointing to a broader stabilization of the real estate industry, and the conditions for broader nationwide housing price stabilization are gradually taking shape.
Supply side: supply is expected to continue contracting over the next two years
After the 828 Policy, developers' land acquisition capacity weakened, and the supply side may continue to tighten over the next two years. The 828 New Policy restructures the real estate business model. As of October 11, Beijing, Shanghai, Guangzhou, Wuhan, Tianjin, Hangzhou and other places have successively issued detailed rules for housing sales system reform. Under the presale-for-completed-homes system, the cycle for project cash flow to turn positive is significantly extended; according to our estimates, under the new presale/new completed-home sales model, the amount developers can use for land acquisition may decline by 33%/41%. According to China Index Academy data, in September the transaction area of residential land nationwide fell 32.3% year on year in a single month, a significantly wider decline than in August (-16.6%); cumulative transaction area from January to September fell 22.3% year on year, and the land market as a whole continued to shrink.
Demand side: home purchase bottlenecks ease, potential buyer groups accelerate entry
With the introduction of the 929 fiscal interest subsidy policy, since 924 in 2024 China's policies supporting real estate have become unprecedentedly comprehensive and multidimensional, with the administrative, financial, and fiscal sides jointly safeguarding the realization of rigid demand and upgrade demand. The 929 policy reduces the bottleneck of residents' home purchase burden: based on a 1 million yuan loan and the current mortgage rate of 3.05%, after a 100bp interest subsidy, the 30-year monthly payment falls from 4,243 yuan to 3,721 yuan (-12.3%), and cumulative interest falls by 35.6%; under the completed-home sales system, homes are "what you see is what you get," and the delivery risk exposure in purchase decisions is institutionally removed. After the policy landed, conversion has already begun: from October 1 to 13, the number of second-hand home transactions in stores across 25 cities rose 33% year on year, 14pct faster than September's growth. We believe the conversion of wait-and-see demand into transactions is beginning to accelerate, and we expect accumulated potential buyer groups to enter the market in the coming year.
Rent side: monthly payments and rents move toward balance, and conditions for broader housing price stabilization are gradually in place
Among the three conditions China's housing prices need for the first derivative to turn positive—activation of the replacement chain, stabilization of rents in key cities, and optimization of the interest rate environment—some are already in place: as of September 2026, the year-on-year decline in residential rents across 100 cities continued to narrow to 4.7%, the smallest decline since 2025; after the interest subsidy, the eligible first-home loan rate effectively dropped to about 2.05%, the lowest in history and below the first-home provident fund rate; the rental yield of residential property across 100 cities is about 2.46%, and the rent-to-price ratio for low-total-price homes below 1.5 million yuan may reach above 3.0%, with "monthly payment lower than rent" already established among the customer groups covered by the policy. As of August 2026, among 70 cities, 9 had achieved new home price stabilization (cumulative increase during the year), and 5 had achieved second-hand home price stabilization, while all four first-tier cities—Beijing, Shanghai, Guangzhou, and Shenzhen—turned positive. The market with the fullest price discovery may have completed its clearing. We expect a broader range of cities to see housing price stabilization in 2027.
Investment logic: real estate stocks are beginning to move toward "medium-term logic"
The market generally views the 828 New Policy as negative for the supply side, but we believe supply contraction and the formation of structural "supply cheaper than rent" are creating conditions for broader housing price stabilization. The market's reaction to the 828 policy has already been relatively full, and the impact of future detailed rules will gradually weaken. We believe that in 2027 the national real estate market transaction volume is expected to reach a new level, more cities' housing prices will bottom out, and developers adapted to the new model will enter a new cycle.
Body
Since the end of August, the central government has introduced nationwide real estate policies twice in succession: the 828 New Policy announced the official transition of the industry's sales system, and on September 29, the first central interest subsidy for residential mortgages in recent years was launched. We believe the two rounds of policy lead to the same destination, pointing to a broader stabilization of the real estate industry, and the conditions for broader nationwide housing price stabilization are gradually taking shape.
Supply side: supply is expected to continue contracting over the next two years
After the 828 Policy, developers' land acquisition capacity weakened, and the supply side may continue to tighten over the next two years. The 828 New Policy restructures the real estate business model, and developers' cash flow pressure generally rises. As of October 11, Beijing, Shanghai, Guangzhou, Wuhan, Tianjin, Hangzhou and other places have successively issued detailed rules for housing sales system reform. Incremental projects (land acquired after 828) generally face stricter conditions: presale requires the main structure to be topped out, full-process supervision of all presale funds, and mortgage loans to be issued after completion filing. Under the completed-home sales system, the cycle for project cash flow to turn positive is significantly extended, constraining developers' land acquisition capacity. According to our report "Quantitative Measurement of the Impact of Housing Sales System Reform on Developers and the Industry" (2026.9.13), considering offsetting mechanisms such as installment land payments, under the new presale/new completed-home sales model, the amount developers can use for land acquisition will decline by 33%/41%, which means that as capital turnover slows, future land transfer revenue may fall by 30%-40% from the current scale.
After the 828 policy, its impact gradually appeared in the land market. According to China Index Academy data, in September the transaction area of residential land nationwide fell 32.3% year on year in a single month, a significantly wider decline than in August (-16.6%); on the one hand, this was affected by the high base in the same period last year, and on the other hand, after the 828 New Policy landed, developers' wait-and-see sentiment increased and land acquisition became more cautious. Cumulative transaction area from January to September was 244.611 million square meters, down 22.3% year on year, with the decline slightly widening from January to August (-20.0%), and the land market as a whole continued to shrink. On the supply side, land supply in first-tier cities contracted, with the number of residential land parcels supplied in September falling 35% year on year. Entering October, the trend may become more prominent. Since October, land supply has slowed; in the first week after the holiday, the number of residential land parcels supplied in 300 cities fell 89% from the previous week and 10% year on year. Among first-tier cities, only Guangzhou had 5 plots awaiting auction, while other cities had no residential land transfer arrangements.
Demand side: home purchase bottlenecks ease, potential buyer groups accelerate entry
With the introduction of the 929 fiscal interest subsidy policy, since 924 in 2024 China's policies supporting real estate have become unprecedentedly comprehensive and multidimensional: the administrative side (continuous optimization of purchase and loan restrictions, the 828 housing sales system reform and the implementation of detailed rules in Beijing, Shanghai, Guangzhou, and Wuhan), the financial side (lower down payment ratios, lower mortgage rates, mortgage terms extended to a maximum of 40 years, and the 5-year-plus LPR lowered to a historic low of 3.5% and unchanged for 16 consecutive months), and the fiscal side (transaction tax rate adjustments, 929 interest subsidy), jointly safeguarding the realization of China's rigid demand and upgrade demand. Since August, the two major policies have jointly pointed to reducing residents' home purchase bottlenecks and ultimately promoting the realization of demand from real buyer groups.
The 929 policy reduces the bottleneck of residents' home purchase burden: based on a 1 million yuan loan and the current mortgage rate of 3.05%, after a 100bp interest subsidy, the 30-year monthly payment falls from 4,243 yuan to 3,721 yuan (-12.3%), and cumulative interest falls from 528,000 yuan to 340,000 yuan (-35.6%); combined with the 828 New Policy extending mortgage terms to a maximum of 40 years, the 40-year monthly payment falls from 3,609 yuan to 3,055 yuan (-15.4%). That is, the monthly payment burden is expected to decrease by more than 10%. Under the completed-home sales system, homes are "what you see is what you get," and the delivery risk exposure in purchase decisions is institutionally removed. Under the completed-home sales model, on the one hand, delivery risk is reduced through the institutional arrangement of completed-home sales; on the other hand, floor plans, landscaping, and decoration are all physically visible, and the quality risk of goods not matching the display is simultaneously eliminated. Delivery certainty and quality certainty together reduce the hidden discount in home purchase decisions, and "buying with peace of mind" itself is demand.
Improved expectations combined with reduced bottlenecks are expected to push residents who already have the willingness and ability to buy homes out of wait-and-see mode. A survey by China Index Academy shows that at the end of August, the share of residents with stronger home purchase intention than the previous month rebounded by 1.2 percentage points month on month to 16%, and the share planning to buy within half a year rose to a relatively high level of 17%, with the increase most obvious in first-tier cities (+1.7pct); the Cheung Kong Graduate School of Business third-quarter investor sentiment survey also showed that expectations for housing price increases rebounded from 37% at the end of 2025 to 56%. After the policy landed, conversion has already begun: from October 1 to 13, the number of second-hand home transactions in stores across 25 cities rose 33% year on year, 14pct faster than September's growth. We believe the conversion of wait-and-see demand into actual transactions is beginning to accelerate, and we expect accumulated potential buyer groups to enter the market in the coming year.
Rent side: monthly payments and rents move toward balance
Hong Kong's experience in stabilizing the property market shows the transmission path brought by the balance between rents and monthly payments. In early 2025, along with the sharp drop in HIBOR in April, Hong Kong's H mortgage rate plunged from about 5.0% in March to around 1.9% in May. Although it rebounded in the following three months to 4.8% by September 2025, it then trended downward to about 3.5% by March 2026; Hong Kong's private residential price index bottomed in April 2025 and then continued to recover, rising about 7.4% cumulatively by February 2026. The transmission chain in which "supply cheaper than rent" for small and medium-sized units drives "rent-to-buy" demand into the market, expands transaction volume, and then turns housing prices upward has been fully verified in Hong Kong.
In our April report "China's Housing Prices Are Ushering in a Positive Second Derivative" (2026.4.10), we proposed that China's housing prices still lack the following before the first derivative turns positive: activation of the replacement chain, stabilization of rents in key cities, and optimization of the interest rate environment. As of now, some of these conditions are already in place:
Rents in key cities stabilizing: as of September 2026, the year-on-year decline in residential rents across 100 cities continued to narrow from 8.0% in December 2025 to 4.7%, the smallest decline since 2025, and pressure on the rent side has clearly eased. By city tier, the year-on-year decline in second-tier cities narrowed from 8.5% in December 2025 to 3.9%; first-tier cities repaired from a deep negative growth at the end of last year to -6.3%; third-tier cities stabilized at around 4.9%, showing relatively strong resilience. On a median rent basis, Shanghai and Shenzhen achieved positive rent growth this year, with cumulative increases of 2.8% and 0.7% in the first nine months, improving by 5.4 and 3.7pct from last year's full-year year-on-year levels. Although Beijing and Guangzhou did not grow, their declines narrowed by 3.8 and 1.6pct from last year's full-year level to 0.7% and 0.4%.
Historic optimization of the interest rate environment: as of June 2026, the national average mortgage rate was 3.05%, the lowest since statistics began in 2008; after the interest subsidy, the eligible first-home loan rate effectively dropped to about 2.05%, not only the lowest in history but also lower than the first-home provident fund rate. China's "supply cheaper than rent" balance is forming structurally: as of the end of September 2026, the rental yield of residential property across 100 cities was about 2.46%, and the rent-to-price ratio for low-total-price homes below 1.5 million yuan may reach above 3.0%—while after the interest subsidy, the eligible first-home mortgage rate is about 2.05%, and the interest subsidy coverage (area ≤120 square meters, total price ≤1.5 million yuan) highly overlaps with low-total-price homes with high rent-to-price ratios. "Monthly payment lower than rent" has already been established among the customer groups covered by the policy.
Conditions for broader housing price stabilization are gradually in place
Since 2026, the number of cities among the 70 cities with month-on-month housing price increases has risen. The number of cities with month-on-month new home price increases rose from 6 in December 2025 to 20 in June 2026 (January to August were 5, 10, 14, 14, 16, 20, 17, and 15 respectively), and the average increase in rising cities also expanded; the number of cities with month-on-month second-hand home price increases rose from 0 in December 2025 to as many as 13 in March, but has fallen since April (9 in June, 5 in July, 3 in August), and the second-hand home market as a whole is still in a stage of trading volume at the expense of price.
In terms of cumulative gains, as of August 2026, among the 70 cities, 9 had achieved new home price stabilization (cumulative increase during the year), namely Shanghai (+2.0%), Hangzhou (+1.8%), Dalian (+1.0%), Ningbo (+0.8%), Shenzhen (+0.7%), Shenyang (+0.6%), Xiamen (+0.5%), Guangzhou (+0.4%), and Yinchuan (+0.2%). In addition, Wuhan (roughly flat), Hefei, Qingdao, and Nanjing had cumulative declines within 0.3%, nearing stabilization; 5 cities achieved second-hand home price stabilization, namely Shanghai (+2.5%), Beijing (+1.2%), Shenzhen (+0.9%), Shenyang (+0.4%), and Guangzhou (+0.1%), while Ningbo and Xuzhou were roughly flat. It is worth noting that the number of cities with stabilized second-hand home prices increased from zero to 5, and all four first-tier cities—Beijing, Shanghai, Guangzhou, and Shenzhen—turned positive. After experiencing the longest downturn cycle, second-hand home prices in core cities were the first to bottom, which usually means the market with the fullest price discovery has completed its clearing, and its signal significance is stronger than that of new homes. We expect a broader range of cities to see housing price stabilization in 2027.
The core logic lies in the following: first, on the supply side, after the 828 New Policy, new construction and launches will continue to contract over the next two years, and new home inventory destocking in key cities has become healthier; at the same time, listing pressure in the second-hand home market has substantially eased: listings in 49 cities fell from a high of 4.35 million units in October 2025 to the current 4.28 million units, turning from an increase to a decline year on year (-1.5%), and the supply-demand relationship is moving toward rebalancing in more cities; second, on the demand side, the interest subsidy makes the holding cost of eligible homes roughly equal to rent, and the group for which "supply cheaper than rent" applies is the first to complete a reversal in housing price expectations, activating the replacement chain from the bottom up—first stabilizing second-hand homes in first-tier and strong second-tier cities, then transmitting to upgrade demand for new homes; third, in terms of price levels, housing prices in most cities have already undergone deep adjustments from their peaks. Referring to the path of cities such as Shanghai and Hangzhou that took the lead in stabilizing in 2026 (second-hand homes before new homes, low total price before high total price), we expect the number of cities with cumulative increases in both new and second-hand home prices to expand further in 2027, and nationwide housing price stabilization will move from individual cities to city clusters.
We suggest focusing on two paths: 1. Low-total-price homes: policy dividends strengthen the momentum for price stabilization. The mortgage interest subsidy policy makes "monthly payment lower than rent" the first to be established for low-total-price homes, which is conducive to driving concentrated entry of rigid-demand buyers through "rent-to-buy." Relatively speaking, price signals in some representative cities have already led the way: the Iceberg Index shows that as of October 4, 2026, the average price of homes below 2 million yuan in Shanghai rose 1.9% year on year and 6.3% cumulatively during the year, significantly outperforming the citywide average. The declines in the low-total-price segment in Suzhou, Chengdu, and Guangzhou were also smaller than the citywide average. The interest subsidy policy will further amplify the attractiveness of low-total-price homes and is expected to promote housing price stabilization. 2. High-quality upgrade homes in core areas: structural opportunities arising from the resonance of scarce supply and product premium. After the 828 New Policy, new construction and launches continued to contract, and the supply of high-quality housing in core locations of core cities is becoming scarce; after the replacement chain is activated, upgrade buyers have low price sensitivity and place more emphasis on product strength and delivery certainty, and the new "what you see is what you get" sales rules further strengthen the premium of high-quality homes.
Investment logic: real estate stocks are beginning to move toward "medium-term logic"
Since the end of August, real estate stocks have experienced two major policies, 828 and 929, but fluctuations have begun to trend toward stability. We believe the market's reaction to the 828 policy has already been relatively full, and more city-level detailed rules are expected to land afterward, but their intensity may be weaker than that of Beijing and Shanghai, so the impact of the 828 detailed rules will gradually weaken. In particular, it is worth noting that we expect policy flexibility in second- and third-tier cities may be higher than in first-tier cities, which may bring structural opportunities. Looking ahead, the market will focus on whether medium- and long-term fundamentals can reflect policy effects as expected.
Institutional holdings hit a historic low, and low crowding builds high odds
As of 2Q26, public fund holdings in real estate had a market value of 27.6 billion yuan, down 24% from 1Q26, only 22% of the historical peak since 2013 (128 billion yuan in 1Q22); the holding ratio was 0.31%, down another 0.14pct from the previous quarter, a new low since data began in 2013, and a sharp decline from the 2Q13 peak of 7.11% and the 2013-2019 central level of about 4.1%. Compared with the standard industry allocation ratio (0.84%), current actual holdings are only 37% of that, with an overweight ratio of -0.53pct, and it has been underweight for 45 consecutive quarters since 2Q2015, with the underweight state running through the entire industry downturn cycle.
Industry leverage is accelerating its reduction, and balance sheet repair consolidates the valuation bottom
The 12 key developers had total interest-bearing debt of 1,789.3 billion yuan in 1H2026, down 3.1% year on year, continuing the reduction trend; the average net debt ratio was 44.6%, down 7.5pct sharply from 52.1% at the end of 2025, even lower than the 2024 level (46.6%). Structurally, 10 developers saw their net debt ratios decline from the end of 2025; Binjiang Group, Jianfa International Group, China Overseas Grand Oceans, China Overseas Land & Investment, and China Resources Land had ratios below 50%, with Binjiang Group even falling to -0.5%. Balance sheet repair on the supply side and housing price stabilization on the demand side are forming a resonance. The systematic reduction in net debt ratios means credit risk is converging, and the erosion of profits by impairment provisions is expected to weaken; low-leverage developers still retain the option to acquire land and expand at the bottom of the cycle, and once sales recover, their market share and performance elasticity may become more prominent. Overall, current institutional holdings in real estate are at a historic low. If housing price stabilization expands from the low-total-price segment to a broader range and industry fundamental expectations repair, the space and elasticity for returning capital will be significantly greater than in sectors with high holdings. The industry's dual low position of "low leverage + low allocation" means real estate stocks have limited downside risk and ample upside space, further highlighting their allocation value. We believe that in 2027 the national real estate market transaction volume is expected to reach a new level, more cities' housing prices will bottom out, and developers adapted to the new model may enter a new cycle.
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