CITIC SEC released a research report stating that in March 2026, new home and second-hand home price indices increased month-on-month in over 10 of the 70 large and medium-sized cities. While inventory digestion will still require considerable time, the property market is sending optimistic signals, which is highly significant for boosting homebuyer confidence. In the short term, the development of a multi-layered REITs market will also contribute to the revaluation of high-quality commercial real estate held by enterprises. Regarding specific investment targets, the report favors property developers with solid asset foundations and proactive transformation strategies; brand companies possessing space operation and service capabilities; and Hong Kong property enterprises poised to benefit from an upward industry cycle. Key viewpoints from CITIC SEC are as follows:
Land supply and new construction starts continue to contract. According to data from the National Bureau of Statistics, national real estate development investment in the first quarter of 2026 was 1.77 trillion yuan, down 11.2% year-on-year. The area of new construction starts was 104 million square meters, a decrease of 20.3% year-on-year, while the completed area was 98 million square meters, down 25.0% year-on-year. By the end of the first quarter, the floor area of commercial housing awaiting sale declined by 0.1% year-on-year, marking the first year-on-year decrease since June 2021. Under policies strictly controlling new supply, land supply area decreased significantly, and companies became more cautious in land acquisitions. Wind data shows that in the first quarter of 2026, the cumulative land supply area in 100 large and medium-sized cities fell 32.2% year-on-year, the transaction value dropped 43.4% year-on-year, and the land premium rate decreased by 16.0 percentage points year-on-year.
The decline in sales is narrowing, indicating seasonal peak activity. National Bureau of Statistics data indicates that in the first quarter of 2026, commercial housing sales value was 1.73 trillion yuan, down 16.7% year-on-year, while sales area was 195 million square meters, a decrease of 10.4% year-on-year. For the single month of March, commercial housing sales value and sales area fell by 13.9% and 8.0% year-on-year respectively, with the rate of decline narrowing significantly compared to the previous two months. High-frequency data from intermediary platforms like Beike and Woaiwojia show that, as of April 15th, the cumulative transaction volume of second-hand homes in 76 sample cities increased 15.4% year-on-year, with post-Spring Festival cumulative transactions up 20.4% year-on-year.
Housing prices rise month-on-month in multiple cities, signaling a market shift from decline to recovery. Data from platforms including Beike and Woaiwojia indicate that as of April 16th, second-hand listings in 140 cities changed by less than 1% compared to the end of the previous year, indicating relative stability in second-hand supply (compared to increases of 4.8% and 5.8% during the same periods in 2024 and 2025, respectively). The scope for price reductions has narrowed significantly, and the momentum for price declines has noticeably weakened. Statistics bureau data shows that in March, the number of cities among the 70 large and medium-sized cities where new home and second-hand home price indices increased month-on-month rose to 14 and 13, respectively. Core cities such as Shanghai, Shenzhen, Guangzhou, and Hefei saw month-on-month increases in both new and second-hand home prices. Although transaction volumes may seasonally decline after April, the stabilization of second-hand home prices in core cities is expected to help further solidify homebuyer confidence.
Establishing new operational models requires time, but an industry upturn cycle is foreseeable. CITIC SEC believes that optimizing the asset-liability structures of enterprises, particularly the substantial clearance of inefficient assets and the stabilization of overall rental income from commercial properties, will still require approximately 20 months. However, the trend is clear. Following the longest downturn cycle in history, the firm believes the restart of the real estate景气 cycle is an inevitable general trend. Furthermore, the recovery will be structural and regional, with core cities likely to experience an upturn earlier.
Risk factors include persistently weak real estate demand and the risk that the recent sales surge proves short-lived; the challenge that most developers still hold significant unsold inventory to digest, posing a risk of further profit declines across the industry; and the risk associated with the low quality and efficiency of some operational assets.
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