Core Insights Commentary on the Ministry of Housing and Urban-Rural Development Work Conference: Stabilizing the Market While Transitioning to a New Model
On December 22-23, the Ministry of Housing and Urban-Rural Development held a work conference to summarize real estate policies for 2025 and outline key tasks for 2026, along with policy directions for the "15th Five-Year Plan." We believe that policies aimed at controlling incremental supply, reducing inventory, and optimizing supply will be further implemented in 2026. Coupled with potential reserve requirement ratio (RRR) cuts and interest rate reductions, these measures will help stabilize the market. Supply-side optimization will continue, with product quality likely emerging as a core competitive advantage for developers navigating market cycles, potentially reshaping corporate market positions and competitive dynamics.
**Balanced Priorities for Long-Term Development** The conference reviewed housing construction achievements in 2025: 1. Significant progress in urban renewal initiatives. 2. Full completion of housing delivery guarantees. 3. Initial momentum in "quality housing" construction, including exploration of standardized systems such as "6633" and "365."
Looking ahead to the "15th Five-Year Plan," the conference emphasized "promoting high-quality real estate development" through two key balances: 1. **Balancing Risk Prevention and Industry Transformation**: Upholding market-oriented and rule-of-law principles to mitigate developer debt risks while advancing industry transformation. 2. **Balancing Livelihood Improvements and Stable Growth**: Steadily advancing urban renewal projects (e.g., old residential areas, urban villages, and dilapidated housing) and leveraging "quality housing" to drive industrial chain upgrades.
Compared to 2024’s focus on "halting the industry’s decline and stabilizing recovery," the 2025 discussions placed greater emphasis on long-term development, with "high-quality" mentioned 19 times (eight more than in 2024), underscoring a policy orientation toward stability and transitioning to a new model.
**2026 Priorities: Market Stabilization with Key Measures** The conference outlined four focus areas for 2026, reiterating efforts to stabilize the real estate market. Key highlights include: 1. **Financing**: Implementation of a "lead bank" system, where each project designates a primary bank to share risks and rewards with developers. This broad-based accountability mechanism is expected to mitigate credit risks. 2. **Sales**: Promotion of a pre-sale-to-completed-sales transition ("what you see is what you get") to eliminate delivery risks. Pre-sale projects will face stricter fund supervision. Market participants should monitor local pilot programs for completed sales. 3. **Localized Policies**: Reaffirmation of city-specific policy adjustments, granting local governments greater autonomy to tailor real estate measures. Progress in easing restrictive policies across regions warrants attention in 2026.
**Investment Recommendations** The conference aligns with the central government’s commitment to stabilizing the sector while providing clear guidance. Supply-side optimization may reshape competitive landscapes and create opportunities for property management firms. Key recommendations include: 1. Developers with strong credit, prime locations, and superior products ("three strengths"). 2. Developers with robust operational capabilities to maintain cash flow resilience. 3. Hong Kong-based developers benefiting from the local market recovery. 4. Property management firms with stable cash flows and dividend advantages.
**Risk Factors**: Policy volatility, fundamental market downturns, and operational risks for select developers.
