Xin Hua Cai Jing·2026-01-05 09:46Core Viewpoint - The Chinese real estate industry is expected to reach a turning point around 2026 after undergoing a cyclical adjustment, with net rental returns and mortgage rates projected to converge by November 2026 under the assumption of stable mortgage rates and rents [1][2]. Group 1: Market Observations - The three key market focus areas identified for the real estate sector in 2026 include changes in second-hand housing inventory, policy transitions following the expiration of the "Financial 16 Measures," and the trajectory of debt extension events for certain real estate companies [1]. - Current challenges persist in the second-hand housing market, with a net increase of 12% in the number of second-hand homes listed across 49 cities by November 2025 compared to the end of 2024, while transaction volumes have mostly shown negative year-on-year growth [1]. - The imbalance in supply and demand has put downward pressure on prices, with the second-hand residential price index in 70 cities experiencing a month-on-month decline of 0.7% in November 2025, a widening drop compared to mid-year [1]. Group 2: Rental Returns and Mortgage Rates - The narrowing difference between net rental return rates and mortgage rates is seen as a key factor in stabilizing demand, with the current difference at approximately 60 basis points [2]. - Assuming stable rental levels and mortgage rates, it is projected that by November 2026, the net rental return and mortgage rates will converge, influenced by the linear extrapolation of average monthly price declines since 2025 [2]. - The capital market may respond similarly to the U.S. experience in 2009, where significant excess returns in real estate stocks were observed once the difference between net rental returns and mortgage rates turned positive, indicating that the approach of the equilibrium point could lead to preemptive pricing in the capital market for second-hand housing inventory [2].