Summary of Conference Call on Real Estate Sector Industry Overview - The real estate sector has shown signs of improvement since early 2026, ranking 18th among 31 Shenwan industries, indicating a positive shift in market sentiment and liquidity [1][4] - Despite a 45% increase in the Shenzhen Foreign Real Estate Index, it still underperformed compared to the Shanghai Composite Index, suggesting potential for catch-up in undervalued segments [1][5] Key Insights and Arguments - **Market Performance**: The new housing market remains weak, with transaction volumes significantly down year-on-year, and a projected overall decline in transaction area for the year, although the rate of decline may slow [1][6] - **Policy Dependency**: The recovery of the new housing market is heavily reliant on policy support, such as easing measures in first-tier cities and adjustments to the Loan Prime Rate (LPR) [1][7] - **Inventory Levels**: The inventory of unsold new homes in 70 cities is at a historical high, with varying de-stocking cycles across cities, indicating significant pressure on overall inventory [1][8] - **Land Market Trends**: The land market has seen a decline in transaction area and revenue, exacerbating supply-demand imbalances and limiting new housing supply [1][9] Additional Important Points - **Second-Hand Housing Market**: The second-hand housing market has also experienced a decline in transaction volume, with expectations of price stability but potential for slight decreases due to increased listings and stagnant purchasing power [1][10] - **Policy Impact**: Current policies are insufficient for a substantial turnaround in the real estate market, with only minor measures being implemented [1][11][12] - **Investor Sentiment**: There are mixed expectations among investors regarding the real estate sector, with some anticipating a recovery in 2026 while others remain cautious due to poor new housing data [1][13] - **Investment Opportunities**: Companies like Beike and developers such as Binhai Group and China Merchants Shekou are highlighted as potential beneficiaries of demand-side policies [1][14] - **Risks**: Ongoing declines in new housing sales and construction data pose risks to the sector, although the current market position still offers a favorable risk-reward ratio for investments [1][15]

Core Viewpoint - The real estate industry in China is undergoing a deep adjustment, with significant declines in investment, sales area, and sales revenue in 2025, indicating a challenging market environment [1][3][9]. Investment and Sales Data - In 2025, national real estate development investment reached 82,788 billion yuan, a year-on-year decrease of 17.2% [1]. - The sales area of new commercial housing was 88,101 million square meters, down 8.7% year-on-year, while the sales revenue was 83,937 billion yuan, reflecting a 12.6% decline [1][9]. - The construction area for real estate developers was 659,890 million square meters, a decrease of 10.0% year-on-year, with residential construction down 10.3% [3]. Construction Activity - New construction area was 58,770 million square meters, down 20.4%, with residential new construction area at 42,984 million square meters, a decline of 19.8% [4]. - The completion area was 60,348 million square meters, down 18.1%, with residential completions at 42,830 million square meters, a decrease of 20.2% [4]. Market Dynamics - The market is still in a "de-inventory" phase due to declining new home sales and significantly reduced land transactions over the past two years [5]. - Some central and state-owned enterprises are maintaining orderly construction activities, and there is still demand for well-located properties, which is boosting market confidence [6]. Financial Policies and Support - Local governments are enhancing "guarantee delivery" efforts, with recent financial policies aimed at stabilizing financing for projects on the "white list," which will support the delivery of homes [7]. Leading Companies - In 2025, ten real estate companies achieved sales exceeding 100 billion yuan, with four surpassing 200 billion yuan. These include major players like Poly Development, China Overseas Land & Investment, and Vanke [9]. - The top ten companies by investment are primarily state-owned enterprises, with significant investments from China Overseas, China Resources, Poly Development, and China Merchants Shekou, indicating a strategic positioning during market adjustments [9]. Market Trends - December 2025 showed signs of improvement, with new commercial housing sales area increasing by 39.87% month-on-month and sales revenue rising by 44.07% [10]. - The average price of new residential properties in first-tier cities saw a slight decrease, with Shanghai experiencing a minor increase, while other cities like Beijing and Guangzhou reported declines [10][11]. - The second-hand housing market is also seeing a shift, with increased transactions in second-hand homes as buyers seek more affordable options [12].

Core Viewpoint - The People's Bank of China has introduced a new financial policy that lowers the minimum down payment ratio for commercial property loans to 30%, which is expected to stimulate the market by reducing the purchasing threshold for commercial properties [1][2]. Group 1: Policy Implementation - The new down payment ratio has been implemented in Shaanxi Province, effective from January 23, 2026, reducing the previous minimum from 50% to 30% for commercial properties, including "commercial-residential mixed-use properties" [2]. - This policy is seen as a significant benefit for currently available commercial properties, as it lowers the entry barrier for potential buyers [3]. Group 2: Market Dynamics - Despite the reduction in down payment, the overall cost of purchasing commercial properties remains high due to elevated loan interest rates and other associated costs, which may limit its attractiveness to investors [5][7]. - The demand for residential properties is generally larger compared to commercial properties, which tend to have stable prices and rely more on rental income for returns, making them less appealing in comparison to residential investments [6]. Group 3: Investment Considerations - The current investment environment has shifted from capital appreciation to rental yield, making prime commercial properties in core urban areas more attractive [6]. - The reduction in down payment alone may not be sufficient to attract investors; further adjustments in loan terms, interest rates, and holding costs are necessary to enhance the appeal of commercial properties [7]. Group 4: Types of Commercial Properties - Commercial properties encompass a wide range of types, including shops, office buildings, apartments, and luxury residences, each with distinct market dynamics and investment potential [8][11][15][18]. - Community shops are considered lower risk due to their stable consumer base, while office buildings in Xi'an face high vacancy rates, making them less attractive for investment [9][12]. - The luxury segment, particularly in core urban areas, may benefit the most from the down payment reduction, as it allows business owners to allocate funds more effectively for higher returns [21][22].

Investment Rating - The report maintains an "Overweight" rating for the real estate industry [4] Core Views - The real estate market is experiencing a structural downturn, with new home prices decreasing by 3.0% year-on-year and second-hand home prices down by 6.1% in 2025 [1][2] - Core cities are showing signs of a small-scale structural market, with cities like Shanghai and Hangzhou experiencing some price stability or increases, while most other cities are seeing declines [1][2] - The report emphasizes the importance of policy changes and economic indicators, suggesting that real estate remains a key economic barometer [4] Summary by Sections New Home Market - In December 2025, new home prices in 70 cities fell by 0.4% month-on-month, with a year-on-year decline of 3.0% [1] - New home prices in first, second, and third-tier cities decreased by 1.7%, 2.5%, and 3.7% respectively [1] - The new home transaction area in 30 cities was 117.7 million square meters, down 1.3% month-on-month and 38.1% year-on-year [3][25] Second-Hand Home Market - Second-hand home prices in 70 cities fell by 0.7% month-on-month and 6.1% year-on-year, with all cities experiencing price declines [2][12] - The transaction area for second-hand homes in 15 sample cities was 213.9 million square meters, showing a 3.9% increase month-on-month but a 4.0% decrease year-on-year [3][36] Market Performance - The report notes that the real estate index increased by 5.2%, outperforming the Shanghai and Shenzhen 300 index by 5.83 percentage points [2][17] - The report highlights the performance of specific stocks, with notable increases in companies like Zhongrun Resources and Wanze Shares [17][20] Investment Recommendations - The report suggests focusing on real estate-related stocks, particularly in first-tier and select second-tier cities, as these are expected to perform better in the current market environment [4] - Recommended stocks include Green Town China, China Overseas Development, and Poly Development among others [4]

Investment Rating - The report maintains an "Overweight" rating for the real estate industry, indicating a positive outlook for investment opportunities in this sector [4][6]. Core Insights - The report highlights that the new home prices in 70 cities decreased by 3.0% year-on-year, while second-hand home prices fell by 6.1% in 2025, with core cities experiencing a significant decline [1][2]. - The report emphasizes that the real estate sector serves as an early economic indicator, suggesting that investments in this area can reflect broader economic trends [4]. - It notes that the competitive landscape in the industry is improving, with leading state-owned enterprises and select private firms performing well in land acquisition and sales [4]. Summary by Sections New Home Market - In December 2025, new home prices in 70 cities decreased by 0.4% month-on-month and 3.0% year-on-year, with first, second, and third-tier cities showing price changes of -1.7%, -2.5%, and -3.7% respectively [1][11]. - The report indicates that new home prices increased in 5 cities while decreasing in 65 cities throughout the year, with Shanghai showing a consistent month-on-month increase [1]. Second-Hand Home Market - The second-hand home prices in 70 cities fell by 0.7% month-on-month and 6.1% year-on-year, with all cities experiencing a decline [2][12]. - The report notes that after a brief stabilization in some cities post-September 2024, the second-hand home prices resumed their downward trend starting in the second quarter of 2025 [2]. Transaction Volume - For new homes, the transaction volume in 30 cities was 117.7 million square meters, reflecting a 1.3% decrease month-on-month and a 38.1% decrease year-on-year [3][25]. - In the second-hand market, the transaction volume in 15 cities totaled 213.9 million square meters, showing a 3.9% increase month-on-month but a 4.0% decrease year-on-year [3][36]. Investment Recommendations - The report suggests focusing on real estate-related stocks, particularly in first-tier and select second-tier cities, as these areas are expected to benefit from policy changes and market dynamics [4]. - Specific companies recommended for investment include Green Town China, China Resources Land, and Poly Developments among others [4].

Investment Rating - Industry investment rating: Stronger than the market (maintained) [2] Core Insights - The report indicates an increase in market attention towards the real estate chain, with significant weekly gains of 5.21% and 9.23% for the Shenwan real estate and building materials sectors respectively. The rebound is attributed to several factors, including a substantial rise in second-hand housing transactions in key cities, a positive earnings forecast from Poly Developments, and limited downward space for traditional real estate companies [3] - The report suggests that the real estate market is showing positive short-term signals, with ongoing favorable factors accumulating. It highlights the potential for market stabilization in the second half of 2026 to 2027, driven by easing down payment ratios and mortgage rates, which reduce the financial burden on homebuyers [3] Market Monitoring - Transaction volumes have shown a rebound, with new home sales in 50 key cities reaching 13,000 units, a 6.7% increase week-on-week, while second-hand home sales in 20 key cities reached 20,000 units, up 5.2% week-on-week. However, year-on-year comparisons show a 24% decline for new homes and a 6.7% increase for second-hand homes [8][9] - Inventory levels have decreased, with a total of 90.29 million square meters of inventory across 16 cities, reflecting a 0.5% decrease and a decommissioning cycle of 21 months [11] Capital Market Monitoring - The real estate sector saw a weekly increase of 5.21%, outperforming the CSI 300 index, which declined by 0.62%. The current price-to-earnings ratio (TTM) for the real estate sector stands at 63.16, significantly higher than the CSI 300's 14.08, indicating a valuation at the 95.64 percentile over the past five years [21][22] - The report notes that 78.9 billion yuan of real estate bonds were issued this week, with a total repayment amount of 109.7 billion yuan, resulting in a net financing of -30.9 billion yuan [16] Investment Recommendations - The report recommends focusing on three main lines: 1. Real estate companies with light historical burdens and strong product capabilities, such as China Resources Land and China Overseas Development, are expected to benefit from the "good housing" initiative [3] 2. Hong Kong real estate firms benefiting from market stabilization, such as Sun Hung Kai Properties and Henderson Land Development [3] 3. Companies with stable cash flow and dividends, including China Resources Vientiane Life and Poly Property [3]

Investment Rating - The industry maintains a "Buy" rating [8] Core Insights - The real estate market is entering a traditional off-season, with expectations for increased policy support [5] - In major cities, the transaction volume for new homes has seen a significant decline compared to second-hand homes, indicating weaker demand [4] - The market anticipates that other first-tier cities will follow Beijing's lead in optimizing purchase restrictions after observing declining transaction data [5] Summary by Sections Core Cities - Beijing: Second-hand home daily transactions averaged 558 units (up 16.3% year-on-year), while new home transactions averaged 80 units (down 45% year-on-year) [2] - Shanghai: Second-hand home daily transactions averaged 609 units (up 10% year-on-year), with new home transactions remaining flat [2] - Shenzhen: Second-hand home daily transactions averaged 201 units (up 68% year-on-year), while new home transactions dropped 57% [3] National Key Cities - New home transaction volume in 30 major cities decreased by 38% year-on-year, while second-hand home transactions increased by 9.2% year-on-year, primarily due to a low base effect from the previous year [4] Investment Recommendations - The report suggests focusing on leading real estate companies with land reserves in core cities and high-end improvement products, such as Poly Developments [5] - It also highlights the potential for valuation recovery in leading intermediary firms as the proportion of second-hand home transactions continues to rise, citing companies like I Love My Home [5]

Investment Rating - The report maintains an "Overweight" rating for the real estate development and service sectors [6] Core Insights - The real estate sector is experiencing a significant reduction in holdings, with public funds and northbound capital reaching new lows in their investment proportions. The market is currently stabilizing, with a focus on recovery in core cities, particularly first-tier cities [1][2] - Recommended investment opportunities include companies with strong credit, urban presence, and product quality, as well as those with robust operational capabilities to manage cash flow during market adjustments [1] - The report highlights a shift in holdings concentration, with Beike rising to the top position among public fund holdings, indicating a narrowing of investor divergence in the sector [3] Summary by Sections Public Fund Holdings - As of Q4 2025, the total market value of public fund holdings in the real estate sector was 38.8 billion yuan, a 31% decrease quarter-on-quarter. The sector's holdings accounted for 0.43% of total stock investments, down 0.19 percentage points [2] - The real estate sector index fell by 8.9%, ranking 30th out of 31 sectors, primarily due to declining fundamentals and some companies hitting new stock price lows [2] Northbound Capital - Northbound capital's total holdings in real estate stocks were 11.5 billion yuan, a 17% decrease quarter-on-quarter, representing 0.45% of total northbound holdings [4] - The top five real estate stocks held by northbound capital include China Merchants Shekou, Poly Developments, and others, with notable increases in holdings for companies with "real estate+" attributes [4] Recommended Companies - Key recommended companies include: - Yuexiu Property (123 HK) with a target price of 7.06 HKD and a "Buy" rating [8] - Longfor Group (960 HK) with a target price of 15.21 HKD and a "Buy" rating [8] - Greentown Service (2869 HK) with a target price of 6.56 HKD and a "Buy" rating [8] - China Overseas Development (688 HK) with a target price of 19.08 HKD and a "Buy" rating [8] - China Merchants Shekou (001979 CH) with a target price of 12.79 CNY and a "Buy" rating [8] - CR Land (1109 HK) with a target price of 36.45 HKD and a "Buy" rating [8] - Others include companies like Greenland China, and Hong Kong local firms benefiting from market recovery [1][8] Performance Insights - Beike's market value increased significantly, reflecting a strong investor interest, while other companies like Poly Developments and China Merchants Shekou saw reductions in their holdings [3][4] - The report emphasizes the importance of operational efficiency and cash flow management for companies navigating the current market challenges [1][3]

Group 1: Policy Environment - The Shanghai real estate market in 2025 is expected to operate steadily under a backdrop of continuous policy easing, product quality upgrades, and increasing market differentiation [1][2] - No major new policies are anticipated for the year, with a focus on continuity in stimulus measures [1] - Key policy changes include the lifting of purchase limits for non-residents in August and the introduction of the "Good House" regulations in September, which aim to enhance housing quality [1][9][14] Group 2: Land Market - The land market is characterized by a "rise then fall" trend, with overall transaction volumes expected to remain stable compared to 2024 [1][17] - In the first half of the year, premium land parcels in core areas were sold at high premiums, with 17 parcels exceeding a 20% premium rate [1][20] - The second half saw a return to rationality in the market, with bottom-price transactions becoming the norm, led by state-owned enterprises [1][23] Group 3: Residential Market - The supply-demand ratio in the residential market has decreased to 0.94, marking a five-year low, indicating effective inventory reduction [2] - The average transaction price has structurally increased to 80,600 yuan per square meter, primarily driven by luxury properties in central urban areas [2] - The market is dominated by demand for 90-110 square meter units and properties priced between 3 million to 7 million yuan, with a notable increase in sales of high-quality products [2][12] Group 4: Developer Landscape - State-owned enterprises like China Overseas and Jinmao dominate the market, with China Resources, Poly, and China Merchants ranking among the top three in sales [2] - The collaboration among real estate companies is stabilizing, indicating a shift towards more strategic partnerships [2] - The overall outlook for the Shanghai real estate market in 2025 suggests a gradual recovery supported by policy optimization and supply structure adjustments [2]

Core Insights - The Silk Road Software City has been one of the hottest real estate markets in Xi'an for the past six years, starting from early 2020, although its heat has slightly decreased in recent years [1] - In 2026, the area will see new supply from multiple new projects while facing competition from the second-hand housing market and the Fengdong High-tech Integration Zone [2][16] Group 1: Market Overview - The Silk Road Software City is divided into "Soft East" and "Soft West," catering to different buyer preferences, with "Soft East" focusing on residential living and "Soft West" on industrial and residential integration [3][4] - In 2025, five new projects were launched in the Silk Road Software City, with Green Town developing eight projects in total, indicating a strong presence in the area [4][5] Group 2: Sales Performance - The top three selling projects in 2025 were Green Town Jin Haitang, Tiandi Source Gao Xin Chen Yue, and Green Town Qiu Yue Yuan, with sales of 1.98 billion, 1.72 billion, and 1.69 billion respectively, ranking them 9th, 11th, and 12th in Xi'an [5] - The land market saw no premium transactions in 2025, with all four residential plots sold at base prices, reflecting the broader market conditions [5] Group 3: Future Supply - In 2026, the Silk Road Software City is expected to introduce two luxury projects and two new residential projects, including Green Town Chang'an Yuhua and Jinmao Puyi Gao Xin [7][8] - The luxury projects are located within 1,000 meters of each other, with Green Town Chang'an Yuhua offering large units priced around 30,000 yuan per square meter and Jinmao Puyi Gao Xin starting at over 40,000 yuan per square meter [11][14] Group 4: Competitive Landscape - The Silk Road Software City faces competition from the second-hand housing market and the Fengdong High-tech Integration Zone, particularly as price differences may influence buyer decisions [16]