Summary of Conference Call on China Property Market Industry Overview - The conference call focused on the **China Property** market, specifically the performance of major property developers in January 2026 and expectations for the first quarter of 2026 [1][2]. Key Points Sales Performance - Contracted sales for the 25 major developers tracked fell **32% year-on-year (y-y)** in January 2026, despite a low base due to the Chinese New Year (CNY) calendar effect [1][2]. - The top 50 and top 100 developers experienced declines of **26% and 29% y-y**, respectively, in January, compared to **-22% and -29%** in December [2]. Divergence in Developer Performance - State-Owned Enterprises (SOEs) outperformed other developers with milder declines. Notable performers included: - **China Overseas Land & Investment (COLI)**: +20% y-y - **Jinmao**: +14% y-y - **CR Land**: +0.4% y-y - Conversely, developers like **Sunac**, **Shimao**, **CIFI**, **Midea RE**, and **GZ R&F** reported declines exceeding **50% y-y** [3]. Market Outlook - The physical property market is expected to continue its downtrend in 2026-27, with projected declines of **8% and 6% y-y** in secondary home prices [4]. - A meaningful nationwide housing policy is anticipated to remain muted in the coming months, contributing to fragile buyer sentiment and increased inventory [4]. Investment Sentiment - Recent sentiment-driven outperformance in the China property industry is viewed as unsustainable, with expectations of a sector pullback as results season approaches [5]. - The focus remains on quality names with credible self-help stories, such as: - **CR Land (1109.HK)** - **Seazen (601155.SS)** - **C&D International (1908.HK)**, which is seen as a consolidator in the residential market with optimized landbanks [6]. Additional Insights - The analysis indicates that home prices in tier 1 and select tier 2 cities could stabilize in the second half of 2027 if the macro environment remains resilient [4]. - The overall sentiment in the market is cautious, with expectations of continued challenges for developers, particularly those with weaker brand recognition and fewer saleable resources [5][6].

Summary of Conference Call on China Property Market Industry Overview - The conference call focuses on the **China Property** market, highlighting ongoing challenges and forecasts for 2026 and beyond. Key Points and Arguments Market Conditions - **Weak Construction Activity**: Primary housing market construction is expected to remain weak in 2026E-2027E due to persistent liquidity stress and high inventory levels in the industry [1] - **Property Fixed Asset Investment (FAI)**: A potential deceleration in the current double-digit year-on-year decline in property FAI may occur if it reaches 85% of property sales by 2027E, as property FAI primarily reflects the cost of property sales [1] - **Secondary Housing Market**: The supply/demand imbalance in the secondary housing market is anticipated to take longer to adjust, delaying price stabilization [1] Financial Stress and Developer Challenges - **Loan Maturity Extensions**: There is uncertainty regarding the scope for further loan maturity extensions for developers, as high debt levels and declining property sales have offset benefits from interest rate reductions [1] - **Interest Expense**: Interest expenses for privately owned enterprises (POE) developers account for approximately 70% of total developer industry expenses, significantly higher than the 5-6% for larger state-owned enterprises (SOEs) [1] - **Liquidity Stress**: The liquidity stress in the industry is deepening, with increasing risks of credit defaults [1][36] Mortgage Market Dynamics - **Elevated Loan-to-Value Ratios (LTVs)**: The ongoing decline in property prices is raising LTVs for mortgages and operating loans, with a base-case scenario estimating Rmb5.2tn and Rmb0.8tn in outstanding mortgages and operating loans meeting the 80% LTV threshold [2][86] - **Bear-case Scenario**: A potential 30% decline in property prices could lead to Rmb14.7tn in mortgages meeting the 80% LTV threshold, indicating significant risk in the mortgage market [86] Economic Implications - **Household Debt Service Burden**: The household debt service burden in China is projected to remain high at over 15% in 2025E-2027E, raising concerns about a negative feedback loop affecting home prices and credit availability [5][77] - **Policy Stimulus**: Key factors to watch include any new policy stimulus aimed at reviving demand and targeted liquidity injections to developers with land banks in tier-1 and tier-2 cities [6] Adjusted Forecasts - **EPS Estimates**: The underlying EPS estimates for developers have been cut by 7-31% on average for 2025E-2027E, reflecting a weaker fundamental outlook [10] - **ASP Trends**: The average selling price (ASP) forecast for the secondary housing market has been revised down due to ongoing price cuts and weak transaction volumes [9] Developer Liquidity and Debt Restructuring - **Distressed Developers**: The report highlights the ongoing liquidity pressures faced by developers, with 28 major listed developers experiencing significant declines in asset turnover ratios and increasing numbers of distressed developers [42][52] - **Debt Restructuring Progress**: As of October 2025, 19 companies have had their debt restructuring plans approved, with a total estimated debt reduction exceeding Rmb1.2tn [69][70] Market Outlook - **Overall Market Weakness**: The overall outlook for both primary and secondary markets is expected to weaken further, with sell-through rates declining [22][25] - **Land Sales and Construction**: Land sales and construction activities are projected to remain weak until property FAI aligns more closely with property sales [27] Additional Important Insights - **Rental Price Stabilization**: Rental price stabilization is viewed as a key driver for property price stabilization in higher-tier cities [13] - **Fair Value Gap**: There is an estimated 10%-15% property price gap to fair value, which could widen to 30% if deflationary pressures persist [16] This summary encapsulates the critical insights and forecasts regarding the China property market, emphasizing the ongoing challenges and potential risks for investors and stakeholders in the industry.

An Agricultural Bank of China unit is taking its legal challenge against defaulted Chinese builder Shimao to Hong Kong, as it seeks to recover about 1 billion yuan ($140 million) in unpaid debt https://t.co/Lcs1Xvnjos ...