Core Viewpoint - The article discusses the phenomenon of "mortgage inversion" in the real estate market, where the market value of properties falls below the remaining mortgage balance, leading to homeowners considering selling their properties at a loss [4][5][6]. Group 1: Mortgage Inversion Phenomenon - The phenomenon of mortgage inversion is observed across various cities in China, particularly in first-tier cities like Shenzhen and Guangzhou, as well as second-tier cities such as Tianjin and Zhengzhou [4]. - Homeowners are facing situations where the selling price of their properties is lower than the outstanding mortgage, leading to a situation where they owe money to the bank after selling [5]. - Two main categories of homeowners are identified: those with multiple properties looking to sell investment properties to cut losses, and those with a single property facing income declines and unable to afford mortgage payments [7][8][9]. Group 2: Bank Responses and Policies - Banks do not encourage homeowners to sell properties under mortgage inversion conditions, as consumer loans for this purpose are not approved [11]. - To assist homeowners, many banks have introduced relief policies, allowing for negotiations on loan terms, such as extending repayment periods or lowering interest rates [12][13]. - Banks are also establishing bad asset departments to manage and sell properties that have become non-performing assets, with significant numbers of properties listed for sale by various banks [16][18][20][22]. Group 3: Market Conditions and Trends - The real estate market is currently in a downward cycle, with no clear winners, and the need for property prices to stabilize is emphasized [27][28]. - Recent data shows that the average price of second-hand homes in 100 cities has been declining for 42 consecutive months, with a year-on-year decrease of 7.60% [29][32]. - Public sentiment regarding property prices is notably pessimistic, with a significant majority believing prices will either continue to fall or remain stable, indicating a lack of confidence in the market [33][34].

Group 1 - The core view of the report indicates that the real estate industry is expected to outperform the market, with a focus on the challenges faced in 2025 and the need for policy adjustments to stabilize housing prices [1][4] - In 2025, new home sales saw a significant decline, with a year-on-year drop of 13% in Q3, marking the lowest level since 2019 [1][11] - The report emphasizes that income confidence is crucial for the mid-term trend of housing prices, requiring the income confidence index to rise above 50 for sustained stability in prices [1][46] Group 2 - The outlook for 2026 suggests a slight narrowing of sales declines, with expected sales amounting to 7.6 trillion yuan, a decrease of 10.9%, and a sales area of 840 million square meters, down 6.8% [2] - New construction is projected to grow significantly by over 20%, while completions are expected to decline by 20% due to insufficient inventory [2][18] - Investment in the sector is anticipated to benefit from improved construction activity, estimated at 7.5 trillion yuan, down 9% [2] Group 3 - Investment recommendations include waiting for market stabilization and focusing on structural opportunities, with specific companies identified as potential outperformers based on their financial health and market positioning [2][3] - Companies recommended for investment include China Jinmao, China Overseas Development, and China Overseas Grand Oceans Group, which are expected to contribute excess returns due to their strong fundamentals [2][3] - The report highlights the importance of selecting stocks with low historical burdens and those benefiting from favorable market conditions, such as lower interest rates [2][3]