Investment Rating - The report assigns an "Overweight" rating for the real estate sector, indicating a positive outlook relative to the market index [5]. Core Insights - The overall performance of the real estate market in Q4 2025 shows weak transaction volumes, continued price declines, and rising inventory levels, indicating a need for stronger policy interventions to achieve market rebalancing [3][12]. - Only 19% of the 27 cities analyzed show signs of market stabilization, with the real estate sector still in a deep adjustment phase [12]. - The new housing market experienced a temporary recovery at the beginning of the year, but momentum weakened significantly in the second quarter, leading to increased downward pressure in Q4 [12][22]. Summary by Sections Market Overview - The real estate market in Q4 2025 is still in a bottoming phase, with significant regional differences due to localized policies and varying reliance on land finance [8]. - A comprehensive scoring model was developed to assess the real estate cycle across cities, categorizing them into four stages: bottoming, rising, topping, and declining [8][9]. Price Trends - In Q4 2025, the year-on-year decline in new home prices expanded, with significant fluctuations observed, particularly in first-tier cities [14][16]. - The second-hand housing market mirrored the new housing trends, with prices also experiencing a year-on-year decline in Q4 [16][19]. Transaction Volumes - First-tier cities saw a dramatic year-on-year decline of 47% in new home transactions in Q4 2025, reflecting a significant drop in market activity [21][23]. - Second-tier cities faced even more pronounced declines, with new home transactions down by 43% year-on-year in Q4 [22][23]. Inventory and Clearance Cycles - The clearance cycle for new homes in first-tier cities exceeded 23 months, while second-tier cities reached a historical high of 26 months, indicating increasing inventory pressures [31][32]. - The prolonged clearance cycles and low transaction volumes highlight the lack of sales momentum and inventory accumulation in the new housing market [32].

Core Viewpoint - The real estate sector is a focal point during the annual Two Sessions, with a clear directive from the Central Economic Work Conference to stabilize the market by 2025, emphasizing the importance of policy implementation and collaboration between local and central governments [1][2]. Group 1: Market Indicators - Multiple indicators show positive changes in the real estate market, with a notable improvement in the sales area of commercial housing since Q4 of last year, including a 35% year-on-year increase in new home sales in first-tier cities in December [4]. - The transaction volume in first-tier cities has shown a significant recovery, with second-hand home prices stabilizing after three months of month-on-month increases, and new home prices rising for the first time since June 2023 [4][5]. - The land market is also reflecting renewed confidence among real estate companies, with over 100 rounds of bidding and high premium land parcels emerging, some with premium rates exceeding 20% and the highest reaching 87.5% [5]. Group 2: Policy Impact - The positive changes in real estate indicators are attributed to a series of policies implemented since late September, which have begun to show results, particularly in first-tier and some second-tier cities [7]. - Experts suggest that maintaining the current positive momentum requires further policy support, including optimizing existing measures and introducing new policies to stimulate demand and supply [9][10]. - Recommendations include lowering housing costs through interest rate cuts, utilizing local government special bonds to acquire idle land, and expanding policies to encourage housing upgrades and improve the role of housing provident funds [10][11].