Core Viewpoint - The article discusses the significant decline in sales performance of China Overseas Land & Investment (中海地产) in Shanghai, dropping from 700 billion to 280 billion, highlighting the challenges faced in a changing market environment [3][64]. Group 1: Sales Performance - In 2025, China Overseas achieved a sales revenue of 2,512 billion, a nearly 20% decline year-on-year, dropping from second to third place in the industry rankings [26][89]. - The sales in Shanghai for the first half of 2025 fell to 137.8 billion, ranking seventh among competitors [11][72]. - By the end of 2025, the company had to enter a "wartime state" to boost sales, launching several key projects in December [16][78]. Group 2: Market Dynamics - The market in Shanghai has shifted from scarcity to abundance, with increased competition and a longer decision-making cycle for buyers [33][98]. - The number of projects has surged, but customer demand has not kept pace, leading to a more competitive environment [97][118]. - The company faces challenges in maintaining its market position as the dynamics of the luxury housing market have changed significantly [96][115]. Group 3: Strategic Decisions - Despite the declining performance, the company chose to increase its land acquisition budget to 907 billion in 2025, the highest in the country, indicating a strategic gamble [46][109]. - The company’s approach reflects confidence but also poses financial risks as profit margins are being squeezed due to rising land prices [49][112]. - The reliance on high-end projects places the company in a vulnerable position, as it must balance scale and profitability amidst declining sales [119][120].

Group 1 - The core viewpoint of the report emphasizes that the next phase will be characterized by policy adjustments, structural changes, and differentiation in the market [1] - The overall sales volume of new and second-hand homes has not stabilized, with a notable decline in land acquisition activity [8][20] - The report indicates that the total sales area of commercial housing in China from January to October 2025 was 720 million square meters, a year-on-year decrease of 6.8%, while the sales amount reached 6.9 trillion yuan, down 9.6% year-on-year, reverting to levels seen in 2015 [9][10] Group 2 - In 2025, land transaction volumes continued to shrink from a low base, with the total land transfer area for residential use in 300 cities decreasing by 11.7% year-on-year [26] - The report highlights that the land market showed a high concentration in major cities, with the top ten cities accounting for nearly 50% of the total land transaction value [33] - The average premium rate for land transactions has shown a downward trend, dropping to 2.5% in November 2025, the lowest level of the year [29] Group 3 - The inventory of new homes remains at historically high levels, with the de-stocking cycle extending beyond previous peaks, particularly in third-tier cities where the de-stocking period has reached 46 months [39][43] - The report notes that the de-stocking pressure is particularly pronounced in second and third-tier cities, with a significant number of cities exceeding the warning line for inventory levels [40][41] - The report indicates that the effective inventory boundary is influenced by price elasticity, suggesting that even "ineffective inventory" can be converted into actual sales through reasonable discounts [34]

Investment Rating - The investment rating for the real estate industry is "Outperform" based on the analysis of major companies [35]. Core Insights - As of Q3 2025, only 19% of the 27 major cities show signs of stabilization in the real estate market, with transaction volumes indicating a split where second-hand homes outperform new homes [38][39]. - New and second-hand home prices continue to decline on a quarter-on-quarter basis, with new home prices seeing expanded declines in Q3 2025 after a period of narrowing declines since October 2024 [39][41]. - Inventory pressure remains significant, with over 80% of cities having new home clearance cycles exceeding 18 months, indicating a persistent supply-demand imbalance [38][41]. Summary by Sections 1. Transaction Decline and Lengthening Clearance - The real estate market is characterized by a decline in transaction volumes and an increase in clearance cycles, reflecting local policy differences and reliance on land finance [5][9]. 2. Price Trends in Q3 - New home prices experienced an expanded decline in Q3 2025, while second-hand home prices followed a similar trend, indicating a lack of sustained recovery [11][16]. - Despite some cities showing signs of price stabilization, the overall trend remains uncertain, with significant variations across different cities [12][20]. 3. Transaction Numbers and Recovery - The overall market shows weak recovery, with first-tier cities slightly outperforming second-tier cities, which continue to face negative growth in new home transactions [40][29]. - First-tier cities saw a 5% year-on-year increase in new home transactions by September, while second-tier cities maintained a -16% year-on-year decline [40][29]. 4. Weakened Demand and Rising Inventory Cycles - Demand has weakened, leading to rising inventory cycles, particularly in first-tier cities where clearance cycles have increased to 19.9-21.1 months [41][31]. - Second-tier cities face even higher inventory pressures, with clearance cycles reaching a three-year high of 24.8 months due to weak new home transactions and structural issues [41][31].

Investment Rating - The report assigns an "Accumulate" rating for the real estate industry [5]. Core Insights - The overall market in Q2 2025 shows weak transaction volumes, stable prices lacking trends, and increasing inventory with heightened de-stocking pressure [3]. - Only 19% of the 27 cities analyzed exhibit signs of market bottoming, indicating a general trend of "volume contraction, price stagnation, and inventory pressure" [12]. - The new housing market is experiencing a downturn, with first-tier cities showing a significant slowdown in sales growth, while the second-hand housing market demonstrates relative resilience but with increasing regional disparities [12][13]. Summary by Sections 1. Transaction Decline and Lengthening De-stocking - The report highlights that the real estate cycle varies significantly across cities due to localized policies and differing reliance on land finance [8]. - A comprehensive scoring model based on seven core indicators is used to assess the real estate cycle of each city, categorizing them into four stages: bottoming, rising, topping, and declining [8][9]. 2. Price Trends: Q2 New and Second-hand Housing Prices Decline - In Q2 2025, new housing prices experienced a slight decline after a period of stabilization, with 85% of cities unable to sustain price increases for more than two months [17]. - Second-hand housing prices also fell, with 78% of cities still in a downward trend by June [17][19]. 3. Transaction Volume: Weak Recovery and Increased Volatility - First-tier cities maintained an upward trend in new housing transactions until June, where a decline of 12% was noted [22]. - Second-tier cities saw a 15% year-on-year drop in new housing transactions in Q2, reflecting greater inventory pressure and declining buyer confidence [22][27]. 4. Demand Entering a Tug-of-War Phase Leading to Rising Inventory Cycles - The de-stocking cycle for first-tier cities increased to 20 months by June 2025, indicating intensified market supply-demand conflicts [29]. - Second-tier cities faced even longer de-stocking cycles, reaching 23 months, highlighting structural issues such as declining population attraction and excess land supply [29]. 5. Company Profit Forecasts - The report includes profit forecasts for key companies, with several companies rated as "Accumulate" based on their projected earnings per share (EPS) and price-to-earnings (PE) ratios [32].