Core Viewpoint - The Chinese real estate market is undergoing a significant adjustment, moving towards a more balanced and reasonable state reminiscent of 2016, driven by various economic and demographic factors [3][4][5]. Market Performance - In the first half of 2025, the national sales area of commercial housing decreased by 8.3% year-on-year to 562 million square meters, while sales revenue fell by 12.5% to 5.83 trillion yuan [4]. - The number of cities experiencing a decline in new residential prices reached 53, and 58 cities saw a drop in second-hand housing prices, indicating a widespread market downturn [4]. Historical Context - The year 2016 is highlighted as a pivotal point, with commercial housing sales area at 1.573 billion square meters and sales revenue at 11.76 trillion yuan, alongside a reasonable price-to-income ratio [4]. - Current price-to-income ratios have improved, with first-tier cities at approximately 13:1, second-tier cities at 9:1, and third and fourth-tier cities at 6:1, moving closer to the 6-8 range considered reasonable [5][7]. Demographic and Economic Factors - Population aging and negative growth are expected to reduce annual housing demand to around 8 million units by 2030, a decrease of about 30% from 2016 levels [7]. - Urbanization is slowing, with the urbanization rate projected to grow by less than 0.5 percentage points annually over the next decade, compared to 1.2 percentage points from 2010 to 2020 [7]. Investment Trends - There is a shift in asset allocation among residents, with investments in deposits, financial products, and stocks surpassing real estate for the first time in 2025 [7]. - The financial environment for real estate is becoming more rational, with the growth rate of real estate loans declining from double digits to single digits [7]. Supply and Demand Dynamics - The supply-demand imbalance is easing, with new residential supply in first-tier cities increasing by 5.3% while decreasing by 7.8% in third and fourth-tier cities [8]. Future Market Characteristics - Regional differentiation is expected to become more pronounced, with stable prices in first-tier and strong second-tier cities, while third and fourth-tier cities face greater price adjustment pressures [9]. - The market is anticipated to return to a focus on residential needs rather than speculative investments, with a growing emphasis on the intrinsic value of housing [9]. - The secondary market and rental market are projected to dominate, with second-hand transactions expected to account for over 65% of total transactions by 2030 [9]. - Quality competition will replace price competition, as consumer preferences shift towards better quality and services in housing [10].