Summary of China Property Monthly Tracker Industry Overview - The report focuses on the **Chinese property market**, highlighting significant declines in property sales, construction activities, and investment trends as of December 2025 and forecasts for early 2026. Key Market Indicators - **Primary Sales**: - Volume declined by **-16%** year-over-year (yoy) and value by **-24%** yoy in December 2025, leading to a full-year decline of **-9%** in volume and **-13%** in value [2][10] - **New Starts**: - New construction starts fell by **-19%** yoy in December, with a full-year decline of **-20%** [10][11] - **Completions**: - Completions also saw a decline of **-18%** yoy, which was below expectations [10][11] - **Fixed Asset Investment (FAI)**: - FAI reached its lowest level since 2012, declining by **-36%** yoy in December and **-17%** for the full year [10][11] - **Secondary Transactions**: - Secondary transaction volume in 15 cities dropped by **-30%** yoy in December, leading to a full-year decline of **-2%** [10][11] Price Trends - **Average Selling Price (ASP)**: - The nationwide ASP in December was **-0.4%** month-over-month (mom) and **-9.5%** yoy, indicating continued price weakness [10][24] - **Secondary ASP**: - The secondary ASP index also fell by **-0.7%** mom in December [10][24] Developer Activity - Developers' land acquisition pace slowed significantly, with only **8%** of contract sales allocated to new land purchases in December [11][61] - The average project-level gross profit margins (GPM) for developers was **25%**, with a focus on Tier-1 and Tier-2 cities [11][61] Future Expectations (Jan-Feb 2026) - Continued price weakness is anticipated, with expected declines in sales volume and value in the mid-single digits (MSD) to high-single digits (HSD) yoy [3][12] - Completions and new starts are expected to decline further, reflecting ongoing liquidity challenges for developers [18][19] Policy Considerations - Potential reforms in the Housing Provident Fund and large-scale mortgage interest subsidies are being monitored as they could impact market stability [4][10] - The report highlights the need for policy support to address mortgage delinquencies and stimulate demand through urban renewal programs [4][10] Additional Insights - The report notes a significant decline in developer financing, with new funding sources down **-41%** mom and **-46%** yoy in December [37] - The land market remains under pressure, with land sales volume and value declining by **-12%** and **-11%** yoy, respectively [30][10] Conclusion - The Chinese property market is experiencing significant challenges, with declining sales, construction, and investment activities. The outlook for early 2026 remains cautious, with expectations of continued price weakness and the need for supportive policy measures to stabilize the market.

Summary of Conference Call Notes Industry Overview - **Industry**: China Property - **Key Policy Change**: The Ministry of Finance (MOF) announced a reduction in value-added tax (VAT) for sales of homes owned for less than two years from 5% to 3%, effective January 1, 2026. Homes owned for two years or more remain exempt from VAT [1][4][5]. Core Insights and Arguments - **Limited Impact of VAT Reduction**: - The VAT reduction is expected to have minimal effect on the housing market as it primarily benefits sellers, not buyers. The estimated tax savings for a unit sold at RMB 2 million would be RMB 37,000, which is only about 2% of the sale price [1][4]. - Homes sold that have been owned for less than two years account for only 6-7% of the private housing stock, indicating that the majority of transactions will not be affected by this policy [4]. - The policy does not address the weak expectations for home prices, which remain a significant concern for potential buyers [1][4]. - **Future Policy Considerations**: - Potential future measures may include further easing of home purchase restrictions in major cities like Shanghai and Shenzhen, mortgage subsidies, increased income tax rebates for mortgage borrowers, and reductions in other transaction taxes [4]. - However, these measures are also viewed as unlikely to significantly revive the housing market [4]. Investment Recommendations - **Top Picks**: - China Resources Land (1109.HK) - China Resources Mixc (1209.HK) - China Jinmao (0817.HK) [1][4]. - **Top Avoid**: - China Vanke - H (2202.HK) [1][4]. Additional Important Information - **Market Sentiment**: The current piecemeal approach to policy support suggests that policymakers may not yet feel the urgency to implement stronger measures to stimulate the housing market [1][4]. - **Analyst Ratings**: The report includes various stock ratings and price targets for companies within the China property sector, indicating a mix of overweight (OW), neutral (N), and underweight (UW) ratings across different firms [5][19][21][24]. This summary encapsulates the key points from the conference call regarding the China property market, focusing on the recent VAT policy change, its implications, and investment recommendations.