Core Viewpoint - The real estate market is expected to stabilize in an L-shaped manner by 2026, indicating that prices will not rebound immediately nor continue to decline significantly, but will remain flat for a period while gradually bottoming out [1] Group 1: Supporting Arguments for L-shaped Stabilization - Second-hand housing prices have retracted approximately 39% from their peak, indicating a significant reduction in market bubble [1] - New construction area has decreased by 74%, leading to a severe contraction in supply and a passive return to balance in supply-demand dynamics [1] - The median rental yield in 30 key cities has reached 2.06%, surpassing the one-year deposit rate, suggesting a more favorable economic rationale for long-term holding [1] Group 2: Counterarguments Against L-shaped Stabilization - The concept of L-shaped stabilization is unlikely to occur naturally in the market, as low volatility typically discourages buyers from entering the market [5][6] - A stable price environment may lead to increased buyer hesitation, as potential buyers may choose to wait for clearer signals of price recovery [6][7] - Sellers facing ongoing costs and no immediate price recovery may be compelled to lower prices, disrupting any potential stabilization [7] Group 3: Importance of Transaction Volume - The recovery of the real estate market is primarily driven by transaction volume rather than price movements, as volume reflects genuine market confidence [10][11] - In 2025, the total sales area of new residential properties was 881 million square meters, a year-on-year decline of 8.7%, indicating ongoing market contraction [10] - January 2026 saw a significant increase in transaction volume, with key cities reporting a 33% year-on-year growth in second-hand housing transactions, suggesting a potential market recovery [11] Group 4: Differentiated Market Dynamics - The L-shaped stabilization concept may not apply uniformly across the country, as it is likely to manifest as a highly differentiated phenomenon in specific cities with favorable supply-demand conditions [18][19] - Cities like Shanghai are showing signs of stabilization, with a 0.2% increase in new home prices and a sustained high volume of second-hand transactions [19] - Conversely, many second-tier and third-tier cities continue to struggle with high inventory levels and declining populations, making L-shaped stabilization unlikely in those areas [21]