Core Viewpoint - The current real estate market in China is significantly different from the past, characterized by comprehensive and multidimensional differentiation among cities and regions [1][5]. Group 1: Market Differentiation - The differentiation in the real estate market is no longer limited to tiered cities; even within first-tier cities, there is notable variation, and second-tier cities are also experiencing differentiation [1][5]. - Different areas within cities are showing varying performance, with some new housing products selling well while others do not, indicating a stark contrast between new and second-hand housing [1][5]. Group 2: Quality Housing Performance - High-quality properties in key cities and prime locations are expected to perform well this year, as they possess unique advantages in terms of location, planning, design, and management services that older products cannot match [1][5]. - Cities that did not experience a significant price surge in the previous cycle are not seeing major declines in the current market [3][5].

Group 1 - The real estate market is undergoing a structural differentiation, with significant variations across city tiers and product types, indicating a new market layout logic that requires detailed data observation [1] Group 2 - From January to October, national real estate development investment decreased by 14.7% year-on-year, with residential investment down by 13.8% and new construction area declining by 19.8%, reflecting the cautious strategies of real estate companies focused on "ensuring delivery and controlling new starts" [2] - Sales data shows a trend of "overall pressure with endogenous improvement," with commodity housing sales area and sales amount down by 6.8% and 9.6% year-on-year, respectively, but the decline has narrowed by 9.0 and 11.3 percentage points compared to the same period last year [2] - The inventory reduction is progressing steadily, with the area of unsold commodity housing decreasing for eight consecutive months, down by 3.22 million square meters at the end of October compared to September, although the total inventory remains relatively high with a year-on-year increase of 3.3% [2] Group 3 - There is a growing differentiation at the city level, with core cities showing resilience that supports market recovery; for instance, new home prices in first-tier cities fell only by 0.8% year-on-year, while Shanghai saw a 5.7% increase [3] - The "dual screening" mechanism at the product and enterprise levels is reshaping the industry landscape, with mid-range residential products showing better resilience compared to entry-level products due to stronger purchasing power and product quality [3] - The trend of quality resources concentrating among leading enterprises is evident, with state-owned and financially stable private companies increasing their market share and achieving project average sales rates 15-20 percentage points higher than the industry average [3]

Core Viewpoint - The article discusses the current state of the real estate market in major Chinese cities, highlighting that while supply may decrease in quantity, the quality of offerings is expected to improve, which could maintain market activity but may not significantly boost transaction volumes [1][26]. Group 1: Land Transaction Trends - In the first eight months of 2025, land transaction amounts in 300 cities increased by 9% year-on-year, with first and second-tier cities performing significantly better than third and fourth-tier cities [3][5]. - The total land transaction area was 38,982 million square meters, with a year-on-year decline of approximately 10% [5][8]. - Major cities like Shanghai, Hangzhou, Beijing, and Chengdu accounted for 37% of national land transaction amounts, with each exceeding 350 billion yuan in transactions [8][9]. Group 2: Supply Expectations - The expected new supply of residential properties in five key cities over the next nine months is projected to be 1,944 million square meters, representing a year-on-year decrease of 29% [11][14]. - The peak of new project launches is anticipated in the fourth quarter of 2025, particularly in cities like Chengdu and Hangzhou, where over 50% of new supply is expected [14][15]. - The supply of new residential properties is expected to be primarily focused on affordable and mid-tier products, with significant variations in supply-demand dynamics across different cities [18][25]. Group 3: Market Dynamics and Product Segmentation - The supply-demand matching in cities like Hangzhou is relatively high, while mismatches exist in some areas of Shanghai and Chengdu [26][30]. - In Beijing, there is a potential oversupply of mid-tier products, while high-end products may face slight demand fatigue due to increased supply [30][32]. - In contrast, Chengdu is experiencing a shortage of mid-tier products, leading to a sustained supply-demand imbalance [32][37]. Group 4: Inventory and Market Pressure - Cities like Beijing and Xi'an are facing higher inventory turnover periods, exceeding 20 months, which may lead to inventory accumulation as new supply increases [45]. - The overall market heat is expected to be maintained due to the matching of supply and demand in cities like Shanghai and Hangzhou, despite limited impacts on transaction volumes [45].

Investment Rating - The industry investment rating is "Outperform the Market," indicating that the industry index is expected to perform better than the benchmark index over the next 6-12 months [25]. Core Insights - In July 2025, the new home prices in 70 major cities decreased by 0.3% month-on-month, while second-hand home prices fell by 0.5%. The decline in new home prices remained consistent with June, while the drop in second-hand home prices showed a slight narrowing [6][9]. - The number of cities experiencing a decline in new home prices increased to 60, with an average drop of 0.38%. For second-hand homes, 68 cities saw a price decrease, with an average decline of 0.57% [6][12]. - First-tier cities experienced a narrowing of new home price declines but faced increased downward pressure on second-hand home prices, which recorded the largest monthly drop since October 2024 [6][16]. - The report emphasizes the need for the real estate market to stabilize and recover, with a focus on "high-quality urban renewal" as a key task for the industry [6][18]. Summary by Sections New Home Prices - In July, new home prices in first-tier cities fell by 0.2%, a slight improvement from June. Shanghai saw a 0.3% increase, while Beijing remained stable [6][9]. - Second-hand home prices in first-tier cities dropped by 1.0%, marking a significant increase in the rate of decline compared to June [6][16]. Second-Hand Home Prices - Second-tier cities saw new home prices decrease by 0.4%, while second-hand home prices fell by 0.5%, showing a slight improvement from June [6][14]. - Third-tier cities maintained a stable decline in new home prices at 0.3%, while second-hand home prices decreased by 0.5%, also showing a slight improvement [6][14]. Investment Recommendations - The report suggests focusing on four main lines of investment: 1. Companies with stable fundamentals and high market share in core cities, such as Binjiang Group and China Resources Land [6]. 2. Smaller companies that have made significant breakthroughs in sales and land acquisition since 2024, like Poly Real Estate Group [6]. 3. Companies with operational or strategic changes, such as New Town Holdings and Longfor Group [6]. 4. Real estate brokerage firms benefiting from the recovery in the second-hand market, including Beike-W and Wo Ai Wo Jia [6].