China: 70-city average primary property prices decline accelerated in January Bottom line: The National Bureau of Statistics' 70-city house price data suggest the weighted average property price in the primary market fell by 5.3% mom annualized in January after seasonal adjustments. The widening in sequential decline of house prices was broad-based across all city tiers. We emphasize the 70-city data are for primary market transactions (new home sales) only; secondary market data by NBS and some third-party ...

Summary of J.P. Morgan's Research on China's Housing Market Industry Overview - The report focuses on the **Chinese housing market**, highlighting a broad-based weakness at year-end 2025 and projecting a continued downturn into 2026 without significant policy changes [1][6]. Key Indicators and Trends - **Housing Activity Index**: J.P. Morgan's housing activity index showed a slight increase at year-end, but most indicators are still contracting sharply. Key metrics include: - New home sales down **18.9%** year-over-year - New starts down **18.8%** - Completions down **20.6%** - Real estate fixed asset investment (FAI) down **36.5%** - Funding sources down **28.1%** [1][4]. - **Price Trends**: - New home prices fell **0.37%** month-over-month (non-seasonally adjusted) in December, a slight improvement from **-0.39%** in November. - Secondary home prices dropped **0.70%**, with larger declines in tier-2 and tier-3 cities. - New home prices are down **12.6%** from the 2021 peak, while secondary prices have decreased by **21.3%** [1][2]. - **Inventory Levels**: - New homes under construction equate to **72.3 months** of sales, while completed unsold units stand at **6.7 months** [1][2]. Demand and Supply Dynamics - The equilibrium demand for housing in China is estimated at around **1 billion square meters** annually. However, both demand and supply are expected to remain below this equilibrium in the near term due to weak income and price expectations [2][6]. - The market is characterized by curtailed demand, widespread incomplete projects, and rising inventories of unsold units, leading to a collapse in housing transactions and investment [2][6]. Policy Measures and Market Outlook - Recent policy measures, including relaxed home purchase restrictions and lower mortgage costs, have been introduced to support the market. However, these measures are viewed as insufficient to halt the ongoing correction or revive the market [3][5]. - A comprehensive rescue package is deemed necessary to stabilize the housing market, which may include a large-scale real estate stability fund and removal of purchase restrictions [5][6]. Future Projections - Without major policy changes, the downturn in the housing market is expected to persist into 2026, with key indicators continuing to contract, albeit at a slower pace. A further **10%** decline in real estate FAI is anticipated, contributing to a macro drag on GDP growth [6][5]. - Critical indicators for the outlook include house price trends and new home sales by state-owned enterprise (SOE) developers. Price stabilization is essential for demand recovery, while faster declines could pose additional risks [6][4]. Conclusion - The Chinese housing market is facing significant challenges, with ongoing declines in key metrics and elevated inventories. Without substantial policy reforms, the market is likely to continue its correction, impacting broader economic growth and household wealth [2][6].

Summary of China Property Market Conference Call Industry Overview - **Industry**: China Property Market - **Key Data**: - Real Estate Investment (REI) recorded a significant decline of **-35.8% year-on-year** in December, marking the largest drop since December 2009 [1] - New home prices decreased by **-3.0% year-on-year** in December, while secondary home prices fell by **-6.1% year-on-year** [1] - The overall residential sales volume dropped by **-26% year-on-year** in December [1] Core Insights - **Investment Trends**: - REI for FY25 is projected at **Rmb8.3 trillion**, a **-17.2% year-on-year** decline, falling below residential sales of **Rmb8.4 trillion** [2] - New housing starts are at a **21-year low**, with **588 million sqm** started, down **-20% year-on-year** [2] - The area under construction decreased by **-10%**, reaching **6.6 billion sqm** [2] - **Market Conditions**: - The market is expected to face a structural decline into 2026 unless liquidity improves, with anticipated REI dropping by **-13% year-on-year** [3] - National sales are projected to decline by **-11% year-on-year**, with new home average selling prices expected to fall by **-3% year-on-year** [3] - **Policy Impacts**: - Recent government policies aim to stabilize the market, including a reduction in the down payment for commercial properties from **50% to 30%** and extending tax refunds for home sellers [4] - The easing measures are seen as risk control rather than a direct boost to the market [4] Additional Important Points - **Sales and Earnings Outlook**: - Weak sales and earnings downgrades are anticipated, with a potential short-lived rebound in share prices driven by policy expectations [5] - The luxury retail sector showed positive same-store sales growth in Q4, but December results were below expectations [5] - **Land Sales**: - Land sales in 300 cities decreased by **-9% in area** and **-23% in value**, reaching an 18-year low [2] - The government land revenue for the first 11 months of 2025 was down **-11%** [1] - **Macro Economic Indicators**: - China's GDP growth for FY25 is projected at **+5.0% year-on-year**, with a slight deceleration in retail sales growth to **+0.9% year-on-year** in December [1] This summary encapsulates the critical insights and data points from the conference call regarding the current state and future outlook of the China property market.

Investment Rating - The report indicates a negative trend in the primary property market, with a weighted average property price decline of 2.4% month-over-month annualized in May, following a decline of 1.8% in April [2][10]. Core Insights - The National Bureau of Statistics (NBS) data shows that the primary market experienced a broad-based decline in property prices across all city tiers, with year-on-year changes reflecting a decrease of 3.5% in May compared to 4.0% in April [1][7]. - Despite ongoing easing policies, the number of cities with sequentially higher property prices has decreased in both primary and secondary markets [7][15]. - The report highlights that Tier-1 and Tier-2 cities saw declines of 0.8% and 2.2% month-over-month annualized in May, while Tier-3 cities experienced a decline of 3.5% [7][14]. - Local housing easing measures have been implemented, but challenges remain, particularly in lower-tier cities due to weaker growth fundamentals and oversupply issues [8][7]. Summary by Sections Primary Market Performance - The weighted average property price in the primary market fell by 2.4% month-over-month annualized in May, with a year-on-year decline of 3.5% [2][10]. - The sequential decline was observed across all city tiers, with Tier-1 and Tier-2 cities showing declines of 0.8% and 2.2% respectively, and Tier-3 cities declining by 3.5% [7][14]. Market Dynamics - The report notes an 8% year-on-year increase in new home transaction volume in June month-to-date, indicating some recovery in major cities [8]. - Inventory months in major cities decreased slightly, primarily driven by Tier-3 cities [8]. Policy Response - Policymakers have intensified housing easing efforts, including a focus on a new real estate development model and the "good housing initiative" [8]. - Continued measures are expected to stabilize home prices and support the delivery of pre-sold homes, including potential cuts to mortgage rates and expanded bank lending for specific property projects [8].