矿业专家：中国房地产-下行周期再续两年-Mining Expert Calls #3 China Property_ Another Two Years of Downcycle

Summary of Key Points from the Conference Call on China Property Market Industry Overview - The conference call focused on the China property market, with insights provided by UBS's John Lam and the China property team Core Insights and Arguments - Market Outlook: The property market outlook has become more cautious, with expectations that housing price expectations have fundamentally shifted towards renting over purchasing. After a brief stabilization in Q1 2025, physical demand and prices have weakened since the second half of 2025. The market is now expected to reach its lowest point in mid-2027, with inventories normalizing [1][2] - Sales Forecast: China residential property sales are projected to decline by 10% year-on-year in 2026 and an additional 5% in 2027. Secondary property prices in Tier 1 and Tier 2 cities are also expected to drop by 10% in 2026 and another 5% in 2027 [1][2] - Commodity Demand: Demand for commodities from the China property segment is expected to remain depressed in 2026 and 2027, with a gradual recovery anticipated in 2028 and 2029 [2] - Policy Measures: Potential measures to stabilize property prices include suspending social housing supply and cutting interest rates by over 100 basis points. However, both actions are deemed unlikely due to their potential negative impact on banks' net interest margins [2][6] - Default Risks: There is a rising risk of mortgage or property-backed loan defaults, which could lead to increased foreclosure sales by banks, further driving down property prices [2][5] Additional Important Insights - Secondary Market Dynamics: The secondary sales and rental market is expected to increase its share from approximately 50% in 2025 to 60% by the end of the decade. High vacancy rates are projected to stabilize at 18.8%, equating to about 7 years of new home sales [5][9] - Rental Market Trends: Despite higher rental demand, rental prices are declining due to the supply of social rental housing and the shift of secondary sale listings to rentals. Rental yields continue to lag behind average mortgage rates by approximately 130 basis points [5][11] - Inventory Levels: Total national inventories are expected to decrease from 30 months to around 25 months by mid-2027, with a potential acceleration in new starts in 2028 and 2029 as the current gap between new starts and sales is unsustainable [5][14][18] - Long-term Housing Demand: The long-term housing demand is estimated at approximately 840 million square meters per year, with around 720 million square meters to be supplied by the primary market [5][18] Conclusion - The China property market is facing significant challenges, with declining sales, falling prices, and increasing risks of defaults. The outlook suggests a prolonged downcycle, with potential recovery only expected in the later part of the decade. Investors should remain cautious and consider the implications of these trends on the broader market and commodity demand [1][2][5][6]