CITIC SEC released a research report stating that China's property market has shown signs of improvement in supply-demand dynamics, with adjustments largely completed. The firm predicts a stabilization trend by 2026.

According to CITIC SEC, 2026 could mark a pivotal year for real estate developers to repair balance sheets, with some firms potentially hitting the bottom of their profit cycles. Companies likely to recover first are those strategically positioned in high-potential cities, possessing well-managed investment properties, or holding appreciating financial assets.

Key insights include: 1. **2025 Housing Market**: While supply-demand imbalances eased slightly, the overall downtrend persisted. Data shows total primary and secondary home transaction volumes dipped marginally year-on-year in the first three quarters, indicating sustained demand. New home supply narrowed significantly, with completions and starts falling to 60% and 30% of peak levels, respectively. However, persistent price declines and weak rental yields exacerbated secondary listing pressures due to self-fulfilling bearish expectations.

2. **2026 Stabilization Prospects**: International comparisons reveal typical property downturns last 2–18 years (averaging 5–6 years), with price corrections of 9%–55% (mean: 30%). China’s current cycle appears adequately adjusted. Domestically, shrinking homeowner equity gains are reducing listing pressures, while lower purchasing costs lay groundwork for recovery. Continued "quality housing" initiatives may also spur demand.

CITIC SEC forecasts 2026 declines to moderate: - Commercial property sales value/area: -1.4%/-2.2% YoY - New starts/completions: -8.2%/-20.1% YoY - Development investment: -5.8% YoY

By 2027, a potential upcycle may emerge.

**Regional & Asset Selection Critical**: - **Location**: Outperforming developers prioritize cities like Hangzhou, Shanghai, and Chengdu, where land profitability offsets weak nationwide activity. - **Investment Properties**: Well-operated assets (e.g., malls, rentals, hotels) generate stable cash flows, aided by lower rates, consumption recovery, and REITs expansion. To-C-focused assets (retail, hospitality) are preferred over office-heavy portfolios.

**Risks**: - Further price declines squeezing profits - Poor regional choices or overexposure to underperforming office assets - Evolving housing standards devaluing existing inventory

**Outlook**: With policy support and intrinsic stabilization signals, CITIC SEC favors firms excelling in *location*, *asset mix*, and *operations*, noting that sector valuations typically bottom before prices do. Many developers already hold appreciating assets, reinforcing recovery optimism.