China's property market showed cooling signs in the first half of 2025, with national commercial property sales declining 5.5% year-on-year to 4.42 trillion yuan. Residential sales specifically dropped 5.2%, according to Kaiyuan Securities research. June witnessed the steepest monthly contraction since September 2024, with sales area and value plunging 5.5% and 10.8% respectively. The average selling price fell 5.6% amid intensified discounting during mid-year sales campaigns, indicating sustained pressure on price stabilization despite volume-for-price tradeoffs.

Regional disparities emerged clearly: Eastern regions recorded a 5.2% sales area decline while central China showed relative resilience with only 1.2% contraction. Tier-1 cities outperformed with 7.3% growth in new home transactions during the first 24 weeks, contrasting with tier-2 (-2.2%) and tier-3/4 cities (-4.2%).

Construction indicators presented mixed signals. New housing starts narrowed their decline to 20.0% nationwide (residential: -10.4%), yet persistent land acquisition weakness—down 5% year-to-date—threatens future development momentum. Completion volumes remained depressed at -14.8%, with residential completions down 15.5%, constrained by earlier start reductions.

Investment deterioration continued with real estate development spending falling 11.2% to 4.67 trillion yuan. Crucially, developers' funding channels revealed a notable shift: domestic loans grew 0.6%—the first positive reading—while self-raised funds (-7.2%), presales (-7.5%), and mortgages (-11.4%) all worsened.

Kaiyuan recommends developers with strong urban positioning and premium product capabilities, including Greentown China (03900), China Merchants Shekou (001979.SZ), and China Overseas Land (00688). Dual-track players like China Resources Land (01109) and Longfor Group (00960) offer exposure to both residential recovery and commercial stimulus. Premium property managers—CR Mixc Living (01209) and Poly Property Services (06049)—stand to benefit from quality housing policies.

Key risks include slower-than-expected sales recovery, inadequate financing improvements, escalating developer liquidity pressures, and insufficient policy support.