CICC: The Turning Point in Beijing and Shanghai Real Estate Markets Is Approaching

China International Capital Corporation Research Report states that the current real estate cycle adjustment has lasted over four years. Considering recent changes on the supply side and policy front, CICC believes that this year, housing prices in Beijing and Shanghai are likely to stabilize. The real estate sector may gradually enter a beta phase. Investors are advised to adopt three investment strategies based on their risk appetite: 1) allocate to stable assets with obvious beta characteristics; 2) focus on structural growth in real estate development, targeting projects with strong product quality, high inventory quality, and deep valuation discounts with significant potential; 3) some private enterprises are returning to the “table,” achieving substantial revaluation under oversold valuations.

Full Text

CICC: The Turning Point in Northward Housing Markets Is Approaching

CICC Research

The current real estate cycle adjustment has lasted over four years. Considering recent changes on the supply side and policy front, we believe that housing prices in Beijing and Shanghai are likely to stabilize this year. The real estate sector may gradually enter a beta phase. Investors are advised to adopt three investment strategies based on their risk appetite: 1) allocate to stable assets with obvious beta characteristics; 2) focus on structural growth in real estate development, targeting projects with strong product quality, high inventory quality, and deep valuation discounts with significant potential; 3) some private enterprises are returning to the “table,” achieving substantial revaluation under oversold valuations.

Summary

Why do we believe that housing prices in Beijing and Shanghai are likely to stabilize this year? The core reason for this real estate cycle adjustment is inventory, particularly the inventory of second-hand homes, which directly affects marginal housing prices. We found a strong quantitative correlation between the inventory clearance cycle and housing price trends. Since the second half of 2025, the number of second-hand homes listed in Shanghai and Beijing has been continuously declining, and the clearance cycle in both cities has basically returned to a range where prices are expected to stabilize.

Is the stabilization of housing prices in the northward cities sustainable? We find that the decline in listings in both cities does not stem from accelerated transactions but from a decrease in the volume or willingness to sell, evidenced by fewer new listings and more delistings. This is quite different from previous policy cycles and periods of stable prices. We believe this likely reflects a natural bottoming out of social inventory. If transaction volumes remain relatively stable and land market “control of new supply” is effectively implemented, the improvement in supply-demand conditions and price stabilization could be sustained.

What are the recent policy changes, and how do they differ from previous ones? We highlight two points: First, policymakers are increasingly focusing on “de-stocking” issues from top to bottom, possibly leading to unexpected progress in housing stockpiling, such as pilot programs in Shanghai for second-hand housing stockpiling in three districts. Second, although the marginal adjustments to purchase restrictions in Beijing and Shanghai are moderate and similar to previous adjustments, the backdrop of bottomed-out social inventory in both cities could serve as a catalyst and accelerator for positive housing price expectations.

Risks

• Unexpected increase in new land supply in core cities.
• Unexpected increase in second-hand housing listings.
• External and internal risks causing a significant contraction in housing transaction volumes.

(Source: People’s Financial News)