Middle Finger Research Institute: It is expected that the trend of differentiation in the real estate market will continue in 2026. "Good cities + good houses" still have structural opportunities.

The China Securities Institute stated that December is a crucial period for real estate companies to achieve good performance. It is expected that the entry of high-quality projects in key cities will increase, and the market transaction volume is expected to remain at a certain scale. Looking ahead to next year, according to the calculations of the China Securities Index, in a neutral scenario, it is expected that the sales area of new commercial housing nationwide will decrease by 6.2% year-on-year in 2026, a narrower decrease compared to this year. The market differentiation trend will continue, and the "good city + good house" still has structural opportunities. Under the guidance of policies to control the increment and destock, it is expected that the new construction area will decrease by 8.6% in 2026, a significant decrease compared to the past few years. The reduction in the supply side will help reduce market inventory and improve the supply-demand relationship. 01. Demand: The sales area of new commercial housing nationwide from January to November was 790 million square meters, a decrease of 7.8% year-on-year. Sales area: According to the data from the National Bureau of Statistics, from January to November, the sales area of new commercial housing nationwide was 787 million square meters, a decrease of 7.8% year-on-year; the sales area of residential housing was 658 million square meters, a decrease of 8.1% year-on-year. Sales revenue: From January to November, the sales revenue of new commercial housing was 7.51 trillion yuan, a decrease of 11.1% year-on-year; of which, residential sales revenue was 6.60 trillion yuan, a decrease of 11.2% year-on-year. Currently, the real estate market has gradually entered a stage where existing homes dominate, and second-hand homes are the main transactions in the market. In core cities, new supplies are mostly achieved through creating "good house" products to enhance quality, and improvement in demand has become an important support for the market. Second-hand homes mainly cater to first-time homebuyers. Since this year, there has been a significant increase in the transactions of second-hand homes priced under 3 million in cities like Beijing and Shanghai, with 70% of properties priced below 5 million, making them the mainstream demand in the second-hand housing market. According to data from the China Securities Index, from January to November, the number of transactions of second-hand residential housing in the top 30 cities increased by 2% year-on-year, driving the overall volume of new and second-hand home signings to remain largely stable year-on-year. Figure: Cumulative sales area and sales revenue growth rate of new commercial housing nationwide Data source: National Statistics Bureau, China Securities Index (CREIS) 02. Supply: Real estate development investment from January to November decreased by 15.9% year-on-year. Real estate development investment: From January to November, the national real estate development investment was 7.86 trillion yuan, a decrease of 15.9% year-on-year; of which, residential development investment was 6.04 trillion yuan, a decrease of 15.0% year-on-year. Figure: Cumulative development investment in real estate and housing since 2015 and their year-on-year growth rates Data source: National Statistics Bureau, China Securities Index (CREIS) Construction area: From January to November, the total construction area of homes nationwide was 6.561 billion square meters, a decrease of 9.6% year-on-year; of which, the residential construction area was 4.576 billion square meters, a decrease of 10.0% year-on-year. New construction area: From January to November, the total new construction area of homes nationwide was 535 million square meters, a decrease of 20.5% year-on-year; of which, the residential new construction area was 392 million square meters, a decrease of 19.9% year-on-year. Completion area: From January to November, the total completion area of homes nationwide was 395 million square meters, a decrease of 18.0% year-on-year. Among them, the completion area of residential homes was 281 million square meters, a decrease of 20.1% year-on-year. Overall, the new housing market is still in the "destocking" stage. On the supply side, the trend of reduced development investment and new construction continues, which to some extent helps to reduce market inventory and improve the supply-demand relationship. Figure: Cumulative new construction and construction area of homes nationwide and their year-on-year growth rates Data source: National Statistics Bureau, China Securities Index (CREIS) 03. Capital sources: Real estate companies had 8.51 trillion yuan of funds in place from January to November, a decrease of 11.9% year-on-year. Funds in place for real estate development enterprises: From January to November, the funds in place for real estate development enterprises were 8.51 trillion yuan, a decrease of 11.9% year-on-year. Domestic loans: From January to November, domestic loans amounted to 1.31 trillion yuan, a decrease of 2.5% year-on-year and accounted for 15.4%. Use of foreign capital: From January to November, the use of foreign capital was 23 billion yuan, a decrease of 24.6% year-on-year. Self-raised funds: From January to November, self-raised funds amounted to 3.06 trillion yuan, a decrease of 11.9% year-on-year and accounted for 36.0%. Deposits and advances: From January to November, deposits and advances were 2.51 trillion yuan, a decrease of 15.2% year-on-year and accounted for 29.5%. Personal mortgage loans: From January to November, personal mortgage loans amounted to 1.18 trillion yuan, a decrease of 15.1% year-on-year and accounted for 13.8%. Figure: Year-on-year growth rates of funds in place for real estate companies and various sources of funds Data source: National Statistics Bureau, China Securities Index (CREIS) 04. Policy dynamics On November 21st, the Ministry of Housing and Urban-Rural Development held a national urban renewal work promotion meeting, emphasizing the need to "faithfully implement the Opinions of the General Office of the CPC Central Committee and the General Office of the State Council on Continuing to Promote Urban Renewal Actions," and to focus on efforts in planning, funding, operations, and governance tailored to local conditions. From December 10th to 11th, the Central Economic Work Conference was held in Beijing, focusing on next year's economic work. The meeting emphasized the need to "implement more active and proactive macroeconomic policies, enhance policy foresight, pertinence, and coordination, continue to expand domestic demand, optimize supply, improve quality during quantity augmentation, activate existing stocks, ... continue to prevent and resolve risks in key areas, focus on stabilizing employment, enterprises, markets, and expectations, and promote the qualitative and effective improvement and rational growth of the economy." The deployment of real estate-related policies is still placed in the chapter of "preventing and resolving risks in key areas," proposing efforts to stabilize the real estate market, implement differentiated policies to control the increment, destock, and optimize supply, and encourage the acquisition of existing commercial housing for affordable housing, among others. Deepening the reform of the housing provident fund system and orderly promoting the construction of "good houses" were also emphasized. Various localities such as Hangzhou, Chengdu, and Tianjin Binhai New Area have promoted the activation of existing resources, with Hangzhou seeking public opinions on the "Implementation Measures for Temporary Change of Property Use in Hangzhou," and Foshan optimizing the conditions for overseas individuals to purchase property. Chongqing and Foshan have also optimized their housing provident fund loan policies, while Beijing released proposals for the "15th Five-Year Plan" at the end of the month, aiming to "continuously promote housing for all. Accelerate the construction of a new model for real estate development, improve the housing supply system of 'market + guarantee,' and promote a balance of renting and buying housing." Looking ahead, based on the policy trends, the Central Economic Work Conference has explicitly stated the need to "implement more active and proactive macroeconomic policies," emphasizing the continuous pursuit of stability while seeking progress and enhancing quality and efficiency. The integration of existing policies and incremental policies will be emphasized, and efforts will be made to increase the strength of counter-cyclical adjustments. As the first year of the "15th Five-Year Plan," it is expected that both macroeconomic and real estate policies will be given top priority. The meeting has listed "adhering to domestic demand-driven growth and building a strong domestic market" as the primary task. The real estate industry is important as it is both related to consumption and a key investment area, serving as a vital lever for expanding domestic demand. The meeting clearly emphasizes the need to "stabilize the real estate market," with the core approach of "tailoring policies by city to control the increment, destock, and optimize supply." Key focus will be on the direction of "destocking" and incremental policies for next year, as well as the resolution of issues related to land acquisition and stock policies. The housing provident fund policy will still play a crucial role in supporting the release of housing demand, and in terms of optimizing supply, the description of "good house" construction has been adjusted to "orderly promotion," which will help to avoid short-term shocks to the existing inventory and thus more prudently guide the market for a smooth transition. In terms of market trends, December is a crucial period for real estate companies to achieve good performance. It is expected that the entry of high-quality projects in key cities will increase, and the market transaction volume is expected to remain at a certain scale. Looking ahead to next year, according to the calculations of the China Securities Index, in a neutral scenario, it is expected that the sales area of new commercial housing nationwide will decrease by 6.2% year-on-year in 2026, a narrower decrease compared to this year. The market differentiation trend will continue, and the "good city + good house" still has structural opportunities. Under the guidance of policies to control the increment and destock, it is expected that the new construction area will decrease by 8.6% in 2026, a significant decrease compared to the past few years. The reduction in the supply side will help reduce market inventory and improve the supply-demand relationship.