CITIC SEC: In March, housing prices in many areas stopped falling and rebounded, and the industry's prosperity cycle is expected to restart.

CITIC SEC released a research report stating that in March 2026, in 70 large and medium-sized cities, more than 10 cities saw an increase in the price index of new and second-hand homes compared to the previous month. Although it will take some time for the supply to be digested, the real estate market is sending optimistic signals, which is significant for boosting the confidence of home buyers. In the short term, the construction of a multi-level REITs market will also help in re-evaluating high-quality operational real estate assets of enterprises. In terms of targets, they are optimistic about real estate companies with good asset foundations and active transitions; they are optimistic about brand companies with spatial operation and service capabilities; they are optimistic about Hong Kong real estate companies with an upward economic cycle. The main points of CITIC SEC are as follows: Continued reduction in land supply and construction According to data from the National Bureau of Statistics, in the first quarter of 2026, the national real estate development investment was 1.77 trillion yuan, a year-on-year decrease of 11.2%, the new construction area was 104 million square meters, a year-on-year decrease of 20.3%, and the completed area was 98 million square meters, a year-on-year decrease of 25.0%. By the end of the first quarter, the inventory of commercial residential properties decreased by 0.1% year-on-year, the first year-on-year decrease since June 2021. Under the policy of controlling incremental supply, the supply area has significantly decreased, and companies are more cautious about acquiring land. Data from Wind shows that in the first quarter of 2026, the cumulative supply area in 100 large and medium-sized cities decreased by 32.2% year-on-year, transaction amount decreased by 43.4% year-on-year, and land auction premium rate decreased by 16.0 percentage points year-on-year. Narrowing sales decline, seasonal hot sales Data from the National Bureau of Statistics shows that in the first quarter of 2026, the sales of commercial residential properties were 1.73 trillion yuan, a year-on-year decrease of 16.7%, and the sales area was 195 million square meters, a year-on-year decrease of 10.4%. In March, the monthly sales amount and sales area of commercial residential properties decreased by 13.9% and 8.0% respectively year-on-year, a significant narrowing of the decline compared to the previous two months. According to high-frequency data, as of April 15, the cumulative transaction volume of second-hand housing in 76 sample cities increased by 15.4% year-on-year, and the cumulative transaction volume after the Spring Festival increased by 20.4% year-on-year. Prices in several cities have increased month-on-month, market trend turning from decline to recovery According to intermediaries such as Beike and 5i5j Holding Group, as of April 16, the changes in the listing prices of second-hand housing in 140 cities compared to the end of last year were less than 1%, and the supply of second-hand housing was basically stable (with increases of 4.8% and 5.8% in the same period in 2024 and 2025 respectively). The profit margin of second-hand housing has significantly narrowed, and the momentum for price reduction has visibly decreased. Data from the National Bureau of Statistics shows that in 70 large and medium-sized cities, the number of cities where the price index of new and second-hand housing increased month-on-month rose to 14 and 13 respectively in March, with core cities such as Shanghai, Shenzhen, Guangzhou, and Hefei seeing an increase in the price index of new and second-hand housing. Although transaction volume may decline seasonally after April, the stabilization of second-hand housing prices in core cities will further consolidate the confidence of home buyers. It takes time to build the new model, but the restart of the economic cycle is foreseeable CITIC SEC believes that optimizing the asset-liability structure of companies, especially the approximate clearance of inefficient assets and the overall stability of rental income from operational real estate, will take about 20 months. But the trend is clear, after experiencing the longest downturn cycle in history, we believe that the restart of the real estate economic cycle is inevitable. And the economic recovery is structural and regional, with core cities experiencing an earlier economic recovery. Risk factors The risk of continued weak demand for real estate, and the risk of a temporary hot sales phenomenon; the risk that most real estate companies still have bad inventory waiting to be cleared, leading to further decline in industry profits; and the risk of low efficiency of some operational assets.