Zheshang: The real estate industry shows "overall volume declining, structural recovery"; 2027 marks the era of further digging into "alpha stocks"

Zheshang released a research report stating that, compared with 2025-2026, the bank believes 2027 marks an era of further digging into "alpha stocks," with the core investment strategy being "entering the era of existing-home sales, with the stock market recovering first." For the 2027 real estate sector investment strategy, the bank recommends focusing on: 1) leading brokerage firms; 2) high-quality top players, preferably "development + operation" enterprises with a thick cash flow safety cushion and revenue and profit not entirely dependent on residential development; in addition, the bank believes China Overseas Grand Oceans, a top player in tier-3 and tier-4 cities, is also worth watching; 3) commercial management and property management, leading companies with stable dividend-paying capacity under a dividend style. Zheshang's main views are as follows: Real estate industry outlook: In 2026, the real estate industry presents a "total volume declining, structural recovery" pattern, with major adjustments at the policy and institutional levels On fundamentals, National Bureau of Statistics data show a "structural recovery pattern": in tier-1 cities, new home prices turned positive month-on-month in August, second-hand home prices rose month-on-month for six consecutive months, Shanghai was the first to turn positive year-on-year, the transaction share of upgrade-type products rose systematically, and a new price anchor is forming. On policy, tier-1 cities have successively relaxed purchase restrictions, housing provident funds have been systematically activated, and the 929 fiscal interest subsidy achieved a structural rate cut; the 828 existing-home sales system was introduced, with detailed rules implemented in five cities, reshaping the industry's underlying rules. On performance, in 2026H1 the A-share sector's overall net profit margin was -15%, brokerage and commercial management profit realization was relatively good, and property management remained steady. On market performance, brokerage stocks performed relatively better over the year; in June-July, all sectors resonated in bottoming out, commercial management and property management came under significant pressure in the second half, and transformation stocks fluctuated in pulses. Industry opportunity mining: In 2027, the industry will enter the "existing-home era," with the core contradiction shifting from "policy and fundamentals" to "institutional implementation and cash flow adaptation" Industry perspective: The bank believes that by the end of 2026, demand-side policies should have been largely exhausted, and structural recovery in fundamentals will enter the realization period; however, if the existing-home system is implemented in 2027, developers' cash collection cycles will be significantly lengthened. From January to September 2026, land acquisition by the top 100 developers was already down 20.5% year-on-year, with the premium rate falling to 6.9%; land acquisition amount, land acquisition area, new construction starts, and sales amount all showed negative year-on-year growth, and the bank believes this trend may continue into 2027. At the same time, the bank believes supply-side clearing in the incremental market is accelerating, with the stock market benefiting more obviously. Policy outlook: On real estate policy, monetary policy easing is shifting from "broad rate cuts" to "targeted interest subsidies"; the bank believes subsequent attention should be paid to the leverage effect of fiscal interest subsidies on rigid demand, and in addition, the introduction and implementation pace of local existing-home system detailed rules may differ but will not change the trend. Investment perspective: Dividing investment themes by "relationship with the existing-home system" is more effective than by "light/heavy assets" brokerage is basically unaffected, developers will diverge sharply based on cash flow adaptability, commercial management valuation depends on the interest rate inflection point, property management returns to dividend pricing, and industrial parks and transformation stocks are assessed case by case. The bank believes that in 2027, cash flow adaptability will replace land reserve scale as the most important influencing factor. Risk warnings: Factors such as financing chain friction risk for real estate enterprises during the transition period of the existing-home system, risk of constraints from macroeconomic and household income expectations, uncertainty risk regarding renewal of home purchase interest subsidy policies, uncertainty risk regarding the pace of policy implementation, and risk of slow recovery in market confidence may delay the industry's recovery process.