China Real Estate: Housing Market Challenging, but Green Shoots to Emerge With Policy Support

We published our inaugural China real estate industry pulse for the first quarter of 2024 with the view that housing demand should gradually recover through 2026, supported by ongoing policy tailwinds. While new home sales in China remained sluggish in 2023, the nationwide average price was steadier due to a continuing mix shift to wealthier regions with more resilient prices. Moreover, we like the ramping-up of supportive measures since the second half of 2023 and expect further easing in buying restrictions and mortgage rate cuts in large cities. While share price performances could remain volatile in the near term, we see an improving risk/reward profile at the current valuation as the market may be missing key developers' improving sales outlooks. As such, we prefer top state-owned builders, China Overseas Land & Investment and China Resources Land, as both have seen better sales growth, higher asset quality, and healthier gearing ratios versus their peers.