CICC: The turning point for the northern real estate market is approaching
This round of real estate cycle adjustment has lasted over four years. Considering recent changes on the supply side and policy end, we believe that this year, housing prices in Beijing and Shanghai are expected to stabilize, and the real estate sector may gradually transition to a beta market. We suggest investors seize three investment strategies based on their risk preference: 1) Allocate to stable targets with clear beta characteristics; 2) Allocate to structural growth in real estate development—targets with strong product capabilities, high-quality inventory, or deeply discounted valuations with large potential upside; 3) Some private firms may return to the “table,” achieving significant revaluation under oversold valuations.
Summary
Why do we believe housing prices in Beijing and Shanghai may stabilize this year? The core reason for this round of real estate cycle adjustment is inventory, with second-hand housing inventory directly affecting the marginal pricing of housing. We find a strong quantitative correlation between the destocking cycle of second-hand housing inventory and housing price trends. Thanks to the continued decline in the number of second-hand listings in Shanghai and Beijing since the second half of 2025, the destocking cycle in both places has basically returned to the range where housing prices are expected to stabilize.
Is the stabilization of housing prices in Beijing and Shanghai sustainable? We note that the recent decline in listings in both cities is not due to accelerated transactions, but rather a decrease in the volume available for sale or willingness to sell, manifesting as fewer new listings and more delistings. This is very different from previous windows after policy introductions when housing prices stabilized. We believe this is most likely the manifestation of inventories naturally bottoming out. If transaction volumes remain basically steady and the “control incremental” policy in the land market is effectively implemented, the optimization of supply and demand conditions and the stabilization of prices will be sustainable.
How are recent policy changes different from before? We highlight two points: First, the policy side is beginning to focus on the “destocking” issue from the top down and may see sustained, unexpectedly strong progress in housing purchase and repurchase, such as Shanghai’s pilot repurchase of second-hand homes in three districts. Second, the marginal adjustments to purchase restrictions in Beijing and Shanghai have only moderate strength, similar to previous rounds, but given the recent bottoming in social inventory in both cities, they may act as a catalyst and accelerator for housing price expectations turning positive.
Main Text
Introduction: Since the beginning of the year, housing prices have stabilized slightly. How to assess the future trend?
Since January 2026, the housing price trend in China has stabilized, particularly evident in major cities like Beijing and Shanghai. In January, the China International Capital Corporation (CICC) index for second-hand residential transaction prices narrowed its month-on-month decline to -0.6%. Among them, in Beijing and Shanghai, the high-frequency listing prices from the end of 2025 to before Lunar New Year rose by 0.5% and remained flat, respectively. The market has debated this, mainly focusing on its sustainability. Is the temporary stability due to policy expectations, holidays, or other short-term factors? What logic should we use to judge the medium-term price trend and turning point for real estate? We will attempt to answer these questions in this report.
Chart 1: Second-hand residential price trend in China
Source: Beike and other agencies, CICC Research Department
Chart 2: High-frequency listing prices for second-hand homes in key cities
Source: Beike and other agencies, CICC Research Department
Inventory Level is the Predictive Key—Housing Prices in Beijing and Shanghai are Expected to Stabilize Within the Year
Second-hand housing inventory level determines marginal pricing
Inventory level is the key variable determining China’s housing price trend this cycle. In our previous report, “Real Estate Outlook 2026: Steady Progress, Awaiting Opportunities”, we proposed a four-factor framework affecting whether monetary policy flows to real estate in the medium term. Based on this framework, during this cycle, China’s housing demand is still substantial, leverage levels are healthy, payment ability has some local imbalance but has now improved, and the core issue is the relatively high inventory level. Inventory is usually measured using the destocking cycle—namely, the ratio of housing inventory to transaction volume, which reflects the relative strength of supply and demand. A low destocking cycle implies that housing supply cannot meet demand, and under loose liquidity conditions, it can drive price increases. If the destocking cycle does not return to a reasonable level, even under loose monetary conditions, real estate will not become the main destination for money flows, and prices remain pressured.
Chart 3: Four-factor framework affecting short- and medium-term monetary flow into real estate
Source: CICC Research Department
This cycle’s high housing inventory problem exists at both the residential side (second-hand homes) and corporate side (new homes), and is more complex than the pre-2015 situation where only new home inventory was high. From 2015, to digest high new home inventory, the monetization policy for shantytown resettlement emerged, temporarily digesting new home inventory. However, rapid surge in demand caused a significant environment for price increases, and the quota policy for new homes led to temporary oversupply; companies, acting out of inertia, continued to restock. After a short digestion, inventory surged again. Meanwhile, price increases and restrictions on second-hand home sales caused inventory accumulation on the residential side, ultimately leading to dual-high inventory problems in new and second-hand housing by 2021. The scale of these inventory problems is largely tied to local land supply, the timing of purchase restriction policies, and the scale of new population. Though cities of varying levels all have inventory problems to different degrees, in general, inventory issues lessen progressively from lower-tier to higher-tier cities.
Chart 4: Actual sales area of new homes vs. potential benchmark
Source: National Bureau of Statistics, CICC Research Department
Residential second-hand housing inventory determines marginal pricing and should be closely monitored as a key indicator. As mentioned above, prior to the current down cycle, second-hand inventory was already noticeably accumulating. When liquidity was ample and prices could continue rising, residents kept their homes for asset appreciation. But as liquidity tightened and price drop expectations deepened, excess housing would be gradually listed to “cut losses,” resulting in increased second-hand listings and pressure on prices. Because purchase prices vary and residents' tolerance for losses and liquidity are different, sellers willing to sell exist for all prices (by contrast, new home prices are inflexible due to fewer sellers, cost rigidity, and higher leverage, so price adjustment is slower). Thus, second-hand listing and destocking cycle is a critical indicator for tracking the stage of the cycle. All residential housing could potentially become new listings, but under the premise that self-ownership rates are not significantly dropping, the net contributors of new listings are mainly vacant and rental homes (“broad inventory” or “social inventory”), which also indicates cycle stage and even has more forward-looking value. Unfortunately, there is no easy-to-obtain monitoring data for broad inventory.
Corporate-side new home inventory’s guiding role for the turning point in this cycle is weak. In fact, since 2021, broad and mid-range new home inventory have continued to drop, and land repurchase in 2025 accelerated this decline. However, we suggest that new home inventory’s effectiveness is already diminished, and thus its guidance for the price turning point is weak: First, new home prices are limited by developers’ profit requirements, cannot be flexibly adjusted like second-hand prices, and some inventory becomes “zombie” over time because the price diverges from the market. Second, as expectations weaken, more land and projects are left idle, and cannot be converted to effective inventory in the short term. Of course, once market expectations recover, new home inventory’s effectiveness will gradually return.
Chart 5: New home inventory and destocking cycle
Source: National Bureau of Statistics, China Index Database, CICC Research Department
Chart 6: Proportion of new residential construction relative to land acquisition
Source: National Bureau of Statistics, CICC Research Department
Destocking cycle for second-hand listings in Beijing and Shanghai has returned to reasonable levels
Empirically, the quantitative relationship between the second-hand home destocking cycle and price increases or decreases is clear; cities with better supply and demand conditions (especially Shanghai and Beijing) may see prices stabilize earlier. Among 16 key cities with available data, during periods before August 2021 when prices rose or remained stable, the destocking cycle lingered around or below 7–9 months. Subsequently, the destocking cycle breached the interval, and during the 2023 mini-spring and end-2024 "stop-falling and stabilize" stage, it nearly returned to the interval, and prices stabilized. However, due to weak demand and ongoing listing replenishment, this did not last, and the cycle now floats around 11–12 months. Each city has its own reasonable interval for price stabilization, with differences mainly affected by intermediary listing market share and invalid inventory levels. According to the relationship between current listing cycles and reasonable intervals, we believe Shanghai, Beijing (first-tier), Hefei, Chengdu (second-tier) are reaching the end of their social inventory destocking process, and prices may stabilize earlier.
Chart 7: Overall second-hand listing destocking cycle and price trend in 16 cities
Source: China Index Database, Beike and other agencies, CICC Research Department
Chart 8: Destocking cycle and price trends in major cities for second-hand homes
Note: Shenzhen housing price data is missing from February 2021 to April 2024. When estimating the destocking cycle interval, we assume its price turning point is the same as the national trend.
Source: China Index Database, Beike and other agencies, CICC Research Department
Social inventory in Beijing and Shanghai is bottoming out, supporting sustainability of price stabilization
A detailed breakdown of the structure of second-hand listings in Beijing and Shanghai shows social inventory naturally bottoming out, which further confirms that the stabilization trend is likely to be sustainable. Out of four cities, except Chengdu, all began non-policy-driven listing declines at some point in 2025—Beijing, Shanghai, and Hefei started in October, September, and June of 2025, respectively, and as of January 2026 listings had fallen by 14%, 24%, and 16%. In Chengdu, listing declines were not significant, but absolute listing levels remained low, so its destocking cycle hovered near the reasonable interval and its cumulative price drop in 2025 was much smaller than the industry as a whole. Breaking down reasons for listing declines, all four cities saw new listings fall, delistings increase, and transaction volume stabilize. This means it was not faster transactions that drove listings down, but a decrease in salable supply or willingness. We believe this is most likely the result of social inventory naturally bottoming out. As long as transaction volumes remain stable, the optimization of supply and demand and stabilization of prices are relatively sustainable. This is markedly different from listing declines driven by policy, which usually see more new listings, fewer delistings, and surging transactions, reflecting the logic that policy encourages buyers to enter and sellers to quickly unload. Once transaction volumes fall, pressure from sellers returns and suppresses price expectations.
Chart 9: Listing breakdowns in Beijing, Shanghai, Chengdu, Hefei
Source: Beike and other agencies, CICC Research Department
Policy side prioritizes 'destocking', new policies in Beijing and Shanghai may act as catalysts
Inventory issues are again a policy priority. Core city policies may accelerate local price stabilization. At the end of 2025, the Central Economic Work Conference reprised the “destocking” issue for the first time since 2015, indicating renewed top-down focus. In February 2026, Shanghai began piloting second-hand home repurchase in three central districts. We believe this policy is ideally timed (with destocking almost over), and the pilot chooses second-hand residential properties (with the most direct impact on price), thus enjoying “favorable timing, location, and harmony.” If the pilot progresses and is promoted in other cities with similar conditions, with supporting demand and “control incremental” policies, the stabilization pace may further accelerate.
Chart 10: Real estate policy content since December 2025
Source: Government website, CICC Research Department
'Control incremental' below expectations is the most important potential risk
Regarding the positive conclusions above, we highlight the following potential risks and structural differences:
1) If “control incremental” is below expectations, the destocking process may be interrupted. From past experience, once prices stabilize, local governments and companies have an incentive to increase land supply and acquisition; local market new home supply may trigger secondary home sales and divert demand, interrupting destocking and price stabilization. The price differences between ultra-high/high-tier and mid-low-tier cities in the second half of 2025 may be partly related to this. Thus, “control incremental” is a key risk for judging turning points in local and overall real estate cycles.
2) Second-hand listing volume is influenced by noise factors, so trend monitoring should be cautious. Seasonal effects, technical noise, and exogenous shocks all cause inventory fluctuations. For example, second-hand market activity drops at year-end and the beginning of the year, causing pre-New Year declines and post-New Year rebound in listings; agency platforms periodically clean invalid listings, causing short-term noise; irregular exogenous events, such as policy expectations, lifting restrictions, issuance of title deeds, or instability in jobs/income, can trigger selloffs.
3) If internal/external risks sharply shrink transaction volumes, supply and demand must be reassessed. Positive judgments are based on the premise that volumes will not drop significantly. Currently, volumes are not far from historical norms (see “Real Estate Outlook 2026”). If exogenous risk (geopolitics blocking exports) or internal risk (unexpected financial risk) harms residents' purchase ability, sharp drops in transactions could deteriorate supply-demand and renew price downside risk.
4) Spatial unevenness of inventory issues and regional expectation spillover could slow the transition from local to national stabilization. While high-tier cities (mostly second-tier) saw marginal declines in listings since December 2025, the declines are small (2.5% by end of January) and timed with policy efforts. Thus, we believe these declines are more policy-driven and may be temporary; most second-tier cities’ listing destocking cycles remain high, so price stabilization may take time. In lower-tier cities, listing volumes are even still rising. Overall, spatial unevenness in inventory may mean this cycle’s transition from local to national stabilization is slower than previous cycles, but the pace depends on how local stabilization affects expectations in second-tier cities.
Chart 11: Monthly listings in 130 cities by tier
Source: Beike and other agencies, CICC Research Department
Chart 12: New land supply and price trend for ultra-high/high-tier cities
Source: China Index Database, Beike and other agencies, CICC Research Department
Chart 13: Price trend differences in cities of different tiers, 2025
Source: Beike and other agencies, CICC Research Department
Overall, second-hand inventory is the key variable for judging the price trend in China’s real estate cycle. The destocking cycle for second-hand listings in Beijing and Shanghai has continuously optimized to the level where price stabilization is expected, and the listing breakdown indicates social inventory bottoming out. Coupled with policy efforts, we believe prices in both cities are likely to stabilize within the year. It’s advisable to keep monitoring fundamental data for confirmation; government “control incremental” is especially critical.
The Real Estate Sector May Gradually Shift From Policy Speculation to a Beta Market
Positive price performance in core cities may help the real estate sector enter a beta market in 2026. Reviewing the sector's monthly excess returns since July 2021, previous moments when both A-share and H-share real estate sectors had significant positive excess returns were always accompanied by policy shifts. However, as fundamental improvements did not last, policies only produced pulse-like effects. In fact, the excess returns since January 2026 have also been mainly policy-driven, but considering the recent improvements in social inventory and prices in Shanghai and Beijing, plus strengthening policy, we believe this time the sector may gradually enter a beta market aided by fundamental indicators. First, the confidence boost from local price stabilization may trigger a broad valuation recovery across the sector. Using a “potential net liquidation value” approach, we estimate the RNAV (Revalued Net Asset Value) for 12 covered developers—on average, current market values are 37% below RNAV, and those with deeper discounts may see greater rebound in the first round of valuation repair. Furthermore, as price recovery rhythm differs across city tiers, firms with heavier land reserves in cities where stabilization is likely may see faster business improvement and quicker stock price recovery. Besides the four low-inventory cities mentioned, Hangzhou deserves separate discussion; despite pressure from second-hand inventory, new high-end projects in Hangzhou are benefiting from strong demand from tech and high-paying groups, creating an independent trend, though its sustainability remains to be seen.
Chart 14: Real estate sector excess return review
Note: Shenwan Real Estate Index excess returns are based on the CSI 300 Index; China Property Stock Index excess returns are based on the Hang Seng China Enterprises Index (HSCEI.HI).
Source: Wind, Government Website, CICC Research Department
Chart 15: Sales volume comparison for premium improvement residential projects in Beijing, Shanghai, Shenzhen, Hangzhou
Source: China Index Database, CICC Research Department
Chart 16: Comparison of absorption speeds for premium improvement residential projects in Beijing, Shanghai, Shenzhen, Hangzhou
Note: Beijing, Shanghai, Shenzhen, Hangzhou take new projects with more than 50 units sold and average unit price above RMB 15m/15m/10m/8m as premium improvement projects from early 2024 to end-November 2025; projects with more than 90 days since opening are used to calculate absorption speed. The starting point is the first opening, the end point is either the last day if cumulative sold/provided remains below 90%, or the last day with seven-day sales over 0.5% total area if above 90%.
Source: China Index Database, CICC Research Department
Source: CICC Point of View
Risk warnings and disclaimersThe market involves risks; investments should be made cautiously. This article does not constitute individual investment advice, nor does it consider special investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their situation. Investing accordingly is at your own risk.