UBS: China Real Estate — Policy Shift and Market Stabilization
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UBS observes a significant policy shift in China's real estate sector, paving the way for market stabilization. Since the fourth quarter of 2025, central and local authorities have aggressively introduced easing measures, including down payment reductions, mortgage rate cuts, and relaxed purchase restrictions. During the first quarter of 2026, the decline in national property sales volume narrowed to 5% year-over-year, while sales value turned positive with 2% growth. Although new starts fell 15%, completions rose 8%, supported by ongoing efforts to ensure project deliveries.
Looking at investments, land acquisition expenditure dropped 10%, while construction investment grew 3%, leading to a 2% overall decline in real estate development investment. Policy effects are becoming visible, but industry divergence is widening. State-owned developers outperformed private peers significantly. Inventory destocking improved in key cities, and home prices in 70 major cities stabilized. Furthermore, financing conditions for state-backed firms improved.
For the full year 2026, UBS expects sales volume to remain flat, with sales value growing 5% and overall development investment declining 2%. Prices should stabilize after the second quarter, led by tier-one cities.
UBS maintains a Neutral sector rating, favoring high-credit state-owned developers and high-quality regional players. Top picks include Vanke A, Poly Developments, and China Resources Land with Buy ratings, while Country Garden is rated Sell due to severe private developer liquidity pressures.
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