Stabilizing home prices in tier-1 cities is more likely to bring selective opportunities in premium consumption rather than a broad consumption recovery

Overview

This report responds to investor concerns about the impact of stabilizing property prices in China on consumption. Goldman Sachs' China property team expects Shanghai and Shenzhen to lead the national housing recovery and forecasts home prices in the two cities to rise 15% from end-2025 to 2028, with another 15 cities potentially following a similar trajectory. The core conclusion of the report is that stabilizing home prices in tier-1 and key cities can help support certain premium consumption and restore confidence, but is still insufficient to trigger a nationwide, broad-based consumption recovery.

Core views

The report argues that the most important transmission channels at present are wealth effects in the premium market and improvements in consumer confidence, rather than income effects. Because China's consumption depends more on wage growth, employment, disposable income, and the savings rate, and because this round of home price stabilization is concentrated mainly in higher-tier cities, the affected population is relatively limited and the macro consumption elasticity is moderate. Selective beneficiary areas include premium shopping malls, luxury/premium brands, and Macau gaming; post-property-cycle consumption such as home appliances, furniture, and renovation requires improvements in transaction volumes and completions, and usually lags the bottoming of home prices.

Analysis framework

The report combines correlations among retail sales, home prices, income, and stock market capitalization in China's tier-1 cities, uses scenario sensitivity analysis to assess the impact of changes in income growth and the savings rate on consumption growth, and draws historical analogies from the U.S. housing cycle from 2007 to 2016 and the relationship between Hong Kong home prices and local consumption in recent years to sort out the recovery sequence of different consumption categories in the property cycle.

Methodology notes

• Macro transmission frameworkTransmission channels from real estate prices to consumption

  Wealth effect, confidence effect, income effect, transaction and completion effect, crowding-out effect

  The report breaks down the impact of rising home prices on consumption into multiple channels and concludes that in China at present, the more likely effects are through premium wealth effects and improved confidence on certain categories, while income effects and post-property-cycle transaction effects are relatively weak.

• Scenario analysisConsumption growth sensitivity analysis

  Marginal impact of changes in income growth and the savings rate on consumption growth

  The report estimates that each 1 percentage point increase in income growth or each 1 percentage point decline in the savings rate could add about 1.1 percentage points and 1.6 percentage points, respectively, to consumption growth, relative to the 2026E baseline consumption growth of 5.5%.

• Historical case comparisonU.S. and Hong Kong housing cycle cases

  Recovery sequence of consumption categories during home price cycles

  The U.S. case shows that dining, food service, and pets are more defensive; travel, apparel, and beauty recover earlier with confidence; high-ticket discretionary spending such as gaming, autos, and jewelry rebounds after home prices bottom; and major appliances and furniture typically lag. The Hong Kong case shows a positive correlation between local consumption and year-on-year home price growth, possibly with a lag of one to two quarters.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Premium shopping malls/commercial real estate (CR Land, CR Mixc Lifestyle, Hang Lung, Swire Properties)

  Potential beneficiaries of housing wealth effects in tier-1 and higher-tier cities and the recovery of spending by high-income consumers

  Strengths

  Their customer base has stronger purchasing power and is more visibly affected by premium consumption trends and improving asset prices, and the report notes that related premium consumption trends have already outperformed overall retail.

  Weaknesses

  The benefits are concentrated in a few cities and among premium customer groups, making them hard to view as representative of a national consumption recovery.

  Comparison

  Compared with mass retail and post-property-cycle categories, premium shopping malls are more directly linked to wealth effects and premium consumption scenarios.

  Risks

  If home price stabilization does not broaden, consumer confidence falls back, or tenant sales underperform expectations, the benefits may be lower than expected.

• Luxury/premium brands (Laopu Gold, Anta as agent for Descente, Kolon and Amer Sports, Maogeping, etc.)

  May benefit from wealth effects among premium consumers, rising stock markets, and improved confidence from stabilizing home prices

  Strengths

  The report believes luxury and premium brands are among the consumer subsectors most closely related to wealth effects and have outperformed broader consumption trends in recent quarters.

  Weaknesses

  Demand depends more on high-income consumers, and some categories face pressure from gold prices, brand cycles, and competition.

  Comparison

  They have greater cyclical elasticity than food and beverages and mass daily necessities, but are also more affected by asset prices and consumer confidence.

  Risks

  Gold price volatility, declining brand momentum, slowing household income growth, or changes in regulation and taxation on premium consumption.

• Macau gaming (Galaxy, MGM China, Sands China)

  May benefit from premium wealth effects and improved confidence among China's high-income consumers

  Strengths

  The report lists Macau gaming as one of the sectors most relevant as a potential beneficiary under housing reflation and focuses on the correlation between Macau GGR and China's home prices.

  Weaknesses

  In addition to wealth effects, gaming demand is also affected by tourism, regulation, visas, competition, and visitor mix.

  Comparison

  Compared with mass consumption, Macau gaming is more sensitive to premium consumption sentiment and wealth effects.

  Risks

  Regulatory policy, weaker-than-expected traffic recovery, declining macro confidence, and unsustained home price recovery.

• Post-property-cycle consumption such as home appliances, furniture, and renovation

  More dependent on housing transaction volumes, completions, and renovation demand rather than simply rising home prices

  Strengths

  If transactions and completions recover, they may receive support from post-cycle demand.

  Weaknesses

  Transmission usually lags, and trade-in subsidy policies may already have pulled forward some demand.

  Comparison

  Historical U.S. cases show that major appliances and furniture recover significantly later than the bottom in home prices and require normalized transaction volumes.

  Risks

  Insufficient recovery in home sales and completions, demand pulled forward by earlier policy support, and weak household willingness for big-ticket spending.

Key data

• Shanghai and Shenzhen home price forecast15% increase from end-2025 to 2028Goldman Sachs' property team expects Shanghai and Shenzhen to lead the national housing recovery.
• Economic weight of key citiesNearly 20% of population, about 30% of GDP/retail sales, 43% of new home salesThe scope includes Shanghai, Shenzhen, and another 15 key cities that may follow the recovery.
• 2026E baseline consumption growth5.5%The report uses this baseline to assess the upside elasticity from changes in income growth and the savings rate.
• Income growth sensitivityEvery 1 percentage point increase adds about 1.1 percentage points to consumption growthThis shows that income remains a key determinant of China's consumption.
• Savings rate sensitivityEvery 1 percentage point decline adds about 1.6 percentage points to consumption growthIf stabilizing home prices improves confidence and lowers the savings rate, consumption may gain upside room.
• Estimated housing wealth effectFor every 1 percentage point rise in home prices, retail sales increase by about 0.09 percentage points with a one-year lagThe report says this direct wealth effect is moderate and more concentrated in premium discretionary consumption.
• Short-term Tier-1 home price signalApril primary/secondary residential ASP rose 0.1%/0.4% month-on-month, respectivelyThese marked the third consecutive month and second consecutive month of positive month-on-month growth, respectively.
• Wage growth signalUrban wage growth slowed from 4.6% in 4Q25 to 4.3% in 1Q26Income and employment still constrain a broad consumption recovery.

Impact & implications

The investment implication is that stabilizing home prices is not equivalent to a broad-based consumption recovery, and asset selection should favor premium consumption chains where the wealth effect is more direct for residents in higher-tier cities. Premium shopping malls, luxury/premium brands, and Macau gaming may benefit ahead of mass consumption; post-property-cycle categories such as home appliances, furniture, and renovation depend more on actual transaction and completion improvements, so the pace may be slower. If home prices rise too quickly and increase household savings needs for home purchases, this could also crowd out consumption.

Risks

• If home price stabilization remains limited to Shanghai, Shenzhen, and a small number of key cities, the boost to national consumption may be limited.
• Income growth and the labor market remain weak, which may constrain the breadth and sustainability of consumption recovery.
• If home prices rise more than expected, households may increase savings for future home purchases, creating a crowding-out effect on consumption.
• The benefits to premium consumption may already be partly reflected in the stock market and related sector performance, and fundamentals still need to validate the thesis.
• Historical cases from the U.S. and Hong Kong are not fully applicable to mainland China because of differences in the financial system, household leverage, mortgage equity withdrawal, and industry cycles.

What to watch

• Whether home prices, transaction volumes, and primary/secondary housing ASP in Shanghai and Shenzhen continue to improve month-on-month.
• Whether the 15 key cities follow tier-1 cities into broader price stabilization and transaction recovery.
• Whether household income growth, employment data, and wage tracking indicators improve.
• Whether consumer confidence, the savings rate, and survey data such as Morning Consult continue to recover.
• Whether premium mall sales, luxury/premium brand sales, Macau GGR, and visitor traffic to Macau continue to outperform overall consumption.
• Whether demand for home appliances, furniture, and renovation improves with a lag as transaction volumes and completions recover.