Tier-1 cities are showing green shoots, but China property is more likely to stabilize in a K-shaped pattern

Overview

This report summarizes JPMorgan's discussions with policy experts, developers, real estate agents, and data providers during the Global China Summit, combined with project fieldwork in Shanghai, Hangzhou, and Jiaxing. The core conclusion is that recent improvements in tier-1 city existing-home prices and transaction volumes do show 'green shoots,' but the market is clearly divided on sustainability; the probability of a nationwide recovery remains low, and the sector is more likely entering a bottoming repair phase marked by structural divergence.

Core views

The report believes China property has passed its worst stage, but has not yet entered a full recovery. Tier-1 cities and some strong tier-2 cities may stabilize first, while upgrading and luxury products are outperforming the mass market; lower-tier cities still face population outflow and high inventory pressure. Sentiment is strongest in Shanghai due to a decline in existing-home listings, lower months of inventory, and wealth effects from the stock market/IPOs, followed by Shenzhen, while Beijing and Guangzhou are relatively more cautious. On policy, the probability of large-scale nationwide easing from the central government has declined, making city-specific measures and execution of inventory acquisition more important variables.

Analysis framework

The report uses a combination of conference takeaways and on-the-ground channel checks: on one hand, it consolidates views from Beijing policy experts, CIFI, Centaline, Iceberg Index, SOE developers, and KE Holdings; on the other hand, it verifies sales traffic, conversion rates, sell-through, pricing, and inventory changes through site visits to projects in Shanghai, Hangzhou, and Jiaxing.

Methodology notes

• Industry cycle assessmentK-shaped stabilization

  Divergent recovery across cities and product lines

  Higher-tier cities, upgrading products, and luxury products may stabilize or improve first, while lower-tier cities and the mass market remain weak, so this is not a broad-based recovery.

• Inventory analysisMonths of inventory

  A core indicator of sales absorption speed and supply pressure

  Experts mentioned that months of inventory in tier-1, tier-2, and tier-3 cities are about 14, 24, and 34 months, respectively; Centaline believes the ideal inventory range is 12-18 months, while Shanghai's existing-home inventory is about 6 months.

• Policy analysisCity-specific measures

  Policy easing is more likely to be implemented selectively rather than through nationwide stimulus

  The report believes most major policy tools have already been used, and recent data stabilization has in fact reduced the probability of nationwide easing; the next focus is policy execution in areas such as provident fund support, purchase restrictions, and inventory acquisition.

• Valuation and homebuying costPositive spread / rental yield versus mortgage rate comparison

  A rental yield above the mortgage rate can signal a price bottom

  Centaline lists rental yield above mortgage rates as one of the true conditions for stabilization, but JPMorgan believes inventory factors are more critical.

Asset mapping & comparison

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

• China Overseas Land & Investment (0688.HK/COLI)

  A key favored SOE developer and alpha opportunity highlighted in the report

  Strengths

  4M26 contracted sales rose 14% YoY, saleable value from new launches in Shanghai and Shenzhen over the next 1-2 months is up more than 10% YoY, and it has strong exposure to tier-1 city upgrading demand.

  Weaknesses

  Land acquisition has been slow year to date, which management explained as due to insufficient supply of quality land from local governments.

  Comparison

  Compared with private developers and property companies heavily exposed to lower-tier cities, COLI benefits more from K-shaped stabilization in tier-1 cities and upgrading projects.

  Risks

  If new launches are delayed, if enthusiasm in Shanghai/Shenzhen fades, or if recent green shoots only reflect release of pent-up demand, sales growth may slow.

• China Resources Land (1109.HK/CR Land)

  One of the SOE developers the report continues to favor

  Strengths

  It has exposure to higher-tier cities and upgrading demand, fitting the characteristics of SOE developers favored by the report.

  Weaknesses

  The report does not provide new company-level operating details.

  Comparison

  Along with COLI and China Jinmao, it belongs to the basket of SOE developers preferred by the report.

  Risks

  If stabilization in tier-1 cities falls short of expectations or land quality is insufficient, earnings elasticity may be limited.

• China Jinmao (0817.HK)

  One of the SOE developers the report continues to favor

  Strengths

  Its rating is disclosed as OW, and it benefits from demand for upgrading housing and quality projects in tier-1 cities.

  Weaknesses

  The report does not provide new company-level operating details.

  Comparison

  Together with COLI and CR Land, it forms the report's preferred SOE developer theme.

  Risks

  A slow recovery in sector demand, insufficient price stabilization, or weaker-than-expected project sell-through.

• KE Holdings

  A beneficiary of the existing-home transaction chain

  Strengths

  The company expects 2Q existing-home market GTV to still achieve low-single-digit positive YoY growth and will continue gaining market share.

  Weaknesses

  Primary market GTV is expected to be only flat YoY.

  Comparison

  Under the new normal of rising existing-home market share, it benefits more directly from active housing stock transactions than pure developers.

  Risks

  If transaction volumes fall back or declining prices hurt transaction confidence, GTV growth may slow.

• Greentown/Jiaxing upgrading projects

  A case of localized structural opportunities in lower-tier cities

  Strengths

  Jiaxing is weak overall, but supply of upgrading/luxury products in core areas is limited, sell-through is healthy, and project profit margins can reach the mid-teens.

  Weaknesses

  The overall market in this tier-3 city remains sluggish, and the demand base is weaker than in tier-1 and tier-2 cities.

  Comparison

  This shows lower-tier cities are not completely without opportunities, but such opportunities depend more on scarce supply in core areas and fast turnover.

  Risks

  Population outflow, high inventory, and demand volatility may limit sustainability.

Key data

• COLI 4M26 contracted salesup 14% YoYThe report believes that if new launches in Shanghai and Shenzhen proceed as planned, contracted sales may continue to post positive YoY growth over the next 2-3 months.
• COLI saleable resources in the next 1-2 monthsup more than 10% YoYMainly supported by project launches in Shanghai and Shenzhen.
• Months of inventory in tier-1, tier-2, and tier-3 citiesabout 14/24/34 monthsUsed to illustrate the greater inventory pressure in lower-tier cities.
• Centaline 2026 primary home sales forecastnationwide sales volume down 7% YoY, tier-1 and tier-2 cities down 3% YoYBroadly consistent with JPMorgan's view on primary home sales.
• Centaline 2026 existing-home sales forecastroughly flat YoYBelow JPMorgan's expected 5-10% YoY growth.
• Centaline new starts/completions forecastdown 20%/11% YoYJPMorgan's corresponding estimates are down 18%/19% YoY.
• Shanghai existing-home listingsdown from about 120k units to 85k units, a decline of about 30%Iceberg Index believes Shanghai's existing-home inventory is only about 6 months, an important basis for confirming a bottom.
• Price changes from Shanghai project fieldworksome projects raised prices slightly by 1-2% versus the previous batchSales managers said visits, inquiries, and sell-through rates were all better than last year.
• Premium of new homes versus surrounding existing homestypically 10-30% higherSales managers believe fourth-generation homes have efficiency above 90%, so new homes and existing homes cannot be simply compared.
• Profit margin on recently acquired SOE land projectstypically above 15%If home prices stabilize, impairment risk is expected to decline.
• Sell-through of Hangzhou luxury projectsamong 6 luxury projects with land acquired in 2025, 3 have already launched and all were 100% sold outBenefiting from controlled land supply and luxury demand.
• Hangzhou provident fund mortgage easinghousehold loan quota raised from Rmb1.2m to Rmb1.8mThis helps sustain transactions in the short term, but momentum may slow in May-June and bottom in 3Q.

Impact & implications

The investment implication is to reduce expectations for a broad beta reversal across the sector and instead look for structural alpha. High-quality SOE developers may outperform private developers and lower-tier-city-heavy developers because they have greater exposure to tier-1 city land and upgrading demand, as well as stronger financing and land acquisition capabilities. Existing-home transaction platforms may benefit from the continued rise in the secondary market share, though transaction momentum and price stability still need to be monitored.

Risks

• Recent transaction improvement may mainly come from release of pent-up demand and selective policy easing, with limited sustainability.
• The probability of nationwide stimulus has declined; if local policy execution is weak, inventory digestion may be slower than expected.
• Lower-tier cities still face population outflow and high inventory pressure, and the sector's recovery may remain divergent for a long time.
• Weak household income expectations and limited willingness to leverage constrain upside for home prices and transactions.
• While the gradual exit of the pre-sale system is a long-term direction, overly rapid implementation could intensify developers' funding pressure.
• Upgrading and luxury products are performing better, but weakness in the mass market may drag on nationwide data.

What to watch

• Whether Shanghai existing-home listings, months of inventory, and asking prices continue to stabilize.
• Whether the conversion rate from showroom visits to transactions in tier-1 cities continues to improve.
• The actual strength of execution of local policies such as inventory acquisition, provident fund mortgage easing, and optimization of purchase restrictions.
• Whether COLI's new projects in Shanghai and Shenzhen launch as planned and how they perform in sell-through.
• Whether the share of existing-home transactions continues to rise and whether KE Holdings' existing-home GTV maintains positive growth.
• Whether the divergence between Hangzhou luxury and mass-market segments continues, and whether transactions bottom in 3Q as expected.
• Whether opportunities for leading SOEs to acquire land increase after improvement in quality land supply and reduced participation by LGFVs.