China property: green shoots have emerged in tier-1 cities, but the recovery is more likely to be structural and fragmented

Overview

This report summarizes JPMorgan's key takeaways from the Global China Summit held in Shanghai and channel checks in Shanghai, Hangzhou and Jiaxing. The report focuses on whether the recent signs of improvement in China's property market are sustainable. The conclusion is cautiously positive: tier-1 cities, especially Shanghai, have indeed shown improvement in transactions, sentiment and some prices, but participants disagree on the drivers and sustainability, and a broad nationwide recovery remains unlikely. The more likely outcome is a structural, differentiated stabilization, with tier-1 and some strong tier-2 cities, as well as upgrade and luxury products, performing better, while lower-tier cities and mass-market products remain under pressure.

Core views

The report's core views are as follows: First, the recent improvement in secondary home prices and transaction volumes in tier-1 cities is a real signal, but it may partly reflect the release of pent-up demand, localized policy relaxation, and wealth effects from the equity market and IPOs, and does not necessarily mean a full upward cycle has begun. Second, inventory remains the key variable determining the quality of the recovery; Shanghai's secondary-home inventory has fallen significantly, which is why it is outperforming Beijing and Guangzhou. Third, on policy, broad nationwide stimulus is unlikely in the near term, and the market will continue to rely more on city-specific measures and the implementation of existing tools such as state inventory acquisition. Fourth, opportunities at the developer level are concentrated in tier-1 cities, upgrade demand, high-quality land banks and leading state-owned enterprises. Fifth, a higher share of secondary-home transactions may become the new normal, while the new-home market needs product strength and higher usable floor area ratios to remain competitive.

Analysis framework

The report combines summit expert interviews, developer discussions and city channel checks, comparing different interpretations of the property's green shoots from policy experts, research institutions, state-owned developers, private developers, brokerage firms and market data providers, while validating actual sales sentiment, absorption, pricing strategies and inventory constraints in tier-1 and lower-tier cities through visits to projects in Shanghai, Hangzhou and Jiaxing.

Methodology notes

• industry cycle viewstructural stabilization and K-shaped recovery

  Tier-1 cities and high-quality upgrade products stabilize, while lower-tier cities and mass-market segments remain weak.

  The report does not interpret the recent improvement in transactions as a nationwide recovery, but instead emphasizes the divergence across cities, product types and developers: Shanghai and Shenzhen are stronger than Beijing and Guangzhou, luxury and upgrade products are stronger than mass-market products, and state-owned developers are stronger than highly leveraged private developers.

• supply-demand and inventory analysisinventory-month bottom signal

  A decline in inventory months into a reasonable range is an important prerequisite for price stability.

  Experts mentioned inventory months of about 14, 24 and 34 months for tier-1, tier-2 and tier-3 cities, respectively; Centaline believes true stabilization requires inventory months to fall to 12 to 18 months. Shanghai's secondary-home listings fell from about 120,000 to 85,000 units, implying roughly six months of inventory, which is an important reason for its stronger performance.

• policy analysiscity-specific policy and policy execution

  The probability of broad nationwide easing is low, and marginal improvement depends more on local execution.

  The report notes that regulators are no longer emphasizing 'stabilizing declines and stabilizing the market' as strongly and are instead using the wording of continuing to stabilize the property market. Experts believe the market has moved out of crisis mode, reducing the probability of strong central stimulus, and shifting the policy focus to local implementation and tools such as state inventory acquisition.

• company selectiontier-1 upgrade demand exposure

  Preference for state-owned developers with higher exposure to tier-1 cities and upgrade products.

  JPMorgan believes the current environment is more favorable for state-owned leaders such as COLI, CR Land and Jinmao, because they have stronger project footprints and greater exposure to upgrade demand in tier-1 cities such as Shanghai and Shenzhen.

Asset mapping & comparison

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

• China Overseas Land & Investment (0688.HK)

  A key beneficiary; the report says alpha opportunities still lie in COLI.

  Strengths

  Achieved 14% YoY contract sales growth in 4M26, and new launches in Shanghai and Shenzhen over the next one to two months are expected to support double-digit YoY growth in available-for-sale resources; it is focused on tier-1 cities and upgrade demand.

  Weaknesses

  Land acquisition has been slower year to date, because local governments have not supplied enough high-quality land; if project launches underperform, near-term sales momentum will be affected.

  Comparison

  Compared with developers more dependent on lower-tier or mass-market exposure, COLI is better aligned with this round of structural stabilization.

  Risks

  Slower upgrade demand in tier-1 cities, unsustained policy effects, limited room for price increases, or insufficient supply of high-quality land.

• China Resources Land (1109.HK)

  One of the state-owned developers JPMorgan continues to favor.

  Strengths

  Has a state-owned background and a portfolio of tier-1 and upgrade-oriented projects, benefiting from a competitive landscape for high-quality land that is increasingly concentrated in top state-owned enterprises.

  Weaknesses

  The report does not disclose separate operating data; the view is mainly based on industry structure and company attributes.

  Comparison

  Compared with private developers, it has stronger financing and land acquisition capability; compared with developers with higher exposure to lower-tier cities, it benefits more from stabilization in tier-1 cities.

  Risks

  Overall industry sales remain weak, inventory clearance is slow, and poor land quality constrains investment pace.

• China Jinmao (0817.HK)

  One of the state-owned developers JPMorgan continues to favor.

  Strengths

  Benefits from the preference for tier-1 cities and upgrade demand, and the recent industry backdrop where project gross margins are generally above 15% is favorable for high-quality state-owned enterprises.

  Weaknesses

  The report does not disclose company-specific incremental operating data.

  Comparison

  Compared with highly leveraged private developers, state-owned developers have an advantage in land acquisition and project execution.

  Risks

  Upgrade demand falls short of expectations, price stabilization fails, or valuation is pressured by easing policy expectations.

• KE Holdings

  A platform for property transactions and an observation point for secondary-home market trends.

  Strengths

  The company expects 2Q secondary-home GTV to remain positive in the low single digits year on year and to continue gaining market share.

  Weaknesses

  Primary-market GTV is expected to be flat year on year in 2Q, indicating that the new-home side still lacks a strong recovery.

  Comparison

  Benefits from the long-term trend of a higher share of secondary-home transactions, unlike traditional developers that depend on new-home sales.

  Risks

  Slower secondary-home transactions, commission-rate pressure, and policy or sentiment changes.

• Lower-tier city property market

  Overall weak but with some localized structural opportunities.

  Strengths

  Core upgrade and luxury projects in cities such as Jiaxing still achieve healthy absorption, and developers can earn mid-to-high single-digit gross margins, with cash payback periods of about one year for some projects.

  Weaknesses

  Population outflows and high inventory keep the overall market in third- and fourth-tier cities under pressure.

  Comparison

  Clearly weaker than tier-1 cities such as Shanghai and Shenzhen, but not entirely devoid of investment opportunities.

  Risks

  High inventory, insufficient purchasing power, mismatches between land and new-home supply, and unsustainable sales momentum.

Key data

• COLI contract sales growth year-to-date14% YoY in 4M26COLI said inquiries and site visits in May remained slightly positive year on year, and supply available for sale over the next one to two months is expected to grow by double digits year on year.
• Inventory months in tier-1, tier-2 and tier-3 cities14 / 24 / 34 monthsUsed to illustrate greater pressure in lower-tier cities and support the K-shaped stabilization view.
• Change in Shanghai secondary-home listings120K units to 85K units, down about 30%Iceberg Index believes Shanghai's implied inventory months are about six months, lower than Hong Kong's more than seven months.
• Centaline's 2026 primary sales forecastprimary sales volume -7% YoY; tier-1/2 cities -3% YoYConsistent with JPMorgan's estimate of a 7% decline in primary sales.
• Centaline's 2026 secondary sales forecastflattish YoYMore conservative than JPMorgan's expected growth of 5% to 10%.
• Construction-side forecastnew starts -20% YoY; completions -11% YoYJPMorgan's corresponding estimates are -18% for new starts and -19% for completions.
• Shanghai project pricing attempts1-2% increase versus last batchesSome projects have tried to raise prices slightly after sentiment improved and absorption came in better than expected.
• New-home premium versus secondary homes10-30% premiumSales managers believe that fourth-generation homes, higher floor heights and improved usable area ratios mean new homes cannot be directly compared with nearby secondary homes.
• Hangzhou luxury project absorption3 of 6 2025 land-king projects launched, all 100% sold outShows that Hangzhou's high-end products are stronger than the mass market.
• Hangzhou housing provident fund loan limit adjustmentfamily loan cap from Rmb1.2m to Rmb1.8mAfter the easing in late March, transactions are likely to stay supported for a period, but momentum may slow in May to June and bottom in 3Q.

Impact & implications

The investment implication is not to simply extrapolate the recent improvement in tier-1 cities into a nationwide property bull market. A more reasonable positioning is to look for state-owned leaders with tier-1 land banks, upgrade products, strong financing capacity and resilient absorption, while staying cautious on high-inventory cities, lower-tier mass-market segments and private developers' balance-sheet pressure. Policy expectations should also shift from waiting for a strong nationwide stimulus to watching local policy execution, state inventory acquisition, provident fund optimization and inventory clearance progress.

Risks

• The recent green shoots may mainly reflect the release of pent-up demand and local policy relaxation, and may not be sustainable.
• The probability of broad policy easing is low, and the market may face a pullback in expectations if it over-assumes strong stimulus.
• Lower-tier cities still have high inventory and population outflows, and overall demand recovery remains weak.
• Beijing and Guangzhou have higher inventory, so even within tier-1 cities there is divergence.
• Weak income expectations and a low willingness to increase leverage limit room for home-price appreciation.
• Although the exit of the pre-sale system is a long-term direction, moving too quickly could intensify developers' funding pressure.
• New homes still carry a 10% to 30% premium to nearby secondary homes, and insufficient product strength could hurt absorption.
• Strength in luxury and upgrade products may obscure the weakness in the mass market.

What to watch

• Whether Shanghai secondary-home listings continue to stabilize or decline, rather than only improving in transaction volume.
• The pace of new-home launches in Shanghai and Shenzhen, and whether COLI's contract sales can maintain YoY growth over the next two to three months.
• Whether inventory clearance in Beijing and Guangzhou improves and whether clearer price-stabilization signals emerge.
• Whether the scale and efficiency of state inventory acquisition at the local level improve.
• Whether tools such as provident fund loan limits, eligibility, restrictions on older homes, and commercial-loan-to-provident-fund transfers are further optimized.
• Whether transaction momentum in Hangzhou slows in May to June and whether it bottoms in 3Q as expected.
• Whether core-area upgrade projects in lower-tier cities can continue to maintain healthy absorption and mid-to-high single-digit profit margins.
• Whether developers move from selective small price hikes to broader price increases, or expand discounts again.