China real estate has entered a K-shaped stabilization phase, with Shanghai leading while nationwide recovery remains uneven

Overview

This report is J.P. Morgan's summary of key points from an expert call with Iceberg Index, focusing on the performance of China's secondary real estate market and the outlook for 2H26/2027. The core judgment is that the market has moved from sharp declines into a phase of milder declines and K-shaped stabilization: transaction volumes still have a basis for positive growth, home price declines are narrowing, purchasing power and rents are showing signs of stability, but divergence is evident across cities, price segments, and developers.

Core views

Both the expert and the report believe that home prices in tier-one cities will see soft stabilization in 2026, with Shanghai the strongest; nationwide home prices will remain in a downtrend in 2026, but the pace of decline will narrow; if inventory digestion proceeds smoothly, more higher-tier cities may bottom in 2027. Shanghai has more clearly confirmed its bottom and may be the first to enter an upcycle in 2027; Shenzhen, Beijing, Guangzhou, and most core cities may still continue to decline in 2026 before gradually stabilizing. From an investment perspective, the report does not recommend betting on a broad beta reversal for the sector, but instead sticking with alpha by selecting SOE developers that outperform in sales growth.

Analysis framework

The report is mainly based on Iceberg Index's real-time data on secondary transactions, average transaction prices, listing prices, listing volumes, bargaining rates, total price indices, and rents, combined with expert judgment on volume and price trends for 2H26/2027. The analytical framework emphasizes cross-validation of transaction volume, the pace of price declines, purchasing power, rents, listing volume, and city-level divergence, rather than focusing on a single transaction indicator.

Methodology notes

• Real estate cycle analysisVolume-price interaction framework

  Improving transaction volumes accompanied by narrowing home price declines is more indicative of sustainable stabilization.

  The expert believes this cycle differs from previous brief stabilization episodes: in the past, when transaction volumes rose, home prices continued to fall at an accelerating pace, whereas this time transaction growth is being accompanied by narrower price declines, suggesting the market may be undergoing structural change.

• City-tier analysisK-shaped recovery

  The direction of recovery is inconsistent across cities and price segments.

  Shanghai's lower-total-price homes are recovering first and the recovery is spreading to higher-total-price segments, while Shenzhen is showing stronger performance in high-end products than in mass-market products, indicating that the real estate market is not recovering synchronously but diverging by city tier, inventory conditions, and demand resilience.

• Market stress monitoringListing volume and bargaining rate observation

  Declining listing volume and narrowing bargaining rates can be used to judge whether selling pressure is easing.

  Listing volume in 25 cities has broadly stabilized after declining since November 2025, while listings in tier-one cities continue to fall; the average bargaining rate across 40 cities narrowed from a peak of 10.7% in February 2026 to 10.3%, and Shanghai narrowed from 9.2% to 6.5%, reflecting marginal easing in selling pressure.

Asset mapping & comparison

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

• COLI (0688.HK)

  One of the report's top SOE developer picks, rated OW in the valuation table.

  Strengths

  Outperforming sales growth, SOE background, and more likely to generate alpha amid the sector's K-shaped stabilization.

  Weaknesses

  Still affected by nationwide home price declines and real estate sales sentiment.

  Comparison

  Year-to-date performance is +9%, outperforming HSI at -4%.

  Risks

  If stabilization in higher-tier cities falls short of expectations or policy support is insufficient, valuation recovery may be constrained.

• CR Land (1109.HK)

  One of the report's top SOE developer picks, rated OW in the valuation table.

  Strengths

  A standout among SOE developers, with strong year-to-date gains and advantages in sales and asset quality.

  Weaknesses

  The share price has already clearly outperformed, so near-term expectations may be high.

  Comparison

  Year-to-date performance is +24%, significantly outperforming HSI at -4% and other developers.

  Risks

  If sector transaction growth continues to slow, even leading names may face valuation pullbacks.

• China Jinmao (0817.HK)

  One of the report's top SOE developer picks, rated OW in the valuation table.

  Strengths

  Benefiting from preference for SOE developers and the recovery logic of higher-tier cities.

  Weaknesses

  The valuation table shows a relatively high 1FY P/E, and earnings recovery still needs to be validated.

  Comparison

  Year-to-date performance is +12%, outperforming HSI at -4%.

  Risks

  If home prices continue to fall or sales recovery falls short of expectations, both earnings and valuation may come under pressure.

• Shanghai secondary residential market

  The leading city sample for this round of stabilization in China's real estate market.

  Strengths

  Listing volume is down 32% from the peak, the listing price index has rebounded 1.8% since January, and the lower-total-price segment has seen relatively notable gains over 6 months.

  Weaknesses

  The recovery still needs to continue spreading from the lower-total-price segment to higher-total-price segments.

  Comparison

  Compared with Shenzhen, Beijing, and Guangzhou, Shanghai is closest to confirming a bottom and may be the first to enter a 2027 upcycle.

  Risks

  If the peak season after the 2027 Lunar New Year fails to drive demand, the judgment of an expansion cycle may be delayed.

• Shenzhen secondary residential market

  A typical case of divergence under K-shaped stabilization.

  Strengths

  High-end products are performing better than mass-market products, and overall home prices have been broadly stable since 2026.

  Weaknesses

  The decline in listing volume is mainly driven by the withdrawal of zombie listings, while mass-market products continue to fall.

  Comparison

  Weaker than Shanghai; the expert expects prices to still fall 3%-4% in 2026 before possibly bottoming in 2027.

  Risks

  If demand does not truly improve, the market may continue to decline gradually after a temporary stabilization.

Key data

• Real-time secondary home transaction YoY growth in major cities+25%-30% in April-May, slowing to about +10% in June-JulyThe expert expects about +10% YoY growth in 2H26, with the base case for 2027 remaining positive growth.
• Iceberg 40-city transaction average price indexDown 41% from the peak, up 9% versus 2014/15 levelsThe expert believes that after a substantial adjustment, home prices have shifted from sharp declines to mild declines, and further downside may be less than 9%.
• Monthly change in Iceberg 70-city listing price indexNarrowed from more than -1% in 2023-25 to about -0.5% in 2026This shows that the pace of home price declines is slowing, but a nationwide absolute reversal has not yet formed.
• Secondary listing volume in 25 citiesFell by about 10,000 units per month from March to May 2026, then broadly stabilized after MayThe expected continued decline did not fully materialize, indicating inventory digestion remains uneven.
• Shanghai secondary listing volumeDown 32% from the peakThe report says this was mainly driven by strong transaction volumes, with secondary transaction volume exceeding new listings, rather than large-scale listing withdrawals.
• Shanghai Iceberg listing price indexRebounded 1.8% since January 2026The expert believes Shanghai has confirmed its bottom, should remain broadly stable in 2H26, and may enter an upcycle in 2027.
• Shenzhen 2026 home price expectationDown 3%-4%The decline in listings mainly reflects the withdrawal of zombie listings, and the expert believes the market has not truly bottomed yet.
• Beijing/Guangzhou 2026 home price expectationDown 4%-5%They may bottom at the end of 2026 and stabilize in 2027.
• 2026 home price expectation for most core citiesDown 5%-6%If inventory digestion proceeds smoothly, more cities may find a bottom in 2027.
• Year-to-date performance of top picksCOLI +9%, CR Land +24%, China Jinmao +12%, versus HSI -4%The report uses this performance to support its view of sticking with alpha in SOE developers.

Impact & implications

For investors, the report implies that the trading logic for China's real estate sector is shifting from broad-based decline to structural divergence. Positive transaction volume growth, narrowing price declines, and stable rents and purchasing power help reduce systemic bearish expectations, but home prices nationwide have not yet reversed and expectations for policy support are also limited. Therefore, a more reasonable strategy is to avoid the beta risk of highly leveraged or distressed private developers and instead choose SOE developers with more resilient sales, balance sheets, and market share, as well as companies benefiting from stabilization in higher-tier cities.

Risks

• Secondary home transaction YoY growth has already slowed from 25%-30% to around 10%; if it continues to decline, the support that transaction improvement provides to prices may weaken.
• Home prices in most cities nationwide are still expected to decline in 2026, and the sector has not yet entered a broad reversal phase.
• Expectations for policy support are limited, and the expert believes the probability of meaningful large-scale mortgage subsidies in the near term is low.
• The decline in Shenzhen listing volume includes the withdrawal of zombie listings, which may overstate genuine demand improvement.
• If inventory digestion does not proceed smoothly, the judgment that more cities will bottom in 2027 may be delayed.
• Distressed private developers and highly leveraged developers still face pressure on sales, financing, and balance sheets.

What to watch

• Whether secondary home transactions in major cities can maintain around 10% YoY growth in 2H26.
• Whether the monthly decline in the Iceberg 70-city listing price index continues to narrow from -0.5%.
• Whether Shanghai's post-Lunar New Year peak season in 2027 triggers an upcycle in prices.
• Whether prices of Shenzhen mass-market products stop falling, and whether the decline in listings translates into real transaction improvement.
• Whether Beijing, Guangzhou, and other core cities show bottoming signals at the end of 2026.
• Whether secondary listing volume in 25 cities and tier-one cities continues to be digested.
• Whether the average bargaining rate in 40 cities and Shanghai's bargaining rate continue to narrow.
• Whether rents and the Iceberg 40-city total price index can remain stable.
• Whether SOE developers' sales growth continues to outperform the sector.