China's housing activity continues to weaken, with policy focus shifting from investment expansion to consumption empowerment
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China's housing activity continues to weaken, with policy focus shifting from investment expansion to consumption empowerment
JPMorgan believes that China's housing market remains in a prolonged volume adjustment, and that the 15th Five-Year Plan repositions housing as a platform for consumption upgrading and growth in services, but near-term indicators for sales, starts, prices, and financing remain weak.
- JPM's housing activity index declined further, with wider drops in June residential housing starts, sales, completions, and developers' funding sources.
- Price stabilization remains fragile: the month-on-month decline in new home prices across 70 cities narrowed slightly, but the decline in existing home prices widened, and the momentum of price recovery in tier-one cities slowed.
- On the policy front, housing is positioned in the consumption-promoting 15th Five-Year Plan as support for household consumption confidence, wealth, and upgrading demand, rather than as a traditional investment engine.
- The scope of housing-related consumption has expanded from new home purchases to renovation, home furnishings, appliances, building materials, elderly-friendly retrofits, smart homes, and property services.
- The report judges that the current situation is closer to K-shaped stabilization during a prolonged volume adjustment; lower-tier cities remain sluggish, and there are also signs of cooling in the recovery of tier-one cities as well as upgrade and high-end demand.
Report interpretation
Overview
This report focuses on activity in China's housing market and the changing role of housing under the consumption-promoting 15th Five-Year Plan. JPMorgan notes that the housing activity index continues to decline, with major activity indicators weakening further in June; at the same time, the policy narrative is shifting away from using real estate to drive investment expansion toward supporting consumption upgrading through affordable housing, upgrade demand, the rental market, urban renewal, home renovation and furnishings, and property services.
Core views
The core view is that the housing market has not yet entered a broad, self-sustaining nationwide recovery. Policymakers aim to improve affordability and reduce the economy's dependence on real estate, but they are constrained by household wealth and local government finances, which limits the pace of price adjustment. As a result, pressure is showing up more in volume indicators such as transactions, housing starts, land acquisition, and real estate investment. Tier-one city existing homes and upgrade demand once showed positive signals, but the recovery has been narrow in scope and marginal momentum is weakening, while lower-tier cities remain broadly sluggish.
Analysis framework
The report adopts a macro and industry indicator tracking approach, using JPM's housing activity index together with indicators such as the NBS 70-city housing prices, residential housing starts, sales, completions, developers' funding sources, inventory, existing home listing prices, sales manager confidence indices, and transactions in 30 cities to assess the housing market's volume adjustment, price stability, and policy implications.
Methodology notes
Use indicators such as housing starts, sales, completions, financing, inventory, and housing prices to judge the position of the real estate cycle.
The report uses JPM's housing activity index and multiple housing activity indicators to conclude that the market remains in contraction, while distinguishing limited improvement on the price side from continued pressure on the volume side.
Reposition housing from an investment engine to a platform for consumption upgrading, improvement in living quality, and services consumption.
The consumption-promoting 15th Five-Year Plan emphasizes affordable housing, upgrade demand, the rental market, better homes, urban renewal, elderly-friendly retrofits, smart homes, and property services, showing that the policy focus is shifting from incremental sales toward housing quality and related services consumption.
Performance diverges across city tiers and demand segments, and localized improvement does not equal a nationwide recovery.
The report believes that the recovery in tier-one cities and in upgrade and high-end demand is relatively narrow, while lower-tier cities remain weak, so recent performance looks more like K-shaped stabilization during a prolonged adjustment.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Real estate development and residential sales chainDirectly affected by the decline in housing activity
- Strengths
- Policy still emphasizes the healthy development of the real estate market and allows local governments to optimize housing policies and housing provident fund systems to support first-home and upgrade demand.
- Weaknesses
- Housing starts, sales, completions, developers' funding sources, and real estate investment remain under pressure, inventories are elevated, and household credit demand is weak.
- Comparison
- Compared with the home furnishings, building materials, and services consumption chains, the traditional development chain is more constrained by volume adjustment and price expectations.
- Risks
- Continued price adjustment, weaker-than-expected transaction recovery, inventory pressure in lower-tier cities, and insufficient improvement in developer financing.
- Home furnishings, appliances, building materials, and renovation chainBenefiting from the expansion of housing consumption scope
- Strengths
- Policy emphasizes better homes, green, safe, and smart housing, urban renewal, old home renovation, elderly-friendly retrofits, and smart home upgrades, so demand does not come only from new home sales.
- Weaknesses
- If new home sales and existing home transactions remain weak, the release of demand for renovation and large durable goods consumption may be constrained.
- Comparison
- Compared with developer assets, this chain is more closely aligned with the logic of consumption upgrading and existing home renewal.
- Risks
- Insufficient household income and wealth confidence, slow policy implementation, and weaker-than-expected demand for consumption upgrading.
- Rental market and property management servicesA housing services consumption direction supported by policy
- Strengths
- The report mentions a more developed rental market and improved property service quality, and property management is explicitly identified as a consumption sub-sector.
- Weaknesses
- Growth in services consumption depends on households' willingness to pay, the quality of community service supply, and local policy execution.
- Comparison
- Compared with one-off housing transactions, service-oriented businesses are more skewed toward recurring consumption, but their elasticity may be lower.
- Risks
- Household budget tightening, limited room for service price increases, and the drag from weak real estate fundamentals on community consumption.
Key data
- June residential housing starts area-26.6%oyaWas -22.9%oya in May, with the decline widening.
- June residential sales-15.3%oyaWas -12.4%oya in May, with the decline widening.
- June new home prices in 70 cities-0.15%m/m nsaWas -0.20% in May, with the decline narrowing slightly.
- June existing home prices in 70 cities-0.32%m/m nsaWas -0.26% in May, with the decline widening.
- Tier-one city new home prices+0.1%m/m nsaSlowed by 0.1 percentage point from May.
- Tier-one city existing home prices+0.3%m/m nsaSlowed by 0.1 percentage point from May.
- New home prices vs. the 2021 peak-13.9%Showing that the price adjustment is still not fully over.
- Existing home prices vs. peak-22.8%The adjustment in existing home prices has been larger.
Impact & implications
For investment research, the implication is that the real estate chain still faces near-term pressure from volume adjustment, with developers, housing starts, land acquisition, and financing-related segments under pressure; however, the inclusion of housing within the consumption-promotion framework may create structural opportunities for renovation, home furnishings, appliances, building materials, smart homes, elderly-friendly retrofits, rental, and property services. Overall allocation should distinguish between the traditional real estate investment chain and the housing quality improvement and consumer services chain, and avoid interpreting localized warming in tier-one cities as a nationwide recovery.
Risks
- Housing price stabilization remains fragile, with the decline in existing home prices widening.
- Volume indicators of housing activity continue to weaken, including housing starts, sales, completions, and developers' funding sources.
- The recovery in tier-one cities and in upgrade and high-end demand is narrow in scope and losing momentum.
- Lower-tier cities remain broadly sluggish, and inventory pressure and weak household mortgage demand may prolong the adjustment cycle.
- There is a timing inconsistency in policy goals: improving affordability and reducing reliance on real estate while also taking household wealth and local government finances into account.
What to watch
- Whether JPM's housing activity index stabilizes going forward.
- Month-on-month changes in new and existing home prices across 70 cities, especially whether the decline in existing home prices narrows.
- Whether tier-one city existing home transactions, listing prices, and sales manager confidence indices recover.
- Whether the declines in residential housing starts, sales, completions, developers' funding sources, and real estate investment narrow.
- The strength of policy implementation under the consumption-promoting 15th Five-Year Plan for affordable housing, the rental market, urban renewal, elderly-friendly retrofits, smart homes, and property services.
- Changes in inventory destocking in lower-tier cities and household mortgage credit demand.