Home prices in tier-1 cities continue to stabilize mildly, but nationwide property trends remain clearly divergent

Overview

This report tracks China property sector data for June, with the core conclusion that the market is showing clear divergence: home prices in tier-1 cities continue to improve, especially in Shanghai, but prices across the national 70-city sample, residential sales value, housing starts, and completions remain weak. J.P. Morgan maintains its view that home prices in tier-1 cities will stabilize softly in 2026, while nationwide primary home prices and sales value remain on a downward path, albeit with the pace of decline likely to narrow.

Core views

The report’s core views include: first, primary and secondary home prices in tier-1 cities have posted positive MoM growth for multiple consecutive months, indicating strong demand and price resilience in core cities; second, the widening decline in secondary home prices across the national 70-city sample shows that pressure remains high in non-core cities or in the secondary market; third, the widening YoY decline in residential sales value and the downward revision to the full-year sales forecast indicate that the recovery in sector demand remains unsteady; fourth, the continued decline in housing starts and completions reflects insufficient developer willingness to invest in the short term, but in the medium term helps reduce new supply and support price stability; fifth, against this K-shaped stabilization backdrop, investors should choose state-owned developers with stronger sales growth rather than broadly betting on sector beta.

Analysis framework

The report is primarily based on cross-validation using the NBS 70-city home price index, Centaline’s tier-1 city secondary home price index, CREIS top-100 developers’ sales and 300-city land sales data, as well as nationwide property sales, construction, inventory, and valuation tables. The analytical path first compares price divergence between tier-1 cities and the national market, then combines sales, housing starts, completions, land, and inventory data to assess supply-demand direction, and finally maps the findings to individual developer performance and valuation preferences.

Methodology notes

• Industry cycle analysisTracking price, volume, and the construction chain

  Use home prices, sales value, housing starts, completions, land sales, and inventory together to assess the position of the property cycle.

  Home prices are used to observe changes in demand and expectations, sales value reflects transaction strength, housing starts and land sales indicate developers’ willingness to invest, and inventory and completions affect subsequent supply pressure.

• Structural divergence analysisK-shaped stabilization

  Core cities and high-quality state-owned developers improve, while the national market and weaker-quality players remain under pressure.

  The report does not call for a full sector recovery, but instead emphasizes the coexistence of stabilizing prices in tier-1 cities and falling nationwide sales, so the investment conclusion leans more toward selective alpha.

Asset mapping & comparison

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

• China Overseas Land & Investment (0688.HK)

  A key recommended state-owned developer, listed in the report with an OW rating.

  Strengths

  Its sales performance is relatively more stable, and its state-owned background plus exposure to core cities help it generate alpha in a divergent market.

  Weaknesses

  It is still affected by the nationwide decline in residential sales and sector valuation pressure.

  Comparison

  The report lists it alongside CR Land and China Jinmao as alpha names that investors should continue to own.

  Risks

  If the nationwide sales decline widens or price stabilization in core cities fails, valuation and earnings expectations may come under pressure.

• China Resources Land (1109.HK)

  A key recommended state-owned developer, listed in the report with an OW rating.

  Strengths

  Its year-to-date performance is stronger than the Hang Seng Index, while its sales and asset quality are relatively more resilient.

  Weaknesses

  Its valuation and share-price performance already partly reflect its relative advantages.

  Comparison

  Among the three key names, the report shows it has achieved a relatively strong year-to-date gain.

  Risks

  If the recovery in property demand is slower than expected, room for valuation expansion may be limited.

• China Jinmao (0817.HK)

  A key recommended state-owned developer, listed in the report with an OW rating.

  Strengths

  It is included in the basket of state-owned developers outperforming in sales growth and has structural allocation value.

  Weaknesses

  Its share price remains well below its one-year high, reflecting the market discount on sector and company fundamentals.

  Comparison

  Like COLI and CR Land, it is one of the alpha names the report recommends continuing to own.

  Risks

  If the sales recovery is insufficient or pressure on financing and margins persists, the stock price recovery may be slow.

• China property sector

  The core sector asset covered by the report.

  Strengths

  Home prices in tier-1 cities are stabilizing mildly, and declining housing starts help reduce future supply.

  Weaknesses

  Nationwide residential sales value, housing starts, completions, and some secondary home prices are still declining.

  Comparison

  Tier-1 cities and high-quality state-owned developers are outperforming the broader national market and weaker-quality developers.

  Risks

  Continued sales declines, renewed weakness in secondary home prices, weak land sales, and slow inventory destocking.

Key data

• Primary home prices in tier-1 cities+0.12% M/MIn June, prices rose MoM for the fifth consecutive month, with both Shanghai and Shenzhen at +0.3% M/M.
• Primary home prices in 70 cities-0.15% M/MThe decline narrowed from -0.20% in May.
• Secondary home prices in 70 cities-0.32% M/MThe decline widened from -0.26% in May.
• Secondary home prices in tier-1 cities+0.3% M/MUnder the NBS measure, prices rose for the fourth consecutive month, but the Centaline index turned to -0.2% M/M in June.
• Residential sales valueJune down about 12% to 14% YoYThe decline widened from May, while cumulative sales value in 1H26 fell 14% YoY.
• 2026 nationwide sales value forecast-10% Y/YRevised down from the previous -7%, implying about -5% Y/Y in 2H26.
• Housing startsJune -26% Y/YThe full-year forecast was lowered to -22% Y/Y, with weak land sales an important reason.
• CompletionsJune -25% Y/YThe FY26 forecast is -20% Y/Y.
• Key recommended namesCOLI、CR Land、China JinmaoAll three have outperformed or maintained strong performance year to date, and all are rated OW.

Impact & implications

The implication of this report for asset allocation is that the property sector is still not suitable for a simple broad-recovery trade, as nationwide sales and construction data have not yet confirmed a trend reversal; however, stabilizing home prices in tier-1 cities, declining supply, and the sales advantage of state-owned developers create relative return opportunities for high-quality developers. If secondary-home listings in tier-1 cities continue to decline and lead transactions to stabilize, valuations of quality developers may find support; conversely, if the sales decline fails to narrow in the second half, pressure on sector earnings and cash flow will continue.

Risks

• The decline in nationwide residential sales value may exceed the full-year forecast of -10%.
• The widening decline in secondary home prices across 70 cities may weigh on household expectations and upgrade demand.
• Persistently weak land sales may reflect insufficient developer confidence and affect the subsequent investment chain.
• Although declining housing starts and completions help contract supply, they also suppress industry-chain activity and revenue recognition for developers.
• If home price stabilization in tier-1 cities is concentrated mainly in Shanghai, insufficient recovery in other cities will weaken the breadth of the sector recovery.
• If policy easing is insufficient or transmission is ineffective, improvements in sales and prices may be hard to sustain.

What to watch

• Whether the YoY decline in nationwide primary home sales value in July and 2H26 can narrow to 5% to 10%.
• Whether secondary-home listings in tier-1 cities continue to decline and support stabilization in secondary-home prices.
• Whether primary and secondary home prices in Shanghai, Beijing, Guangzhou, and Shenzhen continue to diverge.
• Whether sales growth among the top-100 developers continues to outperform nationwide NBS-reported sales data.
• Whether declines in housing starts, land sales, and completions widen further.
• Whether sales growth at COLI, CR Land, and China Jinmao can continue to outperform peers.