China Property: August China property data weakened as completed-sales policy points to a wider new-versus-existing-home split

Overview

This China Property data update interprets weaker August new-home sales and construction activity through the emerging completed-sales policy framework. Morgan Stanley expects the policy to widen the gap between new and existing homes, sustaining pressure on developers while supporting platforms and developers positioned for secondary transactions or recurring mall income.

Core views

New-home conditions worsened in August despite a low comparison base. Rebased national new-home sales fell 12.1% year on year by value and 14.8% by volume; for 8M26, declines reached 13.0% and 12.1%, respectively. In contrast, NBS's first disclosure of existing-home sales volume showed 10.6% year-on-year growth in 8M26. Total residential floor area sold was therefore down only 1.0% year on year. Morgan Stanley interprets this divergence as evidence that housing demand is shifting away from new homes toward the secondary market. The report expects the completed-sales policy to amplify this K-shaped pattern. By limiting the formation of new launches, the policy should constrain new-home supply and increasingly favor existing-home transactions over coming years. Morgan Stanley therefore sees a transition to a secondary-dominant housing market, with negative implications for developers' sales and earnings outlook but potential benefits for businesses exposed to existing-home transactions. Construction indicators deteriorated further. August total floor area starts fell 30.9% year on year and completions fell 28.4%; the report describes new starts and completions as down 31% and 28%, respectively. For 8M26, total starts and completions were down 24.8% and 23.7%, while total real-estate investment declined 19.9% to Rmb4,798 billion. Bad weather contributed to the August weakness, but Morgan Stanley also highlights the smaller construction scale. It lowered full-year forecasts because developers may become still more disciplined on land replenishment in 4Q until the completed-sales policy details are clearer. Morgan Stanley expects price stabilization to be gradual because destocking takes time and demand remains the principal determinant. Its base timeline is stabilization in most Tier 1 cities by end-2026 and in Tier 2 cities in 2H27; lower-tier cities may take much longer because of severe structural oversupply. Stronger demand-side stimulus and an improved macro environment could bring this timetable forward. For equity implications, the report remains cautious on pure-play developers. It identifies KE Holdings as a key beneficiary of a larger share of existing-home transactions. It also suggests accumulating China Resources Land and Seazen A/H at current levels because their mall operations can buffer earnings. Morgan Stanley states that CR Land trades at about 12x recurring profit with limited value ascribed to its profitable development business, while Seazen trades at about 7x recurring profit, which it believes understates improving liquidity, business prospects and dividend potential.

Analysis framework

Morgan Stanley rebases NBS property data to compare August and year-to-date sales, construction and investment trends, then contrasts new-home and existing-home transaction data to assess the market transition. It links policy-driven supply constraints, demand conditions and destocking to price timing, and applies company-level valuation and recurring-income considerations to selected stock ideas.

Methodology notes

• Industry AnalysisSupply-demand framework

  Comparison of new-home demand, existing-home transactions, launch formation and housing inventory adjustment.

  The report uses sales and construction data to show that constrained new launches and ongoing destocking could shift activity toward the secondary market and delay broad price stabilization.

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted-cash-flow valuation of development properties within 2026 estimated NAV.

  For the developers discussed, Morgan Stanley values development assets using DCF assumptions and combines them with investment-property values, net debt and a scorecard-based NAV discount.

• Other

  Developer scorecard and NAV discount framework.

  Morgan Stanley applies 30-45% NAV discounts based on factors including landbank, execution, scale, growth, profitability, financing and leverage.

Asset mapping & comparison

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

• KE Holdings Inc (BEKE.N)

  Identified as a key beneficiary of a higher share of existing-home transactions.

  Strengths

  Exposure to the transition toward secondary-home transactions.

  Weaknesses

  Earnings and sentiment may be affected by developers' liquidity stress.

  Comparison

  Preferred to pure-play developers in the report's market-transition thesis.

  Risks

  Slower policy easing, renewed competition during recovery, or weaker developer liquidity.

• China Resources Land Ltd. (1109.HK)

  Morgan Stanley would accumulate the stock at current levels, citing mall operations as an earnings buffer.

  Strengths

  Robust mall operations; trades at about 12x recurring profit with limited valuation for profitable development operations.

  Weaknesses

  Contracted sales remain exposed to the weak property market.

  Comparison

  More defensively positioned than pure-play developers because of recurring mall income.

  Risks

  Weaker contracted sales or slower-than-expected new mall openings.

• Seazen Group Ltd. (1030.HK) / Seazen Holdings Company Ltd. (601155.SS)

  Morgan Stanley would accumulate Seazen A/H at current levels, supported by mall operations.

  Strengths

  Recurring mall income, improving liquidity and potential dividends; about 7x recurring profit is viewed as undervaluing the outlook.

  Weaknesses

  Development margins and recurring-income growth remain sensitive to operating execution.

  Comparison

  Viewed more favorably than pure-play developers because mall operations provide an earnings buffer.

  Risks

  Weaker contracted sales, margin compression, weaker rental growth or slower mall divestment into private REITs.

Key data

• August new-home sales value-12.1% y-yRebased national figure; new-home sales weakened despite a low base.
• August new-home sales volume-14.8% y-yRebased national floor-area measure.
• 8M26 new-home sales value-13.0% y-yRmb4,178 billion versus Rmb4,807 billion in 8M25.
• 8M26 existing-home floor area sold+10.6% y-yNBS's first disclosed existing-home sales-volume figure.
• 8M26 total residential floor area sold-1.0% y-y964 million square metres versus 974 million square metres.
• August construction activityStarts -30.9% y-y; completions -28.4% y-yBad weather partly contributed to the decline.
• 8M26 real-estate investmentRmb4,798 billion, -19.9% y-yThe decline deepened as construction scale contracted.

Impact & implications

Morgan Stanley sees completed-sales policy as structurally unfavorable for new-home-focused developers because it may reduce launches and widen the divergence with existing homes. It views secondary-market exposure and recurring mall income as relative defenses, while broader price recovery depends on demand stimulus, macro improvement and progress in destocking.

Risks

• For developers, weaker-than-expected contracted sales, faster development-margin compression and weaker rental growth could undermine the outlook.
• For CR Land and Seazen, new mall openings or investment-property operations could be weaker than expected.
• For KE Holdings, developer liquidity stress, slower policy easing and renewed competition during recovery could pressure earnings and sentiment.

What to watch

• Details and implementation of the completed-sales policy, particularly its effect on new launches and developers' land replenishment.
• Monthly new-home versus existing-home transaction trends.
• Construction starts, completions and real-estate investment after the August downturn.
• Demand-side policy relaxation in higher-tier cities and the resulting home-price stabilization path.
• Contracted sales, mall openings, rental growth and liquidity progress at the preferred companies.