China property market under Beijing's presale policy change: UBS sees Beijing's stricter presale rules cutting developer project IRR and cooling land and new-home activity

Overview

UBS assesses Beijing's implementation of a changed presale model and concludes that it is more restrictive for property developers than Wuhan's earlier framework. The firm expects the policy to weaken Beijing development economics, land-market activity and new-home supply, with differing implications for property-related equities.

Core views

Beijing announced implementation details for its presale-model change on 24 September. UBS judges the framework to be stricter than Wuhan's recently announced approach and believes it could provide a read-across for other tier-one cities, which matter disproportionately to developers because they prefer to build land banks there. The central difference is funding access. In Beijing, developers cannot release presale proceeds until a project is completed. Wuhan permits developers to draw presale funds if supported by banks' letters of guarantee. Beijing's land-payment schedule is also less accommodating: at least 50% of the land premium must be paid in the first month, with the remaining 50% due within two years. Wuhan allows 10% upfront, 40% in the first year and 50% in two years. UBS notes that projects whose land was granted before 28 August 2026 may still apply for the old presale rules through end-2027. Using unchanged property and land prices, land cost equal to 50% of property price, a 50% upfront land payment with the remaining 50% paid by the end of year two, and a two-year sell-through cycle, UBS estimates that project-level IRR falls to 10.1% under Beijing's new framework. That compares with 14.5% under the old presale model and 13.6% under Wuhan's model. The lower IRR reflects developers having less access to buyer proceeds during construction and facing a more front-loaded land-payment burden. UBS therefore expects land auctions and new-home supply in Beijing to decline as project economics become less attractive. For equities, it sees a positive implication for KE Holdings because reduced new-home activity could shift potential demand toward existing-home transactions. It sees a negative implication for China Overseas Land & Investment, for which Beijing represented 18% of contract sales in H1 2026.

Analysis framework

UBS compares Beijing's policy terms with Wuhan's presale framework, then applies stated assumptions on prices, land costs, payment timing and sell-through duration to estimate the change in project-level IRR. It translates the resulting return pressure into expected effects on developer land purchases, new-home supply and selected property-sector companies.

Methodology notes

• Industry Analysis

  Project-level IRR scenario analysis

  UBS estimates developer project returns under the old, Beijing and Wuhan presale models using explicit assumptions about prices, land costs, payment timing and a two-year sell-through cycle.

• Valuation methodsPB valuation

  P/BV valuation

  UBS states that it uses price-to-book-value methods to value China property developers and property managers.

Asset mapping & comparison

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

• KE Holdings

  Potential beneficiary of demand shifting from new-home activity to existing-home transactions.

  Strengths

  Potential exposure to increased existing-home transaction demand.

  Comparison

  Contrasts with the negative read-through UBS identifies for China Overseas Land & Investment.

• China Overseas Land & Investment (0688.HK)

  Negatively affected by weaker Beijing development economics and potentially lower new-home supply.

  Weaknesses

  Beijing accounted for 18% of contract sales in H1 2026.

  Comparison

  More directly exposed to Beijing's development-market slowdown than KE Holdings, which UBS views as a potential beneficiary of existing-home demand spillover.

  Risks

  Lower land auctions and new-home supply in Beijing could weigh on its exposure to the city.

Key data

• Project-level IRR under Beijing's new presale model10.1%UBS estimate based on stated project-price, land-cost, payment-timing and sell-through assumptions.
• Project-level IRR under the old presale model14.5%Comparison point for UBS's estimated impact of Beijing's policy.
• Project-level IRR under Wuhan's presale model13.6%Higher than UBS's estimate under Beijing's stricter framework.
• Land premium payment required in BeijingAt least 50% within the first month; remaining 50% within two yearsCompared with Wuhan's 10% upfront, 40% in the first year and 50% in two years.
• China Overseas Land & Investment Beijing contract-sales exposure18%Share of contract sales in Beijing in H1 2026, according to UBS.

Impact & implications

UBS argues that the policy raises developers' funding and cash-flow constraints during project execution, reducing expected project profitability. It expects this to restrain land-market participation and new-home supply in Beijing, while potentially redirecting some demand to existing-home transactions.

Risks

• UBS identifies restrictive government demand and mortgage-lending policies as a downside risk for the Chinese property market.
• Tight financing conditions for Chinese developers are a downside risk.
• Lower-than-expected growth in China's economy is a downside risk.