Galaxy Securities: As the real estate industry gradually enters a stage of high-quality development, industry valuations may experience an overall recovery

China Galaxy Securities Research Report states that the 2026 Government Work Report emphasizes “focusing on stabilizing the real estate market” and outlines key work directions across various areas such as inventory, housing funds, affordable housing, urban renewal, “good houses,” financing, and new models. As the industry gradually enters a stage of high-quality development, industry valuations may experience a comprehensive recovery. Leading real estate companies, with advantages such as low financing costs and high market share in core areas, are expected to achieve overall beta opportunities through valuation repair.

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【China Galaxy Real Estate】Focusing on Stabilizing the Real Estate Market and Deepening New Models — Commentary on the 2026 Government Work Report

Key Points

Event: The 2026 Government Work Report mentions “focusing on stabilizing the real estate market,” and elaborates on key work directions in areas such as inventory, housing funds, affordable housing, urban renewal, “good houses,” financing, and new models.

Focusing on stabilizing the real estate market: The report emphasizes “focusing on stabilizing the real estate market,” continuing the wording from the 2025 Central Economic Work Conference. In 2025, the transaction volume of commercial housing was 880 million square meters, down 8.7% year-on-year, with transaction value of 8.4 trillion yuan, down 12.60%. In terms of housing prices, since May 2025, prices of commercial residential properties in first- and second-tier cities have continued to decline month-on-month; in January 2026, second-hand residential sales prices in first-, second-, and third-tier cities decreased by 7.6%, 6.2%, and 6.1% year-on-year respectively. During this overall pressure phase in the housing market, stabilizing the real estate market may become an important focus.

Revitalizing inventory and housing demand: The 2026 Government Work Report first highlights city-specific policies, clearly stating the direction: “controlling new supply, destocking, optimizing supply, exploring multiple channels to activate existing commercial housing, and encouraging acquisition of existing properties mainly for affordable housing.” This continues the December 2025 Central Economic Work Conference’s stance, with an addition of “exploring multiple channels to activate existing commercial housing.” On demand, it proposes “strengthening housing security for newly married and newly parented families, and supporting multi-child families’ improved housing needs.” 1) Regarding inventory, as of the end of December 2025, the nationwide commercial housing pending sale area was 770 million square meters, with 400 million square meters being pending sale residential units, representing year-on-year increases of 1.6% and 2.8%, with growth rates gradually narrowing, mainly due to control over housing supply increments. Based on current sales performance of existing homes, the inventory clearance cycle nationwide as of December 2025 is approximately 29.97 months. During this stage of urgent inventory clearance, city-specific policies aim to control new available housing supply and accordingly manage inventory levels; as residents’ demand for improved housing gradually releases, the supply-side of the market can further optimize the structure of new projects. 2) To activate inventory, appropriate acquisition of some existing properties for affordable housing can reduce available inventory and simultaneously meet residents’ basic housing needs.

Housing fund system reform: The 2026 Government Work Report mentions “deepening the reform of the housing provident fund system.” 1) The quota for housing provident fund loans is expected to be further relaxed. In February 2026, Shanghai issued the “Shanghai Seven Measures,” increasing the maximum first-home housing provident fund loan from 1.6 million yuan to 2.4 million yuan, with additional allowances for multi-child families and green building loans, up to 3.24 million yuan. 2) The coverage of the housing provident fund is expected to expand further. On December 5, 2025, Shenzhen issued new regulations allowing employees to withdraw housing provident funds for home purchases, rent payments, repayment of housing loans, and renovation of old neighborhoods, including support for using housing provident funds to repay loans for properties purchased in other cities; in August 2025, Suzhou expanded the scope of housing fund use, including support for property fee payments with housing provident funds.

Optimizing affordable housing supply: The 2026 Government Work Report mentions “optimizing the supply of affordable housing and accelerating the renovation of dilapidated houses.” In February 2026, Shanghai launched a pilot program to acquire second-hand homes for affordable rental housing, with initial pilot areas in Pudong New Area, Jing’an District, and Xuhui District. This pilot aims to broaden channels for securing rental housing and increase supply of small-unit affordable housing. We believe that acquiring second-hand homes in core areas as affordable rental housing can precisely match the rental needs of new residents, young talents, and other groups, satisfying basic housing demands.

Urban renewal: The 2026 Government Work Report proposes “high-quality promotion of urban renewal, steadily implementing renovations of old urban neighborhoods and villages.” It emphasizes “activating and utilizing existing land and idle housing facilities.” This mention of urban renewal focuses on “high quality.” In December 2025, the national Housing and Urban-Rural Development Work Conference proposed drafting and implementing the “14th Five-Year” urban renewal special plan, conducting city inspections and pilot projects, and integrating urban renewal and village renovation to activate existing land. According to the Seventh Census data, the scale of urban residents’ housing built by 2010 is approximately 17.98 billion square meters. With a large existing stock of housing, promoting high-quality urban renewal is expected to further improve residents’ quality of life.

Reiterating “good houses”: The 2026 Government Work Report again mentions “orderly promoting the construction of safe, comfortable, green, and smart ‘good houses,’ and implementing quality improvement projects for housing and property services.” The concept of “good houses” was frequently mentioned in 2025. In May 2025, the national standard “Residential Project Norms” was officially implemented, with improvements across multiple areas. As the scale of existing housing gradually expands, establishing a comprehensive safety management system throughout the housing lifecycle and enhancing property services—focusing on housing operation and maintenance—are likely to better align with current and future industry development.

Financial support: The 2026 Government Work Report mentions “further leveraging the ‘guaranteed delivery’ whitelist system to prevent debt default risks.” The city-level real estate financing coordination mechanism was established in 2024. As of October 11, 2025, loans for projects on the whitelist exceeded 7 trillion yuan, effectively ensuring the construction and delivery of commercial housing projects. We believe that with vigorous promotion across regions, the guaranteed delivery of projects is expected to continue making progress.

Promoting new models: The 2026 Government Work Report proposes “deepening the construction of foundational systems and supporting policies for new real estate development models.” According to the “14th Five-Year” plan suggested by the Central Committee of the Communist Party, the foundational systems for new models likely include development, financing, and sales aspects. Based on the principle of “housing determined by people, land determined by people, and money determined by housing,” new models may gradually coordinate and regulate development and financing processes, and improve pre-sale systems—such as raising pre-sale thresholds, slowing the transfer of pre-sale funds into housing-related accounts, and strengthening supervision of pre-sale funds.

Offline consumption: The 2026 Government Work Report also mentions “implementing service consumption quality improvement initiatives, creating a number of broad-reaching and high-visibility new consumption scenarios, and accelerating the cultivation of new consumption growth points. Activating offline consumption, stimulating sinking market consumption. Clearing unreasonable restrictions in consumption fields, and releasing potential in cultural tourism, events, and health care.” In the real estate sector, commercial real estate such as shopping centers and cultural tourism parks are important offline and service consumption scenes. Operating existing retail and cultural tourism parks with experience-based formats and offline product consumption are expected to benefit.

Investment Recommendations

The 2026 Government Work Report emphasizes “focusing on stabilizing the real estate market” and details key work directions across inventory, housing funds, affordable housing, urban renewal, “good houses,” financing, and new models. As the industry gradually shifts toward high-quality development, valuations may experience a comprehensive recovery. Leading real estate companies, with advantages such as low financing costs and high market share in core areas, are expected to realize overall beta opportunities through valuation repair.

Risk Warnings

Risks of macroeconomic underperformance; significant fluctuations in housing prices; policy implementation and progress falling short of expectations; lower-than-expected housing sales; lower-than-expected real estate investment.

(Source: People’s Financial News)