China’s real estate prices and rents stabilize, but the supply side weakens, reducing forecasts for many indicators in 2026-2027 (Goldman Sachs)
The Goldman Sachs report pointed out that China's real estate market prices and rents have continued to stabilize, but the supply-side weakness still exists.
The Goldman Sachs report pointed out that China's real estate market prices and rents have continued to stabilize, but the supply-side weakness still exists. The decline in first- and second-hand housing prices in June was basically the same as in May. First-line housing prices maintained positive month-on-month growth, and second-hand housing sales and rentals performed better than expected. Construction activities such as new starts, completions, and real estate investments continue to be sluggish. Based on market performance in the first half of the year, Goldman Sachs has lowered its forecasts for commercial housing sales, new construction starts, completions, real estate investment and other related indicators in 2026 and 2027. In 2026, sales area, new construction starts, completions, and real estate investment are expected to decline by 8%, 22%, 15%, and 15% year-on-year respectively. The market has expected a downturn in the real estate industry, but may have underestimated the extent of the continued weakness on the supply side and the decline in investment. One-sentence conclusion: China's real estate prices and rents have stabilized, but the supply side (new construction, investment) continues to be weak, the industry is still in the process of bottoming out, and investment opportunities are limited. Good/bad: Good for leading real estate companies with solid financial status (such as China Overseas Land and Resources, China Resources Land) and real estate service providers. It is negative for industries that are highly related to real estate construction, such as building materials and construction machinery. The market has fully anticipated the downturn in the real estate industry, but may not have adequately priced in the transmission impact of continued weakness on the supply side on the upstream and downstream sectors. Catalysts: 1) July real estate sales, new construction, and investment data; 2) the intensity of policy support such as the relaxation of purchase restrictions in first-tier cities; 3) solutions to the debt problems of real estate companies. One-sentence conclusion: Positions in the global commodity market hit a new high, but Brent crude oil has turned net short and we need to be vigilant. The decline in copper inventories points to improved demand in China, and precious metals are supported by central bank gold purchases. Good/bad: Good for copper, aluminum, precious metals, etc. Negative for crude oil-related assets. Optimism in commodity markets is high, but Brent turning net short could signal the risk of a short-term correction. Catalysts: 1) further changes in copper inventories; 2) evolution of Brent crude oil positions; 3) Chinese economic data validating improving demand trends.