Huatai Securities: The bottom of the real estate market is gradually becoming clearer. Focus on investment opportunities in quality property developers and property management companies.

Huatai Securities pointed out that after the holiday, new home transactions declined year-on-year, but the second-hand housing market welcomed the strongest “small spring” in three years, with overall home prices stabilizing before the holiday, and first-tier cities performing relatively robustly. Leading indicators show that the demand for second-hand homes remains high, the mentality of homeowners listing their properties has stabilized, but the negotiation rates between buyers and sellers have widened, and price expectations will take time to recover. The effectiveness of targeted real estate support policies has been verified, the proportion of transactions for small units has significantly increased, prices are expected to find a bottom first, while also breaking the first link of the exchange chain, accumulating momentum for stabilizing the real estate market. Currently, the bottom of the real estate market is gradually becoming clearer, and there are investment opportunities in quality real estate companies and property management firms.

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Huatai | Real Estate: How is this year’s “small spring” different from previous years?

After the holiday, new home transactions declined year-on-year, but the second-hand housing market welcomed the strongest “small spring” in three years, with overall home prices stabilizing before the holiday, and first-tier cities performing relatively robustly. Leading indicators show that the demand for second-hand homes remains high, the mentality of homeowners listing their properties has stabilized, but the negotiation rates between buyers and sellers have widened, and price expectations will take time to recover. The effectiveness of targeted real estate support policies has been verified, the proportion of transactions for small units has significantly increased, prices are expected to find a bottom first, while also breaking the first link of the exchange chain, accumulating momentum for stabilizing the real estate market. Currently, the bottom of the real estate market is gradually becoming clearer, and there are investment opportunities in quality real estate companies and property management firms.

Core Views

Transaction volume and prices: The “small spring” in second-hand homes contrasts with the heat in new homes, with prices stabilizing.

After the holiday, new home online signing area decreased by 8.8% year-on-year. The transaction volume of second-hand homes is the most impressive indicator of this “small spring.” In the month since the Spring Festival, the online signing area transaction volume in 22 cities reached a new high for 2023, with the number of second-hand home transactions in 26 cities post-holiday seeing a year-on-year growth rate of 22%. Home prices stabilized before the holiday, slightly loosened since March, with first-tier cities relatively strong. Since December 28, 2025, the Iceberg Index for 84 cities has seen the week-on-week decline begin to narrow, entering March the index has loosened slightly, but the week-on-week drop remains within 0.2%. As of March 22, the month-on-month change for the Iceberg Index in 84 cities was -0.5%, with first-tier/second-tier/third and fourth-tier cities at -0.3%/-0.6%/-0.4%, respectively.

Leading indicators: The sustainability of transaction volume heat has certain support, while price expectations remain volatile.

1. The number of listings has seasonally increased, but the growth rate is slower than last year, reflecting a stabilization in homeowner mentality: As of March 21, the number of listings in 49 key cities increased by only 1.0% compared to the Spring Festival, and homeowners did not accelerate listing due to increased transactions (especially in first-tier cities); 2. The number of viewings increased and then stabilized, attention is needed on the impact of declining viewings on future transactions: As of March 22, the last week saw a year-on-year decline of 2.0%. The cumulative year-on-year change in viewings over the four weeks after the holiday was -2.6%; 3. The negotiation rate reflects a significant gap in price expectations between buyers and sellers. By the end of February 2026, the negotiation rate has widened to 10.8%, up 0.5 percentage points from January, although it has narrowed in first-tier cities. The overall price expectation gap between buyers and sellers has not narrowed due to the increased transaction heat, indicating that market trading logic still relies on cost-effectiveness, and the increased transaction volume will take time to transmit to price expectations.

Characteristics of the small spring: Cities with policy support show impressive growth, with small units as the main force.

1. Policy-driven cities represented by Shanghai performed well, while weaker second-tier and below cities showed even stronger growth: The “Shanghai Seven” as the most powerful policy in this round for first-tier cities has received effective market feedback. The online signing area in Shanghai after the holiday increased by 17.4% year-on-year, and the Iceberg Index (as of March 22) only saw a decline of 0.04% compared to before the new policy, with both volume and price performance better than other first-tier cities. In addition, cities like Quzhou and Lhasa, which are weaker second-tier and below, welcomed high growth, which we believe is due to lower de-stocking pressure and a stronger sensitivity to subsidy-type policies; 2. Small units are the main force in this round of transactions, and their increasing proportion forms a commonality among cities, which we believe is due to the following reasons: 1) Ongoing adjustments in housing prices highlight the cost-effectiveness of small units; 2) Policies like public housing funds release rigid and improving purchasing power; 3) The relaxation of purchasing restrictions in key cities is more favorable for small unit buyers.

Investment Conclusion

In the absence of unexpected policy support, the post-holiday heat in second-hand homes reflects a gradually clearer market bottom. We believe quality real estate companies and supporting service providers in core cities will face long-term development opportunities. Key recommendations: 1. Real estate stocks with “good credit, good cities, and good products”; 2. Real estate companies that manage cash flow lifelines through operational capability during market adjustments; 3. Hong Kong local real estate companies benefiting from the recovery of the Hong Kong market; 4. Property management companies benefiting from stable cash flow and possessing dividend advantages.

Risk Warning: Fluctuations in real estate policy, slower than expected recovery of the real estate market, and operational risks for some real estate companies.

(Source: Yicai)