Morgan Stanley expects the downward trend in the mainland property market to continue into next year, with prices for new and second-hand homes expected to decline in the high single digits

Morgan Stanley's report indicates that mainland housing sales recorded a deep year-on-year decline last month, similar to October, with construction and real estate investment declines also exceeding expectations. The bank stated that although the policy stance may remain passive and cautious, sentiment in the residential market continues to deteriorate. It is expected that the downward trend in the physical market will continue into next year, but the pace of decline will slow, with expectations of high single-digit declines in primary sales and secondary housing prices, while new starts, completions, and real estate investment will see mid-double-digit declines. The bank's latest inventory analysis shows that if the macro environment remains stable and resilient, housing prices in first-tier and major second-tier cities may stabilize in the second half of 2027.

The bank maintains a constructive view on domestic property companies with reliable self-rescue capabilities, expecting these companies to generate positive Alpha next year to offset the negative Beta impact on the industry. The bank favors RunDi (01109.HK) and Seazen (601155.SH) as they, as stable commercial real estate operators, will benefit from the consumption-promoting measures of the 14th Five-Year Plan and the strong policy tailwinds for REITs. The bank is also optimistic about C&D INTL GROUP (01908.HK) and China Overseas (00688.HK) as consolidators in the residential market, with their optimized land reserves supporting a return to positive growth in margins and profits