Morgan Stanley expects that housing policies in mainland China may remain low-key in the coming months, and is optimistic about CHINA RES LAND and CHINA OVERSEAS, among others

Morgan Stanley published a research report stating that in December last year, the prices of second-hand homes in major cities in mainland China continued to decline month-on-month, but the rate of decline has slowed. During the same period, the year-on-year drop in sales also moderated; the bank believes that housing policies may remain low-key in the coming months, while the high volume of second-hand home listings may continue to suppress buyer sentiment, thereby putting pressure on home sales and prices.

Morgan Stanley reiterated its view, expecting that as residents' confidence further weakens, the downward trend in the physical real estate market will continue this year, but at a slower pace, with the expected year-on-year decline in second-hand home prices in the high single digits, compared to a 13.7% drop in 2025. If the macro environment remains resilient, housing prices in first-tier and major second-tier cities may stabilize in the second half of 2027.

Although Morgan Stanley maintains a cautious outlook on the recovery of the physical real estate market, it foresees further divergence in stock price performance between the overall industry and high-quality companies with reliable self-rescue capabilities this year. The bank is optimistic about the robust mall operator CHINA RES LAND (01109.HK) and New World Development (601155.SH), believing they will benefit from the emphasis on consumption in the 14th Five-Year Plan and the strong tailwind of REITs policies.

Morgan Stanley is also optimistic about Jianfa International Group (01908.HK) and CHINA OVERSEAS (00688.HK), as their optimized land reserves will support profits and drive a return to positive earnings growth