CITIC Securities: Investors are advised to actively welcome the new real estate cycle and be optimistic about development companies and leading brokerage companies

The Zhitong Finance App learned that CITIC Securities released a research report saying that in recent months, rents in first-tier cities have risen month-on-month, and benefiting from policies and measures, more and more second-hand projects have reached a flat rate. The situation in first-tier cities is very similar to the situation in Hong Kong at the end of 2024. It is a strong sign that housing prices are bottoming out. The policy aims to reduce residents' burden of buying a home. Compared to renting, buying a house is becoming more and more cost-effective. On the premise of a month-on-month increase in rents in some cities, flat rent is an important sign that housing prices are bottoming out. The policy aims to reduce residents' burden of buying a home. Compared to renting, buying a house is becoming more and more cost-effective. Investors are advised to actively welcome the new real estate cycle and be optimistic about development companies and leading brokerage companies.

CITIC Securities's main views are as follows:

The flat rate of rent is an important indicator for measuring when housing prices are bottoming out.

The flat rent balance refers to the phenomenon where the monthly payment amount for buying a house is lower than the rent, which is an important support at the bottom of housing prices. According to Qipu data, the proportion of urban households renting in 2020 was 21.1%, of which 25.6% were in cities. Households that rent are potential buyers. Once the rent in rental consumption is higher than the monthly payment, it will push tenants to enter the home buying market, which in turn will drive a steady recovery in housing prices. Hong Kong achieved partial rent balance at the end of 2024, and housing prices entered a channel of stopping falling and recovering after March 2025.

The extension of the 828 mortgage term and the 929 financial interest rate discount further promoted the gradual transition of the entire market towards flat rent payments.

On August 28, the mortgage period was increased from 30 years to 40 years; on September 29, the central government, mainly, interest rates were discounted by 1 percentage point for first-time buyers to purchase small to medium sized low-priced houses. According to the statistics of the Iceberg Index, based on the total price of a house with a total price of 1.5 million yuan and a commercial loan amount of 1 million yuan, during the subsidy period, the ratio of monthly payments equivalent to rent gradually dropped from 125% to 106% before the September New Deal, and further dropped to 90% after September. Of course, this is a relatively ideal situation. Under a lower down payment ratio, or after subsidies have declined, it is still impossible to achieve a flat rent. Some large cities, where the return on rent is low, have yet to fully equalize rent.

First-tier cities, where rents tend to rise month-on-month, have achieved partial flat rent, and are very close to overall flat rent.

The premise that housing prices are bottoming out is that rents tend to rise month-on-month. “Securities Daily” quoted data from the Shell Research Institute. The month-on-month increase in residential rents in 50 cities increased in July. Among them, the average rent in Beishang and Shenzhen has been rising for 5 consecutive months. Currently, rental yields in Beishang Guangshen have reached 2.15%, 2.11%, 2.21%, and 1.97%, respectively, while the rental yield in 50 cities has reached 2.8%. According to this rental return calculation, the monthly rent ratio for commercial loans enjoying discounted interest rates (based on the total housing price of 1.5 million yuan and a loan of 1 million yuan) is 114%, 116%, 111%, and 124%, respectively. Overall, considering interest rates, Guangshen is already close to overall flat rent, and some real estate properties have achieved flat rent, which is close to what happened in Hong Kong at the end of 2024.

The supply-side contraction in August is already beginning to pay off, and it is expected that demand-side policies in September will further boost the market.

According to tracking, in September 2026, typical intermediary second-hand housing transactions in the 72 sample cities increased 18.9% year-on-year, higher than the 11.7%, 10.6%, and 14.1% year-on-year increases in June, July, and August. The same data that has been tracked since 929 shows that the single-day turnover on September 30 and October 1 was 31.7% and 37.4%, respectively, and the market is showing a further active trend.

Risk factors:

Although many small and medium-sized cities have already achieved flat rent coverage, there is still a downward trend in rents, which is not necessarily a sign that housing prices are bottoming out; after all, interest rates are limited in scope; houses outside the scope of interest rate discounts are still a certain distance away from flat rent; there is a risk that developers' short-term performance will decline.