Executive Summary
The latest data from China’s 70-city survey paints a nuanced picture of the property market at the start of 2026.
– New home prices rose month-on-month in only five cities in January, with Dalian recording the highest increase at 0.2%, surpassing Shanghai which saw flat growth.
– The secondary housing market showed marginal improvement, with price declines narrowing after four consecutive months of universal drops, though year-on-year falls deepened.
– Analysts interpret the data as evidence of a market still in a bottoming phase, with localized resilience in cities like Dalian offering early signs of potential stabilization.
– Policy support remains crucial, with experts calling for further monetary easing, such as interest rate cuts or mortgage subsidies, to foster a sustainable recovery.
– The rental market presents a contrasting bright spot, with premium listings driving up average rents in key cities like Beijing, Shanghai, and Shenzhen.
A Tentative Thaw in a Chilled Market
The release of January’s housing price data by the National Bureau of Statistics has provided the first significant reading of 2026 for China’s vast real estate sector. For global investors and domestic market participants alike, the figures offer a critical barometer of whether the prolonged downturn is finding a floor. The headline takeaway is that new home prices rose in five cities during the month, a modest but notable shift from the pervasive declines that have characterized recent years. This development, particularly with Dalian’s outperformance, introduces a sliver of optimism into a narrative long dominated by caution. However, the broader context remains one of consolidation, as year-on-year price drops accelerated across all city tiers, underscoring that the market’s foundation is still being tested. The path to recovery is not linear, and this data point underscores the complex, localized nature of the current adjustment phase.
New Home Prices Rise in Five Cities: A Detailed Breakdown
The most encouraging data point from January is the month-on-month increase in new home prices across five of the 70 large and medium-sized cities surveyed. This marks a stabilization from previous months where increases were even rarer.
The Leading Contenders: Dalian, Hefei, Xiamen, Wuhan, and Nanchong
The five cities that recorded positive momentum are Dalian, Hefei, Xiamen, Wuhan, and Nanchong. Among them, Dalian stood out with a 0.2% increase, leading the nation. This is significant as it displaces Shanghai, which had often been at the forefront of price resilience but saw its prices remain unchanged from December. The performance of these cities suggests that pockets of demand are responding to adjusted price levels and local economic fundamentals. Yan Yuejin (严跃进), Vice President of the E-house China Research and Development Institute, noted, “These cities have shown higher cost-effectiveness after price adjustments, with some quality properties demonstrating positive rebounds in value.” He specifically highlighted Dalian’s case: “Having undergone a deep adjustment, Dalian has a solid industrial foundation and a clear logic for the integration of people, industry, and the city, providing a basis for stabilization and rebound.”
Tiered City Performance: Diverging Trajectories
A closer look at city tiers reveals a mixed landscape. Second-tier cities, which include several of the gainers, saw their new home prices decline by 0.3% month-on-month, but this was an improvement, with the rate of decline narrowing by 0.1 percentage point from December. First-tier and third-tier cities recorded declines of 0.3% and 0.4%, respectively, with the pace of decrease unchanged from the previous month. This indicates that while the downward pressure persists universally, the momentum of the decline may be easing in some segments, particularly the second-tier cities where the new home prices rise in five cities occurred.The Secondary Market: From Universal Decline to Selective Stabilization
The secondary housing market, often a more immediate reflection of homeowner sentiment and liquidity, showed its first sign of relief in months.
End of a Four-Month Streak
In January, the 70-city secondary market price index ended a four-month streak where every city posted a month-on-month decline. Two cities managed to eke out gains: Yangzhou saw a 0.4% increase, and Zhanjiang rose by 0.3%. While only two cities, this break in the pattern is psychologically important. The month-on-month decline rates also narrowed across all tiers: first-tier cities fell by 0.5% (narrowing by 0.4 percentage points), second-tier by 0.5% (narrowing by 0.2 percentage points), and third-tier by 0.6% (narrowing by 0.1 percentage point). This suggests the aggressive price cuts that dominated late 2025 may be abating as sellers and buyers find a new equilibrium.
The Persistent Year-on-Year Drag
However, the longer-term picture remains sobering. Compared to January 2025, secondary market prices fell sharply: down 7.6% in first-tier cities (with the decline rate widening by 0.6 percentage points), 6.2% in second-tier cities (widening by 0.2 percentage points), and 6.1% in third-tier cities (widening by 0.1 percentage point). This widening of year-on-year declines, even as monthly declines narrow, points to a market where the price base is still resetting. As noted in a recent report by China Post Securities, the marginal improvement in transaction volume at the start of 2026 releases a signal of阶段性修复 (stage性修复, phased repair), but the expanding同比降幅 (year-on-year decline) means the price system has not yet completed its adjustment and clearance. The narrowing环比降幅 (month-on-month decline) is closer to a slowdown in the rate of descent rather than a修复 of the price中枢 (price center), indicating prices have not yet returned to reasonable levels.
Dalian’s Surprise Ascent: Unpacking the Local Dynamics
The fact that Dalian led the new home prices rise in five cities warrants deeper examination. Its outperformance provides a case study in localized market resilience.
Beyond the Data: Dalian’s Underlying Strengths
Dalian, a major port and industrial hub in Liaoning province, has not been immune to the national downturn. However, analysts point to several factors that may be contributing to its current stability. Its economy has a diversified industrial base spanning shipping, manufacturing, and technology, which provides underlying employment and income support. The city has also undergone a significant price correction in recent years, making entry points more attractive for both end-users and investors. The local government’s focus on “人产城”融合 (integration of people, industry, and city) has aimed to create more sustainable urban development, potentially boosting long-term confidence. This combination of adjusted valuations and solid fundamentals is creating a floor that is now manifesting in the price data.
Shanghai’s Pause: A Benchmark for Core Markets
Shanghai’s flat performance in January, after periods of leading gains, is equally telling. A head analyst at a top-tier securities firm told Caijing that price stabilization in first-tier and core second-tier cities like Shanghai is more indicative for national trends. In a policy environment that is already quite comprehensive, the后续 (follow-up) move could involve advancing monetary policies like降息 (interest rate cuts) or房贷贴息 (mortgage interest subsidies) to promote market回暖 (recovery). Shanghai’s pause may reflect a period of digestion after previous support measures and a wait-and-see attitude among buyers, highlighting that even the strongest markets are not yet on a firm upward trajectory.The Broader Canvas: A Market Still in Search of a Bottom
While the new home prices rise in five cities and the secondary market’s improved monthly data are positive, overarching indicators confirm the market remains in a bottoming process.
Year-on-Year Declines Widen Across the Board
For new homes, the同比 (year-on-year) price declines intensified in January. First-tier cities saw prices drop 2.1% year-on-year (widening by 0.4 percentage points), second-tier cities fell 2.9% (widening by 0.4 percentage points), and third-tier cities declined 3.9% (widening by 0.2 percentage points). This universal widening of annual declines is a stark reminder that the market is still working through the overhang from previous highs. The current monthly stabilizations are occurring at a significantly lower price plateau than a year ago.
Expert Interpretation: Cautious Optimism for Q1
Industry experts are interpreting the data with cautious optimism. Li Yujia (李宇嘉), Chief Researcher at the Guangdong Housing Policy Research Center, believes that the start of 2026 has ushered in a good beginning of探底和企稳 (bottoming and stabilization) for the property market, a situation that may extend into March and April. However, he cautions that there is still room for improvement in market supply and demand dynamics, resident expectations, the home replacement chain, and the broader economic基本面 (fundamentals). The marginal improvements are fragile and require sustained supportive tailwinds.
Policy Crossroads: What’s Next for Market Support?
The current data presents a dilemma for policymakers: acknowledge the green shoots or reinforce support to ensure they grow.
The Existing Toolkit and Its Limits
China’s property policy framework has seen substantial easing over the past two years, including relaxed purchase restrictions, lower down payment requirements, and support for project financing. These measures have prevented a systemic crisis but have yet to catalyze a broad-based demand recovery. The differentiation in city performance—exemplified by the new home prices rise in five cities—suggests that blanket national policies may need to be complemented with more targeted local interventions. Cities like Dalian that show intrinsic strength might require less direct support, whereas others may need additional stimulus.Potential Levers: Monetary Policy and Inventory Absorption
The analyst community is increasingly focusing on monetary policy as the next potential lever. Further reductions in the Loan Prime Rate (LPR) or targeted subsidies for first-time homebuyers’ mortgage rates could reduce the carrying cost of homeownership and stimulate demand. Another critical area is accelerating the absorption of existing housing inventory, particularly in lower-tier cities, through mechanisms like government-led purchases for affordable housing. The success of such measures will be key to transforming the current bottoming phase into a genuine recovery.
The Rental Market: An Unexpected Bright Spot
Amid the nuanced picture for sales, the rental market is displaying its own dynamic trends, offering a different perspective on housing demand.
The “Rent Instead of Sell” Phenomenon
According to the latest report from CRIC Research, while overall rents remain on a downward trend, a notable shift is occurring. Some owners of secondary market properties are opting to “以租代售” (rent instead of sell), upgrading and renovating their units before listing them for lease. This influx of higher-quality rental stock, coupled with rising demand for improved rental accommodations, is structurally pulling up the average rent. In January, the average rent across 55 key cities monitored by CRIC rose by 0.5% month-on-month.
Premium Segments Driving Averages
This trend is most visible in major metropolises. Shenzhen, Shanghai, and Beijing saw both month-on-month and year-on-year increases in average rents, leading the nation with monthly rents of RMB 7,400, RMB 6,300, and RMB 5,900, respectively. This indicates that while the for-sale market grapples with price discovery, the premium segment of the rental market is benefiting from upgraded supply and sustained demand from a mobile professional class. It also reflects a pragmatic adaptation by asset owners in a softer sales environment.
Synthesizing the Signals for a Forward-Looking Strategy
The January housing data delivers a message of cautious, localized hope within a overarching narrative of correction. The new home prices rise in five cities, led by Dalian, and the narrowing declines in the secondary market are early indicators that the most intense phase of price depreciation may be moderating. However, the deepening year-on-year falls across the board are a powerful counter-narrative, reminding investors that the market’s valuation reset is ongoing. For institutional investors and corporate executives, the key takeaway is the increasing importance of granular, city-specific analysis. National aggregates mask significant divergence; opportunities and risks are becoming highly localized. The performance of Dalian versus Shanghai underscores that factors like industrial depth, previous adjustment magnitude, and local policy agility are critical differentiators. Looking ahead, the market’s trajectory in the first quarter of 2026 will hinge on the interplay between nascent stabilizing forces, the depth of consumer confidence, and the potential for further, targeted policy support. Market participants should monitor transaction volumes in the coming months as a more reliable indicator of demand strength than price alone, while also watching for policy signals from key meetings. The bottoming process is underway, but its completion and the turn to a new cycle will require patience and precision.