CITIC SEC: Investors are advised to actively embrace the new cycle of real estate, bullish on development companies and leading brokerage firms.

CITIC SEC released a research report stating that in recent months, rents in first-tier cities have risen month-on-month, and benefiting from policy measures, an increasing number of second-hand projects have achieved "mortgage payments equal to or lower than rent." This situation in first-tier cities is very similar to the situation in Hong Kong at the end of 2024, and is a strong signal that housing prices have bottomed out. Policy is committed to reducing residents' home-buying burden, making buying a home increasingly cost-effective relative to renting. Assuming that rents in some cities rise month-on-month, "mortgage payments equal to or lower than rent" is an important signal that housing prices have bottomed out. Policy is committed to reducing residents' home-buying burden, making buying a home increasingly cost-effective relative to renting. Investors are advised to actively embrace the new cycle of real estate, and bullish on development companies and leading brokerage firms. CITIC SEC's main views are as follows: "Mortgage payments equal to or lower than rent" is an important indicator for measuring whether housing prices have bottomed out. "Mortgage payments equal to or lower than rent" refers to the phenomenon in which the monthly mortgage payment for buying a home is lower than the rent, and it is an important support at the bottom of housing prices. According to the Seventh National Population Census data, in 2020, renting households accounted for 21.1% of urban households, with the proportion in cities at 25.6%. Families living in rented housing are potential homebuyers. Once rent in rental consumption is higher than the monthly mortgage payment, it will push renters into the home-buying market, thereby promoting the stabilization and recovery of housing prices. Hong Kong achieved partial "mortgage payments equal to or lower than rent" at the end of 2024, and after March 2025, housing prices entered a channel of stopping the decline and rebounding. The 828 extension of mortgage terms and the 929 fiscal interest subsidy further push the entire market gradually toward "mortgage payments equal to or lower than rent." On August 28, mortgage terms were extended from 30 years to 40 years; on September 29, with central government finances as the main source, a one-percentage-point interest subsidy was provided for first-time homebuyers purchasing small- and medium-sized homes with low total prices. According to statistics from the Iceberg Index, based on a home 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 mortgage payments to rent gradually declined from 125% to 106% before the September new policy, and further declined to 90% after September. Of course, this is a relatively ideal situation. Under a lower down payment ratio, or after the subsidy is phased out, it may still be impossible to achieve "mortgage payments equal to or lower than rent." Some large cities with relatively low rental yields have not yet fully achieved "mortgage payments equal to or lower than rent." In first-tier cities where rents tend to rise month-on-month, "mortgage payments equal to or lower than rent" has been partially achieved, and is very close to being achieved on an overall basis. The premise that "mortgage payments equal to or lower than rent" signals that housing prices have bottomed out is that rents tend to rise month-on-month. Securities Daily, citing data from the Beike Research Institute, reported that in July, the month-on-month increase in residential rents in 50 cities expanded somewhat, among which average rents in Beijing, Shanghai, and Shenzhen had risen month-on-month for five consecutive months. At present, rental yields in Beijing, Shanghai, Guangzhou, and Shenzhen have reached 2.15%, 2.11%, 2.21%, and 1.97%, respectively, while rental yields in the 50 cities reached 2.8%. Based on this rental yield calculation, for subsidized commercial loans (calculated on a total home price of 1.5 million yuan and a loan of 1 million yuan), the monthly mortgage payment-to-rent ratios are 114%, 116%, 111%, and 124%, respectively. Overall, considering the interest subsidy, Beijing, Shanghai, Guangzhou, and Shenzhen are already close to achieving "mortgage payments equal to or lower than rent" on an overall basis, and some individual projects have achieved it, approaching the situation that appeared in Hong Kong at the end of 2024. The supply-side contraction in August has begun to show results, and demand-side policy in September is expected to further boost the market. According to tracking, in September 2026, second-hand home transactions by typical intermediaries in 72 sample cities increased by 18.9% year-on-year, higher than the year-on-year growth of 11.7%, 10.6%, and 14.1% in June, July, and August. Since 929, data from the same sample tracked show that single-day transaction volumes on September 30 and October 1 increased by 31.7% and 37.4% year-on-year, respectively, indicating that the market is trending further toward greater activity. Risk factors: Although many small and medium-sized cities have already achieved "mortgage payments equal to or lower than rent," rents still show a downward trend, and this may not necessarily be a signal that housing prices have bottomed out; after all, interest subsidies have scope limitations, and homes outside the scope of subsidies are still some distance from achieving "mortgage payments equal to or lower than rent"; the risk of short-term performance decline for developers.