Morgan Stanley published a research report indicating that in the first ten months, the national Real Estate sales volume fell by 15.8% year-on-year, and sales value decreased by 20.9%. It is believed that the decline in the fourth quarter will significantly narrow to a year-on-year decrease of 3.5% and 3%. Looking ahead, the domestic property market is expected to hit bottom next year; the Real Estate Industry may still face challenges, but with the support of fiscal policy, the performance in first-tier cities may be stronger, leading to a more moderate national decline.

The bank forecasts that next year, the national first-hand housing sales volume may decline by 11%, and sales value will drop by 12%, while the second-hand housing sales volume is expected to increase by 8% to 10%. Looking ahead, Morgan Stanley believes that the Central Political Bureau has unprecedentedly changed the tone for stabilizing the Real Estate market, along with indicating a more aggressive stance on monetary and fiscal policies. It is believed that regulators will launch fiscally supported incremental easing policies next year, including the purchase of a larger volume of existing homes, urban village redevelopment, a more broadly covered whitelist mechanism, and idle land repurchase measures.

However, Morgan Stanley believes that developers will continue to focus on delivery, deleveraging, and debt repayment, remaining in a struggle for survival in the coming year. Liquidity risk may be alleviated, and state-owned property enterprises that have acquired quality land reserves over the past two years are expected to see their presale profit margins rebound in the second half of next year.

Morgan Stanley continues to prefer defensive state-owned developers, including CHINA RES LAND (01109.HK), China Resources Vientiane (01209.HK), Greentown (03900.HK), China Overseas (00688.HK), and Yuexiu (00123.HK), all given a 'Shareholding' rating.