Broker: UOB Kay Hian
Date of Report: August 6, 2025
China and Hong Kong Property Markets 2025: SOE Consolidation, Policy Shifts, and Key Investment Picks
Strategic Overview: Policy Shifts and SOE Opportunities Shape Property Markets
The property sectors in China and Hong Kong are undergoing significant changes in 2025, shaped by government policies, market consolidation toward state-owned enterprises (SOEs), and evolving investor sentiment. This comprehensive analysis examines the critical developments, transaction data, and strategic recommendations for investors navigating these markets.
Key Takeaways and Recent Developments
- SOE Consolidation: CR Land acquired two prime residential projects in Shanghai for RMB 24.5 billion, signaling increased SOE activity as local government financing vehicles (LGFVs) divest assets under tighter regulatory scrutiny.
- Policy Focus: The July 30th Politburo meeting emphasized strict control over hidden government debt and high-quality urban renewal, with further proactive fiscal and moderately accommodative monetary measures anticipated in the second half of 2025.
- Hong Kong Destocking: The Hong Kong market is progressing in destocking, with potential policy changes under discussion to ease capital transfers for mainland talents, which could meaningfully boost property demand.
China Property Market: Market Weight Maintained Amid SOE-Led Consolidation
Policy Backdrop and Impact on Developers
The Politburo’s July 2025 meeting reinforced prudent real estate policies, emphasizing the management of hidden government debt, especially among LGFVs. The Ministry of Finance recently disclosed six notable cases of violations, including over RMB 60 billion in hidden debt in Xiamen and Chengdu urban renewal projects. This regulatory tightening is prompting LGFVs to divest real estate assets, creating acquisition opportunities for SOE developers.
CR Land’s Strategic Shanghai Acquisition
On August 1, CR Land, in partnership with Nanfang Group (90-10 JV), announced the acquisition of two central Shanghai projects: Pudong Yaohualu Residential Site and Huangpu Yuqingli Historical Protection Mixed-Use Site, for a combined HK\$24.5 billion. These projects, located in the core districts of Pudong Qiantan and Huangpu, are expected to generate approximately RMB 40 billion in contracted sales—representing 15% of CR Land’s total sales in 2024. The projects are anticipated to contribute positively to CR Land’s profits post-2026.
| Project |
GFA (sqm) |
Plot Ratio |
Total Cost (RMBm) |
Avg. Cost (RMB/sqm) |
Estimated Sales (RMBm) |
| Yaohua |
248,100 |
2.9/3.96 |
17,541 |
70,702 |
32,253 |
| Yuqingli |
39,400 (Res), 13,200 (O), 21,997 (R), 7,428 (G), 400 (Others) |
1.4-6.44 |
6,929 |
84,062 |
7,880 |
Sector Implications: Wave of M&A and SOE Market Share Gains
As more LGFVs offload real estate projects, SOEs are positioned to become the main acquirers, accelerating sector consolidation. UOB Kay Hian reiterates a preference for SOE developers, with CR Land as the top pick.
Transaction Data: Weakness in Tier 1 and 2 Cities
- In July 2025, the average daily sales volume of new homes (by GFA) in 28 monitored cities fell by 22% month-on-month and 8.2% year-on-year.
- Tier 1/2/3 cities saw daily sales declines of 29.2%/21.6%/32.5% MoM, and -26.5%/-13.6%/+12.6% YoY, respectively, with sharpest drops in Beijing, Shanghai, Shenzhen, Suzhou, Chengdu, and Foshan.
| City |
Jul 24 (000 sqm) |
Jun 25 (000 sqm) |
Jul 25 (000 sqm) |
Jul 25 YoY (%) |
Jul 25 MoM (%) |
| Beijing |
480 |
544 |
366 |
-24% |
-33% |
| Shanghai |
1,064 |
1,086 |
781 |
-27% |
-23% |
| Guangzhou |
613 |
809 |
519 |
-15% |
-36% |
| Shenzhen |
327 |
218 |
160 |
-51% |
-26% |
Secondary Market and Price Trends
- Second-hand home transactions in July 2025 dropped by 8% month-on-month and 8.4% year-on-year in three Tier 1 and nine Tier 2 cities.
- The average secondary home price across 100 cities was RMB 13,585/sqm, down 0.8% MoM and 7.3% YoY. Tier 1 city prices dropped 0.6% MoM, with Tier 2 and Tier 3/4 city prices also declining.
Hong Kong Property Market: Overweight with Positive Destocking and Policy Catalysts
Destocking Progress and Market Indicators
- The Centaline City Leading (CCL) Index rose 0.9% year-to-date, reaching 138.84 (+0.8% WoW), fully recovering 2025 losses and marking the largest increase in 17 weeks.
- The Centaline Valuation Index (CVI), gauging banks’ property price expectations, stands at 62.59, remaining above the neutral 40-point threshold for 11 consecutive weeks.
- 1M HIBOR hovers at 0.94% in August 2025. While a further rise is anticipated in 2H25, the average rate is expected to be lower than in 1H25, supporting investor sentiment.
Policy Outlook: Easing Capital Transfers to Boost Demand
Financial Secretary Paul Chan is working with central authorities to explore relaxing capital transfer restrictions between China and Hong Kong. This initiative targets facilitating property investment by mainland talents, with the following anticipated impact:
- Most applicants under major talent schemes (ASMTP, IANG, TTTS) are from mainland China. In 2023/24, over 95,000/91,000 visas were issued under these programs.
- If just 5% of these new arrivals purchase Hong Kong property, this could generate about 4,700 transactions—9% of all primary and secondary market deals in 2024.
- Rising rental yields and expanded capital channels could significantly strengthen residential demand, making this a critical focus for the October 2025 Policy Address.
Investment Recommendations: Sector Ratings and Stock Picks
- China Property: Maintain MARKET WEIGHT. The cautious policy stance and high-quality urban renewal focus reduce the likelihood of strong demand-side stimulus, but SOE M&A activity and improved supply-side measures (e.g., special bonds for local government land buybacks) support the sector. CR Land is the top pick.
- Hong Kong Property: Maintain OVERWEIGHT. Despite possible weak margins for development properties in the upcoming earnings season, the prospect of relaxed capital transfer policies is a significant catalyst. SHKP remains the preferred choice.
Sector Picks and Target Prices
| Company |
Ticker |
Rating |
Share Price (HK\$) |
Target Price (HK\$) |
| CR Land |
1109 HK |
BUY |
28.96 |
32.42 |
| Sun Hung Kai Properties (SHKP) |
16 HK |
BUY |
92.85 |
103.14 |
Peer Comparison Table
| Company |
Ticker |
Rec |
Share Price (HK\$) |
Target Price (HK\$) |
Upside (%) |
Market Cap (HK\$ m) |
PE 2026F |
PE 2027F |
P/B 2026F |
P/B 2027F |
Yield 2026F (%) |
Yield 2027F (%) |
| China Resources Land |
1109 HK |
BUY |
28.96 |
32.42 |
11.9 |
206,512.0 |
7.4 |
7.0 |
0.6 |
0.5 |
5.0 |
5.3 |
| Sunac China Holdings |
1918 HK |
SELL |
1.52 |
1.06 |
-30.3 |
17,434.2 |
nm |
nm |
0.4 |
0.0 |
0.0 |
0.0 |
| China Overseas Land |
688 HK |
BUY |
13.41 |
16.67 |
24.3 |
146,770.9 |
7.9 |
7.3 |
0.3 |
0.3 |
4.7 |
5.1 |
| Longfor Properties |
960 HK |
BUY |
9.89 |
11.18 |
13.0 |
69,103.2 |
18.9 |
11.7 |
0.4 |
0.4 |
1.7 |
2.7 |
| New World Development |
17 HK |
HOLD |
6.47 |
4.03 |
-37.7 |
16,282.6 |
12.6 |
7.5 |
0.1 |
0.1 |
0.0 |
0.0 |
| Sun Hung Kai Properties |
16 HK |
BUY |
92.85 |
103.14 |
11.1 |
269,058.9 |
10.6 |
9.6 |
0.4 |
0.4 |
4.2 |
5.2 |
| Kerry Properties |
683 HK |
BUY |
21.14 |
22.70 |
7.4 |
30,680.6 |
10.8 |
6.6 |
0.3 |
0.3 |
6.4 |
6.4 |
Conclusion: Outlook for 2025
The Chinese property sector is set for further SOE-led consolidation as LGFVs divest assets, with CR Land seen as a prime beneficiary. While transaction volumes and prices remain under pressure in Tier 1 and 2 cities, new policy support and SOE activity should stabilize the market. In Hong Kong, continued destocking and the prospect of eased capital transfer restrictions for mainland talents are poised to drive demand. Investors should watch for policy updates and earnings releases, with CR Land and Sun Hung Kai Properties standing out as the top picks for exposure to these evolving markets.
