Highlights

• Shanghai's 15th Five-Year Plan targets to cut new supply of residential units and step up efforts in commercial facilities upgrading. This may become a recurring trend over the next five years in higher tier cities.
   

• We expect pre-sale reforms to further cool the land market, following an 18.4% yoy decline in land sales across 300 in 8M26. Sales remained divergent: new-home sales in 19 major cities fell 3% yoy in Aug 26 but rose 3% yoy in 1-6 September, led by Tier 1 cities (+12% and +39%, respectively).
   

• Maintain UNDERWEIGHT. Our top pick is COLI.
  
   

Analysis

• Shanghai published its 15th Five-Year Plan for urban renewal and housing development on 3 September, cutting new supply of residential units and stepping up efforts to upgrade commercial facilities. The table below summarises the key targets. Over 2026-30, Shanghai plans to reduce new residential housing supply by 33-40% and new residential land supply by 21-38%, while targets for commercial properties upgrading increase 56% and the target for retrofit activity increases by 92%. Specifically, the commercial property upgrading will primarily driven by a) expansion of usage; b) repositioning of underperforming buildings; c) tenant remixing and upgrading; d) data monitoring; and e) focusing on key areas (Lujiazui, Hongqiao, Caohejing and Wujiaochang). Indicated by Shanghai’s plan, we expect tighter residential supply and the upgrading of commercial properties to become defining trends over the next five years in higher tier cities.