Many analysts are highlighting the "green shoots" trade, i.e., calling for the end of falling new property sales and a stabilization of new housing prices in 2026 ... with a corresponding pickup in headline growth.

Unfortunately this is not the way things really work, in that housing sales do not directly impact GDP and growth. What matters for macro, rather, is the impact of property markets on (i) construction activity and (ii) broader sentiment and consumer demand. And here things are much less rosy.

For starters, what arguably drives consumer sentiment is the behavior of prices in the secondary housing market - where prices are still falling at a rapid clip, with no turnaround in sight.

More important still, construction activity in China is also contracting at a double-digit pace, with a two- to three-year lag to primary sales. I.e., even if new sales stabilize today it will still be a long time before this big negative drag on GDP is removed.

As a final note, China has also not yet even begun to clean up developers. For the past four years the focus has been on propping up "zombie" firms while they complete their backlog of pre-sold obligations, and there is still no clear or coherent strategy on how to restructure the sector. Until this happens, it's unlikely that primary demand will recover in any meaningful way.