New home sales in 50 key Chinese cities totaled approximately 82.99 million square meters during the January-July 2026 period, a year-on-year decline of 10.9%, according to a real estate research firm. The overall market continues to bottom out, but a significant structural shift is underway beneath the surface.

Breaking down sales by floor area reveals a clear three-year trend: the proportion of budget-oriented buyers is shrinking, while that of upgrade buyers is rising. The 110-130 sqm segment remains the largest single category, holding a steady 25%-26% share, which reached 26.3% in 2026. The 150 sqm and above category saw the fastest growth, jumping from 11.6% to 13.7%, a 2.1-percentage-point increase over two years. Overall, the share of homes larger than 110 sqm has risen from 52.3% in 2024 to 57.4% in 2026, a cumulative gain of 5.1 percentage points. Conversely, the share of small apartments (under 90 sqm) fell from 21.5% to 18.6%, and the 90-110 sqm segment dropped from 26.2% to 24.1%, a combined decline of roughly 5.1 percentage points, mirroring the rise in larger units. The "foundation" of budget housing is clearly narrowing.

The rise in large-unit share is driven by two factors: a genuine shift in buyer preference toward larger homes, and a passive increase due to deeper sales declines in smaller units. In absolute terms, total new home sales in the 50 cities fell from 867,000 units in 2024 to 678,000 units in the first seven months of 2026, a 21.8% drop. The steepest decline was in units under 90 sqm, which fell by 34.4% to 126,000 units. The 90-110 sqm segment dropped 29.0% to 163,000 units. In contrast, the 150 sqm and above category declined only 6.4% to 93,000 units, the smallest decrease. The 130-150 sqm segment fell 11.9% to 118,000 units, and the 110-130 sqm segment dropped 16.1% to 178,000 units.

This data shows that budget-oriented units are declining much faster than upgrade units, which is a key reason for the rising share of larger homes. However, the minimal absolute decline in units over 150 sqm also reflects the resilience of high-end upgrade demand. During the market downturn, budget buyers, affected by lower income expectations and increased job market pressure, have seen a more pronounced contraction in their willingness and ability to buy homes. In contrast, upgrade buyers, who often have stronger financial resources and more stable income expectations, retain a stronger need for home replacement and upgrades, supported by policy measures.

The structural shift is also evident in pricing. From 2024 to 2026, price trends for different floor-area segments have diverged significantly. The average price for units under 90 sqm edged down slightly from 18,189 yuan per sqm to 18,062 yuan per sqm, remaining largely flat. The 110-130 sqm segment saw its average price increase 4.1% to 18,670 yuan per sqm. The 150 sqm and above category rose 2.4% to 33,647 yuan per sqm. The 90-110 sqm segment was the worst performer, with its average price falling 6.6% to 18,449 yuan per sqm, dragged down by weakening budget buyer purchasing power. The 130-150 sqm segment, an intermediate upgrade category, also faced significant pressure from price cuts to boost sales, despite some support from replacement demand, due to high product homogeneity and heavy supply concentration in second-tier cities (accounting for about 65% of the total).

In terms of price premiums, units of 150 sqm and above command a clear lead, with an average price more than 80% higher than units under 90 sqm. This premium is most pronounced in first and second-tier cities, where it is more than double. Upgrade and large-unit products are becoming the primary vehicle for developers to establish "quality pricing power." This trend aligns closely with the "good housing" policy direction: as budget demand shrinks and replacement demand becomes the main driver, developers are increasingly focusing product strength, floor-area efficiency, fit-out standards, and community services on larger units, thereby widening the price gap.

First-tier cities show a "stepwise upgrade" pattern, while second and third/fourth-tier cities lean toward a "one-step" or "final upgrade" approach. However, the upgrade momentum in second-tier cities is far stronger than in third and fourth-tier cities. In first-tier cities, high housing prices constrain the market, leading to a stepwise replacement upgrade pattern. The share of units over 110 sqm in new home sales is only 40.5%, far lower than in second-tier (61.4%) and third/fourth-tier cities (58.8%). Units under 90 sqm account for 30.6%, and the 90-110 sqm segment accounts for 28.9%, together dominating the market at 59.5%. This structure is tied to the high prices and high population density of first-tier cities. However, the upgrade trend is accelerating. The share of units over 110 sqm in first-tier cities has risen by 6.0 percentage points over two years, with the increase coming almost entirely from the 110-130 sqm and 130-150 sqm segments. The 110-130 sqm share, in particular, jumped 4.1 percentage points to 20.0%, the largest increase among all city tiers. The share of units over 150 sqm has been stable at around 10%. This suggests that buyers in first-tier cities are not generally shifting to luxury homes. Instead, high prices are pushing first-time and budget buyers toward the secondary market and rentals, leaving the new home market primarily for replacement families who are "selling small to buy big," resulting in a gradual upward shift in demand.

Second-tier cities exhibit the most prominent upgrade trend, with a clear "one-step" characteristic. The share of units over 110 sqm in new home sales rose by 6.5 percentage points over two years, above the national average of 5.1 percentage points. Notably, the share of units over 150 sqm increased by 2.1 percentage points to 14.2%. The share of units under 90 sqm plummeted by 4.5 percentage points, the largest decline among all city tiers. This suggests that transitional small units are being skipped in favor of larger homes for first-time or primary purchases, reflecting a "one-step" buying pattern. This trend is driven by factors such as talent attraction programs bringing in high-income groups, the need for replacement and upgrade from existing small homes, and the significant easing of purchase restrictions, which together have more fully released upgrade demand.

Third and fourth-tier cities show a high proportion of large units, but the pace of increase is limited. The share of units over 110 sqm (58.8%) and over 150 sqm (14.5%) is already high, but the increase over two years was only 2.5 percentage points, far below the 6.5 percentage points in second-tier cities and 6.0 percentage points in first-tier cities. The share of the 110-130 sqm segment even fell by 2.0 percentage points. This is partly due to low housing prices, which allow buyers to afford large areas, but the lack of growth is attributed to previous upgrade demand being largely fulfilled, insufficient new demand due to population outflow, and a market primarily driven by replacement of existing housing, leading to relatively slow structural change.

The structural shift toward upgrades is not a short-term cyclical fluctuation but a long-term result of the convergence of three factors: policy, supply, and demand. On the policy front, supply-side easing and demand-side support are jointly driving the upgrade transformation. The Ministry of Housing and Urban-Rural Development has been promoting the "good housing" development direction, relaxing planning constraints on floor height, floor-area ratio, and designs for fourth-generation homes, removing institutional barriers for large, high-quality units. On the demand side, a package of optimization policies has been introduced, including the full implementation of "recognizing a house but not a loan," reducing down payments, lowering interest rates, and easing purchase restrictions, which have significantly lowered the threshold for upgrade buyers. Local governments are also implementing city-specific measures, such as easing restrictions for multi-child and talent families in first-tier cities, fully relaxing restrictions in second-tier cities, and offering subsidies for deed tax in third and fourth-tier cities to promote replacement, collectively supporting the chain of home upgrades.

On the supply side, developers are shifting toward the "upgrade and high-end" segment, which is increasing the share of large units from the source. During the downturn, upgrade products have stronger buyer purchasing power, lower price sensitivity, and better sales and profit performance, driving developers to enhance product quality and increase floor area. Improved liquidity in the secondary market is also making the "sell one, buy one" process smoother. A higher proportion of low-floor-area-ratio land parcels in core cities is further supporting the supply of large units from the land end.

On the demand side, now that the housing shortage problem has been largely resolved, the desire to "live in a good home" has become mainstream, and the window for home replacement is opening collectively. By 2026, the per capita living space for urban residents has exceeded 40 square meters, shifting demand from "having a home" to "having a good home." The last peak of first-home purchases (from 2015 to 2018) is now entering an 8-to-10-year replacement cycle, leading to a concentrated period of home upgrade and replacement.