Have Chinese real estate stocks become a bargain? It is a question that comes up every time the sector starts staging a rebound. The result is volatility. For developers’ shares to swing over 20 per cent in a day is no longer unusual.

Even stocks like China Vanke, once the most safe and stable of the country’s builders, move dramatically on nothing more than a few hints of policy support. That reflects how quickly investor perceptions of the sector are shifting. This week, bondholders denied Vanke permission to delay repayment of a RMB2bn ($280mn) onshore note, a wake-up call for the sector. If Vanke can be pushed to the edge, then the line separating viable developers from casualties is thin.

Previously, throughout the sector’s four-year-long downturn, each rally was read as a sign that perhaps the old model still worked. And indeed, it is not all gloom. While hundreds of small developers have gone bankrupt each year — over 230 housebuilders filed for bankruptcy in 2023 alone — the result is that the remaining developers face much less competition. Meanwhile, local households are sitting on nearly RMB162tn in savings this year, almost double 2020 levels and near a record high.