The property services industry in China experienced a continued freeze in initial public offerings and a persistent cooling of market liquidity during the first half of 2026, with the underlying valuation logic for the sector undergoing a profound re-evaluation.

Initial Public Offerings and Market Withdrawals

In the first six months of the year, the IPO market for property services firms remained completely inactive. Furthermore, companies such as Jinke Services and Risen Life Services delisted from stock exchanges. This brings the total number of listed property service enterprises that have exited the capital markets to five. This pattern of exits without new entrants reflects a significant shift in the sector's capital investment rationale.

Capital Market Performance Deteriorates

The poor performance of the property services segment on the stock market, characterized by persistently low share prices, has eroded the core value of maintaining a listed status. This trend further validates the reasons behind some companies' decisions to delist. Throughout the first half of 2026, the total market capitalization and price-to-earnings ratios for the sector exhibited a fluctuating downward trajectory. As of June 30, 2026, the total market capitalization of listed property service companies was approximately 202.99 billion yuan, with an average PE ratio of 13.06 times (excluding outliers). These figures represent declines of 21.38% and 27.31%, respectively, compared to the beginning of the year.

Policy Environment and Strategic Upgrades

The year 2026 marks the start of China's 15th Five-Year Plan period, during which "enhancing the quality of property services" has been elevated to a national strategic priority. This top-level confirmation of the industry's role and service value signifies a shift in perception, moving property services from being viewed as an ancillary part of real estate development to a critical service impacting public welfare, asset value, and social stability. Multiple supportive policies have been introduced.

In March 2026, the Government Work Report explicitly linked the implementation of a "property service quality improvement initiative" with the construction of "good housing." Subsequently, the Outline of the 15th Five-Year Plan and the dedicated "Urban Renewal 15th Five-Year Plan" issued by the State Council further cemented this focus, listing the quality improvement initiative as a major project.

A significant symbolic change involves the terminology shift from "property management" to "property services." Authorities have adopted a proposal to revise the relevant regulations, with the "Property Management Regulations" expected to be renamed the "Property Services Regulations." This change, which has evolved through several legislative stages since 2007, aims to legally clarify the relationship: property owners are the rights-holders, and property companies are service providers entrusted by them.

Addressing Industry Pain Points

Policies have been rolled out to tackle long-standing industry issues. These include standardizing the management and enhancing the transparency of public revenue generated within residential complexes, establishing formal mechanisms for the exit of underperforming service providers, and improving market-based bidding and selection processes for property service contracts.

Two major supportive policies were introduced. First, a revised draft of the "Regulations on the Management of Housing Provident Funds" proposes allowing funds to be used for paying self-occupied housing property fees. This could alleviate financial pressure on homeowners and potentially improve fee collection rates. Second, a new "Water Supply Regulation" clearly delineates the responsibilities of water supply utilities, freeing property companies from the operational burdens and liabilities of maintaining water supply facilities within communities, thereby allowing them to refocus on their core service functions.

Prevailing Market Challenges

The industry continues to grapple with a fundamental contradiction between service quality and price. On one hand, customer satisfaction with property services has shown a fluctuating decline, with the national score for 2026 at approximately 72.8. On the other hand, property fee price indices are trending downward, indicating weakened pricing power for service providers. This "quality-price mismatch" has fueled a vicious cycle: lower fees lead to reduced service quality, which damages trust and further depresses fee collection willingness.

Data shows that the average fee collection rate for top 100 property service enterprises has declined consecutively, falling from 94.23% in 2021 to 87.32% in 2025, with the rate for residential properties being even lower at around 82.67%.

Exodus from Underperforming Projects

This challenging environment has led to a wave of companies withdrawing from low-quality, inefficient projects. In the first half of 2026, 110 cases of residential project withdrawals due to conflicts were recorded across 35 major cities, a significant year-on-year increase. Approximately 80% of these were "active withdrawals," where companies strategically exited unprofitable or problematic projects to cut losses. Brand-name property service firms accounted for nearly 60% of these active exits.

This trend impacts all stakeholders: homeowners face potential service degradation, companies suffer from reduced income and operational losses, and local governments bear increased burdens in mediating disputes.

Market Competition and Technological Adoption

As the real estate market enters an era dominated by existing stock, competition for managing existing properties has intensified. The number of public tender notices for property service projects in H1 2026 reached 197,000, a 9.47% increase year-on-year, indicating a more active bidding market. Office properties constituted the largest segment by tender volume.

To navigate this competitive landscape, companies are increasingly turning to technology. Artificial Intelligence is being deployed to streamline the bidding process—from identifying opportunities and analyzing tender documents to drafting proposals and checking for compliance risks—thereby improving efficiency and success rates.

Valuation Logic Shifts from Scale to Service Capability

The valuation framework for property service companies is undergoing a deep transformation. The previous era's emphasis on "scale is king" is fading as IPOs stall and liquidity tightens. The market is now rationally re-evaluating companies, recognizing that mere expansion often leads to inefficient acquisitions and quality compromises.

The valuation focus is shifting towards "service capability." A company's worth is increasingly judged by its ability to deliver high-satisfaction services through refined operations, thereby building customer loyalty and brand premium, rather than simply by the number of projects or area under management. This marks a transition from a "scale game" to a "quality competition" era centered on customer value.

Outlook for the Second Half of 2026

Looking ahead, policy developments are expected to continue shaping the industry. The revision of the "Property Management Regulations" is on the legislative agenda, with the potential name change to "Property Services Regulations" symbolizing a stronger institutional emphasis on the service role. Local governments are likely to follow with supporting regulations.

Industry rectification efforts will focus on aligning service quality with pricing, promoting transparency in public revenue and fee structures, and establishing clearer service standards. Leading companies have already identified quality enhancement as a core strategic focus for the 15th Five-Year Plan period.

The concept of "value-added services" is also evolving. The focus is shifting from merely generating additional revenue from homeowners to "co-creation," where companies and residents collaborate to utilize community resources, fostering trust which can, in turn, improve basic fee collection rates.

Technological empowerment will deepen, moving from pilot projects to broader implementation. AI and IoT are expected to enhance customer service responsiveness, enable predictive maintenance of facilities, and improve space management. The future points towards a "human-machine synergy" model, where AI handles standardized, repetitive tasks, freeing human staff to provide personalized, empathetic service where judgment and interpersonal connection are paramount.