Citi believes the recovery in China's key-city real estate markets is spreading from high-end projects to the mass market

Overview

This report discusses May sales and the recovery in key cities across China's real estate market. Citi believes May sales data reinforced the sector's stabilization trend, with the recovery no longer limited to high-end or high-ticket upgrade projects, but spreading to mass-market projects in key cities, more tier-2 cities, more developers, and the new-home market. Policy factors including urban renewal plans, broader use of local special bonds, and easing policies in many cities are also improving household expectations and adding momentum to the market recovery.

Core views

The core views are: first, listed developers' sales continued to improve in May; although still -6% YoY, they were +10% MoM, and the 5m26 YoY decline narrowed to -15%; second, transaction activity in key cities was more resilient, with new-home sales flat YoY, existing-home transactions up 20% YoY, existing-home listings down 1.7% YTD, and prices stabilizing for three consecutive months; third, the recovery is spreading to more cities, more market segments, and more developers; fourth, considering the high base in 1h25 and low base in 2h25, strong YoY sales momentum may continue into 2h26e; fifth, after the sector rose 25%-30% within two weeks of the earlier view upgrade and then saw recent profit-taking, May sales data could become a new stock-price catalyst.

Analysis framework

The report uses monthly developer sales tracking, new-home and existing-home transaction data in key cities, listing volume and price trends, land market activity, and policy catalyst analysis to assess the quality of the sector's recovery. Stock selection focuses on developers with land acquisition growth in 2025, ample saleable resources in 2026e, strong exposure to key cities, and exposure to growth in existing-home transactions.

Methodology notes

• Industry cycle trackingTracking YoY and MoM contracted sales of property developers

  Assess the breadth of sales recovery through the monthly sales of 37 listed developers, the number of companies with YoY growth, the number with MoM improvement, and cumulative 5m26 performance.

  In May, sales of 37 listed developers were -6% YoY and +10% MoM; 23 companies improved MoM and 11 companies achieved YoY growth; the 5m26 YoY decline narrowed from -19% in 4m to -15%.

• City and market structureMonitoring new homes, existing homes, and listing volumes in key cities

  Compare new-home transactions in 34 cities, existing-home transactions in 18 cities, and existing-home listing trends in 39 cities to judge whether demand is transmitting from existing homes to new homes and from core cities to more cities.

  New-home sales in 34 key cities were flat YoY, weekly existing-home transactions in 18 cities rose 20% YoY, and existing-home listings in 39 cities fell 1.7% YTD, indicating improved end demand and easing supply pressure.

• Policy catalystsAssessment of urban renewal and local easing policies

  Treat the State Council's five-year urban renewal plan, expanded uses of special bonds, and local policy easing as catalysts for improving market expectations.

  These policies were introduced during the market recovery and help reinforce the upward trend; Beijing's 2026 urban renewal budget reached Rmb230bn, up 21% YoY, while Shenzhen, Guangzhou, Hangzhou, Xi'an, Tianjin, Wuhan, and others also announced easing measures.

• Portfolio constructionScreening by resource reserves and exposure to key cities

  Prioritize developers and related platforms that increased land acquisitions in 2025, have ample resources in 2026e, and benefit from improving sales in key cities.

  The report names COLI and Jinmao as top picks and also mentions CRL, Poly Property, and Seazen; Beike benefits from growth in existing-home transaction volume.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China real estate sector

  Core research focus

  Strengths

  New homes in key cities are stabilizing, existing-home transactions are accelerating, and policy easing plus urban renewal provide support.

  Weaknesses

  At the national level, sales are still declining YoY and land supply is falling, with the recovery highly dependent on key cities.

  Comparison

  Compared with April, recovery signals in May were broader, covering more developers and mass-market projects.

  Risks

  If the recovery fails to spread to more cities or household expectations weaken again, the sector rally may be hard to sustain.

• COLI

  One of the top picks

  Strengths

  May sales were Rmb27bn, up 14% YoY in May and 14% YoY cumulatively in 5m26, benefiting from ample new launches in key cities.

  Weaknesses

  The report did not disclose specific margin or balance-sheet changes.

  Comparison

  Ranks near the top among developers with cumulative sales growth in 5m26 and is listed as a Top pick.

  Risks

  If new-home demand in key cities weakens or launch schedules fall short of expectations, sales growth may slow.

• Jinmao

  One of the top picks

  Strengths

  Cumulative sales in 5m26 rose 11% YoY, and the report believes it is supported by new launches in key cities.

  Weaknesses

  The report does not provide May single-month sales or valuation details.

  Comparison

  Along with COLI, it is a Top pick, and both achieved sales growth in 5m26.

  Risks

  Sales recovery is highly dependent on new launch resources and resilient demand in key cities.

• CRL

  Preferred name

  Strengths

  May sales were Rmb25bn, up 38% YoY in May and 10% YoY cumulatively in 5m26, showing strong sales growth.

  Weaknesses

  The report did not disclose margins, cash flow, or specific valuation changes.

  Comparison

  Its YoY growth rate in May led among the listed developers.

  Risks

  The high growth rate may be affected by base effects and short-term profit-taking.

• Poly Property

  Preferred name

  Strengths

  May sales rose 15% YoY and it is included in the report's preferred recovery-positioning list.

  Weaknesses

  The report does not provide detailed sales amounts or resource structure.

  Comparison

  It was one of the 11 developers that achieved YoY growth in May.

  Risks

  If the recovery fails to spread from core projects to the broader market, the sustainability of growth will need to be monitored.

• Seazen

  Preferred name

  Strengths

  Included in Citi's preferred recovery-positioning list.

  Weaknesses

  The main text does not provide its May sales, YoY growth, or specific financial metrics.

  Comparison

  Compared with COLI, Jinmao, and CRL, the report provides less data support.

  Risks

  The investment case is more sensitive to the overall sector recovery and the company's resource monetization.

• Beike

  Beneficiary of improving existing-home transactions

  Strengths

  The report is positive on its exposure to growth in existing-home transaction volume, with existing-home transactions in 18 cities up 20% YoY in May.

  Weaknesses

  The report does not provide a specific rating, target price, or earnings forecast revisions for Beike.

  Comparison

  Unlike developers, Beike benefits more directly from stronger activity in existing-home transactions.

  Risks

  If existing-home transactions decline or changes in listing volume suppress trading activity, the related benefits may weaken.

Key data

• May sales of 37 listed developers-6% YoY, +10% MoMApril was flat YoY; the May improvement was driven by better market sentiment and spread to mass-market projects in key cities.
• Cumulative sales of listed developers in 5m26-15% YoY4m26 was -19% YoY, with the cumulative decline continuing to narrow.
• Leading developers by May salesPoly Dev Rmb27.6bn; COLI Rmb27bn; CRL Rmb25bn; CMSK Rmb21bnShown by single-month sales in May.
• Number of developers with YoY growth in May11, about 30% of the sampleLeaders include CRL +38%, CMSK +20%, Yuexiu +18%, Poly Prop +15%, COLI +14%, and C&D +13%.
• Developers with cumulative YoY growth in 5m26COLI +14%; CMSK +13%; Jinmao +11%; CRL +10%; COGO +20%COLI, CMSK, Jinmao, and CRL benefited from ample new launches in key cities, while COGO benefited from increased market share in lower-tier markets.
• New-home sales in 34 key citiesFlat YoY, about 21k unitsData source labeled as CREIS, maintaining the stabilization pace seen since April.
• Existing-home transactions in 18 cities+20% YoY, about 28.6k units/weekFurther accelerated from +9% YoY in April; data source labeled as WIND.
• Existing-home listings in 39 citiesDown 1.7% year to dateExisting-home prices have stabilized for three consecutive months since March 2026.
• National land supplyMay supply area -27% YoY, supply value -20% YoYCRIC data; despite the nationwide decline in supply, demand for high-quality low-plot-ratio land parcels remained strong in key cities such as Beijing, Shanghai, and Hangzhou.
• Beijing urban renewal budget2026 Rmb230bn, +21% YoY2025 was Rmb189bn, reflecting stronger local investment in urban renewal.

Impact & implications

The investment implication is that if sales and existing-home transactions in key cities continue to improve, the real estate sector could regain catalysts after recent short-term profit-taking. Because the recovery depends more on core cities, high-quality projects, and policy support, positioning favors developers with ample resources, stronger exposure to key cities, active land acquisitions in 2025, and abundant saleable resources in 2026e; at the same time, improving existing-home transactions also increases the relevance of transaction service platforms such as Beike.

Risks

• The recovery in key cities may fail to continue or may not further spread to more cities and mass-market projects.
• Policy easing and urban renewal implementation may fall short of expectations, resulting in insufficient improvement in household expectations.
• If the market has already priced in the YoY improvement driven by the low base in 2h26e, the stock-price catalyst may weaken.
• National land supply and sales remain weak, and sector divergence may intensify.
• If home prices come under pressure again or existing-home listings increase, the quality of the transaction recovery may deteriorate.
• The sector already rallied 25%-30% quickly after the April view upgrade and may still face short-term profit-taking.

What to watch

• Whether listed developers' sales growth in June and 2h26e continues to improve YoY.
• Whether new-home transactions in 34 key cities can shift from flat YoY to positive growth YoY.
• Whether growth in existing-home transactions in 18 cities and listing volumes in 39 cities continue to improve.
• Whether the recovery spreads from the six stronger-performing cities to more tier-2 cities.
• Changes in transaction heat and land premiums for high-quality land parcels in key cities such as Beijing, Shanghai, and Hangzhou.
• The pace of implementation of the State Council's five-year urban renewal plan, local special bond support, and easing of purchase and mortgage restrictions across cities.
• Resource monetization and new launch schedules in 2026e for key developers such as COLI, Jinmao, and CRL.