China Real Estate May Sales Performance Improves but Divergence Intensifies

Overview

This report analyzes the May 2026 sales performance of China's real estate industry. Although overall sales improved, significant divergence emerged among developers. State-owned enterprises continued to see sales growth in tier-1 cities thanks to stronger brand influence and quality land reserves, while most private enterprises faced greater sales pressure. Looking ahead, considering limited household leverage appetite and cautious income outlook, Q3 new home sales may weaken again and home prices may continue a moderate downward trend.

Core views

According to CRIC data, May sales of top 100 property developers fell 2% YoY, significantly narrowing from April's -10%, showing some signs of recovery. However, for Morgan Stanley's tracked 25 key property developers, sales fell 17% YoY, worsening from April's 9%. Sales performance divergence was particularly pronounced. SOEs continued to perform well, with China Resources Land, China Merchants Shekou, Yuexiu Property, KWG Group, and China Merchants Land growing 38%, 20%, 18%, 14%, and 13% respectively. In contrast, private enterprises like Sunac, Kaisa, Longfor, Seazen, and Zhongliang Holdings saw sales drop over 45% YoY. Some semi-SOE developers like Gemdale and Vanke also recorded significant declines of 36% and 44% respectively. Looking ahead, due to low household leverage appetite and cautious income expectations, secondary home transaction volume is expected to slow further in June and may turn negative in Q3. For new home sales, limited by reduced saleable resources, continued YoY decline is expected (potential drop of 5%-10%), with full-year sales volume forecast to remain basically flat. Home prices are expected to maintain an overall moderate downward trend in 2026-27, with only tier-1 cities potentially seeing modest increases.

Analysis framework

The report assesses the strength and sustainability of overall market recovery by comparing monthly sales data across developers of different sizes. Simultaneously, through horizontal comparison of sales performance between SOEs and private enterprises, it reveals competitiveness differences among different types of companies in the current market environment. Additionally, the report incorporates factors such as policy easing effects, homebuyer confidence, and developers' saleable resources to forecast sales trends for the coming months.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report reflects demand-side performance by observing changes in property developers' sales data, thereby assessing the overall supply-demand conditions of the real estate market.

• Industry/Sector Analysis FrameworkVolume-Price Breakdown

  Volume-Price Breakdown

  The report not only focuses on changes in sales value but also specifically mentions trends in both transaction volume and price dimensions for a more comprehensive understanding of market dynamics.

• Valuation MethodNAV Net Asset Value Method

  NAV (Net Asset Value) Valuation Method

  The report mentions using the NAV model to value companies and applying certain discounts based on the value of different business segments, reflecting attention to intrinsic asset value.

• Company Fundamentals and Financial FrameworkDuPont analysis

  DuPont Analysis

  Although not directly mentioning the DuPont formula, the report emphasizes the impact of multiple financial indicators such as profitability, execution capability, and leverage levels on corporate performance, consistent with the basic logic of DuPont Analysis.

Asset mapping & comparison

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

• 华润置地 (1109.HK)

  Benefits from brand advantages and quality land reserves brought by SOE background, with excellent sales performance in tier-1 cities

  Strengths

  Has good profit prospects, decent dividend yields, and medium-term revaluation potential

  Weaknesses

  Risk of new shopping mall openings progressing slower than expected

  Comparison

  Compared with other targets, China Resources Land has strong comprehensive strength and development potential among SOEs

  Risks

  Sales contract value below expectations, shopping mall opening slower than expected

• 招商局置地 (1908.HK)

  Also benefits from SOE status, with good sales performance in some cities

  Strengths

  Has stable profit prospects, reasonable dividend returns, and certain revaluation upside

  Weaknesses

  Risk of gross margin potentially below expectations

  Comparison

  Compared with other SOEs, China Merchants Land has certain advantages in land acquisition efficiency

  Risks

  Gross margin below expectations, slow land acquisition progress

Key data

• May Top 100 Property Developers Sales YoY Change-2%Narrowed from April's -10%
• 25 Key Property Developers Sales YoY Change-17%Worsened from April's -9%
• China Resources Land May Sales YoY Change+38%Strong SOE performance
• Sunac China May Sales YoY Change-45%Private enterprise sales under severe pressure
• Full-Year New Home Sales Forecast8-10% declineFull-year total sales volume expected to remain basically flat

Impact & implications

The report believes the current real estate market is in a slow recovery process, but due to insufficient homebuyer confidence and weakening policy stimulus effects, comprehensive recovery is difficult to achieve in the short term. SOEs will continue to dominate due to brand and resource advantages, while private enterprises face greater survival challenges. Investors should closely monitor key indicators such as sales data, home price trends, secondary home listings, transaction structure, and rental levels to confirm whether a true inflection point has emerged.

Risks

• Insufficient homebuyer confidence leading to continued sales weakness
• Policy easing effects gradually fading, failing to effectively boost the market
• Tight developer capital chains affecting project development progress
• Increased price volatility in secondary home market dragging down new home pricing

What to watch

• Sales volume, home prices, secondary home listings, transaction structure, and rental levels during June-August
• Whether the government will introduce new stimulus policies to stabilize the property market
• Capital conditions and debt repayment capacity of developers, especially private ones
• Inventory turnover speed and stock levels in key cities, especially tier-2 cities