China Property Week 23: Sequential Pullback in Transactions, Stable Sentiment, Provident Fund Reform Scope Exceeds Expectations

Overview

This report is Goldman Sachs's weekly tracking of China's real estate sector for Week 23. The core conclusion is that transaction momentum pulled back sequentially but sentiment did not deteriorate materially, with stronger year-over-year improvement in secondary homes than in primary homes; the draft housing provident fund reform covers renovation, property management fees, flexible workers, and cross-regional mutual recognition and lending, making the policy optimization scope broader than previously expected; developer valuations have approached lows seen in the downcycle, but a fundamental recovery still depends on transaction trends, price expectations, inventory, and policy execution.

Core views

The report believes that in Week 23, property transactions pulled back sequentially from the prior week's high level, but the year-over-year improvement widened, indicating that the short-term slowdown in transaction pace has not translated into a clear deterioration in sentiment. Primary home searches, listing activity, and price expectations remained relatively stable, while months of inventory improved slightly. On the policy side, if implemented, housing provident fund reform would support housing consumption and broaden participation coverage for flexible workers, but more aggressive measures such as further rate cuts, mobilization of unused deposits, and loan interest subsidies remain key areas to watch. On the valuation side, developer share prices fell during the week, and the P/B multiples and NAV discounts of offshore and onshore covered names remain at low levels, with the market still waiting for further confirmation from fundamentals and policy.

Analysis framework

The report combines high-frequency indicators such as weekly primary and secondary home transactions, searches and viewings, listings, price expectations, and months of inventory to assess short-term real estate market conditions; at the same time, it uses the GS Property Completion (GSPC) tracker, inferring completion trends through a float glass supply-demand model, and compares NAV discounts and P/B ratios with historical trough ranges to judge developer valuation positioning.

Methodology notes

• Real Estate High-Frequency TrackingWeek 23 Transaction and Inventory Tracking

  Use weekly primary and secondary home transactions and months of inventory to monitor real estate demand and destocking pressure.

  This framework focuses on the divergence between week-over-week and year-over-year changes: transactions fell sequentially this week, but year-over-year improvement widened, while months of inventory were below the May average, pointing to no clear deterioration in market sentiment yet.

• Policy AnalysisHousing Provident Fund Reform Assessment

  Assess the potential support for housing consumption from the housing provident fund in terms of withdrawal scope, contributor groups, and cross-regional loan mutual recognition.

  The draft revision brings owner-occupied home renovation, property management fees, contributions by flexible workers, and cross-regional mutual recognition and lending into the scope of institutional optimization, exceeding the report's previous expectations for the reform's breadth.

• Proprietary Leading IndicatorGS Property Completion (GSPC) Tracker

  Use float glass industry supply-demand conditions and a weekly demand model to infer the trend in real estate completion area.

  GSPC points to a high-teens year-over-year decline in completions in May 2026 and about a 1% year-over-year decline for full-year 2026, supplementing official completion data with a high-frequency read.

• Valuation FrameworkNAV Discount and P/B Trough Comparison

  Use 2026E NAV discounts and 2026E P/B to compare with cycle troughs in 2H08, 2H11, and 1H14.

  Offshore covered developers trade at an average 28% discount to 2026E NAV with 2026E P/B at 0.5x; onshore covered developers trade at an average 27% discount with 2026E P/B at 0.4x. Valuations are at low levels but do not by themselves constitute evidence of fundamental improvement.

Asset mapping & comparison

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

• China Real Estate Developer Equities

  Directly affected by transactions, policy, and valuation rerating

  Strengths

  Valuations are at low levels, the scope of policy optimization has expanded, and secondary home transactions show strong year-over-year resilience.

  Weaknesses

  Primary home transactions and new starts remain weak, share prices broadly fell in Week 23, and the fundamental recovery is not yet solid.

  Comparison

  Offshore covered developers fell 6% on average, weaker than MSCI China at -1%; onshore covered developers fell 8% on average, weaker than CSI300 at -3%.

  Risks

  Further week-over-week weakening in transactions, declining price expectations, policy implementation falling short of expectations, and tighter financing conditions.

• Strong SOE Developers

  Relatively benefit from credit advantages and expectations of policy support

  Strengths

  CRL (1109.HK, Buy) and COLI (O688.HK, Buy) fell about 3% during the week, outperforming peers.

  Weaknesses

  Strong SOE developers as a group still fell 7% on average, indicating that low valuations have not yet translated into a broad rally.

  Comparison

  Strong SOEs performed better than other SOE developers at -8%, and were broadly close to private developers at -7%.

  Risks

  If the sales recovery is not sustained, valuation discounts may persist longer.

• Private Developers

  More sensitive to sales collections, credit conditions, and risk appetite

  Strengths

  Improvement in the secondary home market and policy easing could indirectly improve sector sentiment.

  Weaknesses

  Financing and credit repair remain highly uncertain, and share prices fell 7% on average.

  Comparison

  This week's performance was not clearly better than that of strong SOE developers, reflecting the market's continued preference for entities with stronger balance sheets.

  Risks

  Liquidity pressure, difficulty in debt refinancing, and sales missing expectations.

• Real Estate Transaction Platforms and Brokerage Chains

  Benefiting from improved secondary home transactions and GTV

  Strengths

  BEKE's total GTV is expected to rise 9% year over year in Apr-May 2026, with secondary homes up 16%.

  Weaknesses

  Primary home GTV is still down about 6% year over year, reflecting continued pressure on the primary market.

  Comparison

  The secondary home chain is stronger than the primary home chain.

  Risks

  Transaction pullback, commission rate pressure, and weakening home price expectations.

Key data

• Primary Home Transactions-13% wow；+15% yoyWeek 23 primary home sales volume declined week over week, but the year-over-year growth rate widened versus the previous week.
• Secondary Home Transactions-7% wow；+31% yoySecondary home transactions in about 20 cities declined week over week and rose strongly year over year; agents' expectations for price increases remained intact, while sellers' expectations softened slightly.
• Year-to-Date Primary Home Transaction Area-13% yoy；vs. 2024/2023 at -13%/-44%, respectivelyThis shows the primary home market remains below the levels of recent years over the same period.
• Year-to-Date Secondary Home Transaction Area+1% yoy；vs. 2024/2023 at +22%/+8%, respectivelyThe secondary home market has shown greater resilience than the primary home market.
• Inventory Balance-0.2% wow；-4.6% vs. end-2025Total inventory across about 20 cities continued to edge down.
• Months of Inventory27.8 monthsBelow the May 2026 average of 28.5 months.
• GSPC Completion ViewHigh-teens yoy decline in May 2026; -1% yoy for full-year 2026Based on the GS float glass supply-demand model and the GSPC tracker.
• New Starts ViewLow-twenties yoy decline in May 2026Based on land sales trends across 300 cities and nationwide cement shipment ratios.
• BEKE GTV+9% yoy in Apr-May 2026Primary and secondary home GTV were approximately -6% and +16%, respectively.
• Covered Developer Share Price PerformanceStrong SOEs -7% wow; private developers -7% wow; other SOEs -8% wowCRL (1109.HK, Buy) and COLI (O688.HK, Buy) fell about -3%, relatively outperforming.
• Offshore/Onshore Covered Developer Valuations2026E NAV discount 28%/27%; 2026E P/B at 0.5x/0.4xThe report compares these with historical trough ranges in 2008, 2011, and 2014.

Impact & implications

The implication for the property sector is that short-term transaction momentum has moderated at the margin, but year-over-year improvement and stable sentiment reduce concerns about rapid deterioration; provident fund reform expands the potential coverage of policy support and, if accompanied by lower loan rates, mobilization of existing funds, and loan subsidies, could further support housing consumption. Low valuations provide some margin of safety, but property developer stocks still require sustained improvement in transaction trends, price expectations, and inventory destocking for validation.

Risks

• The pace or intensity of implementation of housing provident fund reform may be below expectations.
• Further measures such as lower provident fund loan rates, mobilization of unused deposits, or loan interest subsidies may fail to materialize.
• Primary and secondary home transactions may continue to decline week over week, making the year-over-year improvement unsustainable.
• Weaker price expectations among sellers or homebuyers may drag on transactions and destocking.
• Months of inventory may rise again, increasing industry destocking pressure.
• Declines in completions and new starts may widen, weighing on the real estate value chain and developer earnings.
• Deterioration in developers' financing conditions or credit risk may suppress valuation recovery.

What to watch

• The final implementation scope and execution details of the draft revision to the Housing Provident Fund Management Regulations.
• Whether there will be further cuts to housing provident fund loan rates, loan interest subsidies, or arrangements to mobilize unused deposits.
• Weekly changes in primary home transactions, secondary home transactions, primary home search activity, subscriptions, and viewings.
• Whether price expectations among agents, homebuyers, and sellers remain stable.
• Whether inventory balance and months of inventory across about 20 cities can continue improving.
• Whether NBS completion and new start data validate the GSPC tracker.
• NAV discounts, 2026E P/B, and relative index performance of covered developers' share prices.
• The sustainability of BEKE's primary and secondary home GTV.