China real estate price and rent stabilization remains on track, but supply-side weakness persists
AI summary card
China real estate price and rent stabilization remains on track, but supply-side weakness persists
Goldman Sachs lowered its 2026E/2027E forecasts for China property sales, ASP, housing starts, completions, and FAI, believing that resilient prices in core tier-1 cities and recovering rents are positive signals, but construction, land, and homebuyer confidence remain weak.
- In June, MoM declines in ASP for new homes/existing homes across the 70 cities were -0.2%/-0.3%, similar to May; ASP for new homes/existing homes in tier-1 cities was positive MoM for the fifth/fourth consecutive month, respectively.
- In June, nationwide commodity housing sales area and sales value were both down 14% YoY, bringing 1H26 to -12%/-14% YoY, broadly in line with or slightly below Goldman Sachs expectations.
- In 1H26, housing starts, completions, and real estate FAI were -23%/-24%/-18% YoY, weaker than prior full-year forecasts, indicating that the supply side and construction chain still have not reached a clear inflection point.
- For existing homes, transaction volume in 15 cities was +10% YoY in June and flat YoY in 1H26; listings in 100 cities declined MoM and YoY, indicating some improvement in sentiment.
- Average rent in 50 cities turned positive MoM in June, the first time since 4Q25; average rent in tier-1 cities has been positive MoM for four consecutive months.
Report interpretation
Overview
This report is Goldman Sachs' monthly tracking of China's real estate market. It believes that June data continued to show that the path toward home price and rent stabilization remains intact, with particularly strong ASP and rent performance in tier-1 cities; however, sales, construction, land transactions, and development investment remain weak, with insufficient supply-side repair, so it lowered multiple sector forecasts for 2026E/2027E.
Core views
Core views include: first, MoM declines in new-home and existing-home prices remained low, with tier-1 cities continuing to outperform lower-tier cities; second, nationwide new-home sales remained under pressure, with 1H26 sales area and sales value down 12%/14% YoY, respectively; third, weak construction activity is the biggest drag, with 1H26 housing starts, completions, and FAI down 23%/24%/18% YoY, respectively; fourth, existing-home transaction and listing indicators improved marginally, but competition from existing-home supply remains strong; fifth, rents improved MoM in June, supporting observations of recovering residential yields; sixth, strong SOE developers remained focused on acquiring land in high-tier cities, and estimated project-level gross margins remained relatively stable.
Analysis framework
The report cross-validates sales, prices, rents, construction, land, and financing using NBS national data, high-frequency tracking of new and existing homes, the 70-city ASP index, 15-city existing-home transactions, 100-city existing-home listings, 50-city rents, land transaction and auction indicators, developer land acquisition samples, REITs financing, and upstream building materials indicators, and adjusts 2026E-2027E sector forecasts accordingly.
Methodology notes
Cross-validation of monthly high-frequency and official data
By using national statistical data, city-tiered price indices, existing-home transactions and listings, rents, land transactions, developer land acquisitions, and upstream building materials indicators, it assesses whether the real estate market is entering a stage of stabilization in prices, rents, and the supply side.
Land acquisition intensity and project gross margin estimation
It evaluates the quality of developers' replenishment and future profitability using the ratio of newly acquired land value to sales value for covered developers, city-tier distribution, exposure to top-10 cities, and project-level GPM estimates.
Adjustments to 2026E-2027E forecasts for sales, prices, starts, completions, and FAI
Based on the pace of 1H26 sales, construction, land, and policy implementation, it broadly lowers 2026E forecasts for sales area, sales value, ASP, housing starts, completions, and real estate FAI.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- China real estate sectorCore research target
- Strengths
- Tier-1 city ASP has improved sequentially for consecutive months, rents have turned upward, and existing-home transaction and listing indicators have improved at the margin.
- Weaknesses
- Nationwide sales, construction, housing starts, completions, FAI, and land transactions remain weak.
- Comparison
- Tier-1 cities are clearly stronger than tier-2 and lower-tier cities; existing-home transactions are performing better than new-home sales, but competition from existing-home supply remains high.
- Risks
- Weak homebuying confidence, no improvement in employment expectations, slow policy implementation, and persistent pressure from existing-home supply.
- Strong SOE developersPotential beneficiaries and consolidators in the sector
- Strengths
- Land acquisition is concentrated in tier-1, tier-2, and top-10 cities, estimated project-level GPM remains relatively stable, and REITs financing channels are more active.
- Weaknesses
- The overall sector sales downturn will still pressure contracted sales and internal cash flow.
- Comparison
- Compared with POE developers, strong SOEs have stronger financing ability and replenishment capacity.
- Risks
- If sales recovery is slower than expected, profit margins and turnover speed of newly acquired land may come under pressure.
- Commercial REITsReal estate financing channel and asset revitalization tool
- Strengths
- Issuance accelerated in June, and 1H26 issuance volume nearly doubled YoY, helping strong developers revitalize commercial assets.
- Weaknesses
- The scale is still insufficient to fully offset downward pressure from development sales and construction.
- Comparison
- Compared with traditional development loans and sales cash collection, REITs are more oriented toward asset securitization and existing-asset financing.
- Risks
- Operating performance of underlying assets, valuation, and changes in market risk appetite may affect issuance and refinancing.
Key data
- 2026E sales area forecast-8% YoYPreviously GSe expected -4% YoY; 2027E was revised to -2% YoY.
- 2026E real estate sales value forecast-12% YoYCorresponding 2027E forecast is -4% YoY; mainly affected by downward revisions to sales volume and ASP forecasts.
- 2026E ASP forecast-4% YoYPreviously -2% YoY; 2027E is -3% YoY.
- 2026E housing starts GFA forecast-22% YoYPreviously -19% YoY; implies 2H26E at -21% YoY.
- 2026E completions GFA forecast-15% YoYPreviously -1% YoY; implies 2H26E at -10% YoY.
- 2026E real estate FAI forecast-15% YoYPreviously -12% YoY; implies 2H26E at -11% YoY.
- June 70-city new home/existing home ASP-0.2%/-0.3% MoMClose to the May trend; tier-1 cities were +0.1%/+0.3% MoM, respectively.
- June nationwide commodity housing sales area/sales value-14%/-14% YoY1H26 was -12%/-14% YoY, respectively.
- 1H26 housing starts/completions/FAI-23%/-24%/-18% YoYShows continued weakness in construction and investment.
- June land sales area/value-23%/-15% YoYIn 1H26, nationwide land sales area/value was -22%/-28% YoY.
- June existing-home transaction volume in 15 cities+10% YoYFlat YoY in 1H26; above GSe's previous expectation of single-digit YoY improvement.
- Average rent in 50 citiesTurned positive MoM in JuneEnded nine consecutive months of decline; average rent in tier-1 cities has been positive MoM for four consecutive months.
- June land acquisition intensity of strong developersAbout 31% of contracted salesAverage project-level GPM was about 22%, with 64% exposure in tier-1 and tier-2 cities and 65% exposure in top-10 cities.
- 1H26 commercial REITs issuanceRmb30bnUp 21% HoH and nearly doubled YoY; four commercial REITs issued in June raised a total of Rmb20bn.
Impact & implications
The implication for the sector is that the market's bottoming and repair still looks more like a structural process characterized by city differentiation and price/rent leading indicators, rather than a broad-based recovery. Resilient prices and rents in tier-1 cities, declining existing-home listings, improving land auction premiums, and active REITs financing are positive signals; however, homebuyer confidence, employment expectations, the pace of policy execution, the construction chain, and land transaction volumes are still insufficient to support a stronger nationwide recovery. Therefore, sector positioning should focus more on integrated developers with exposure to high-tier cities, strong financial resources, and better land acquisition quality.
Risks
- Employment and household income expectations have not improved materially, and homebuyer confidence remains weak.
- The pace of supply-side policy implementation has not accelerated meaningfully, with insufficient support for destocking and urban renewal.
- Competition from existing-home supply continues to suppress new-home sales and price recovery.
- Housing starts, completions, land transactions, and real estate FAI continue to decline, dragging on the industry chain and developers' cash flow.
- Price, rent, and inventory pressures in lower-tier cities may persist, widening divergence from tier-1 cities.
What to watch
- Whether core tier-1 cities, especially Shanghai and Shenzhen, show clearer home price stabilization or a turning point.
- Whether other key cities can follow tier-1 cities in showing MoM ASP improvement.
- Whether existing-home listings, supply-demand balance, and transaction cycles continue to improve.
- Whether rents and residential rental yields in high-tier cities can continue to recover.
- Whether HPR policies such as home purchase restrictions in tier-1 cities will be further comprehensively relaxed.
- Whether urban renewal will accelerate with funding and implementation support.
- Whether improvement in failed land auction rates and premium rates can continue and drive developers' willingness to acquire land.