Citi is bullish on China's real estate sector from July to October, with improving transaction volumes in core cities as the main theme

Overview

This is a Citi research report on China's real estate sector. Its central view is that investors should position ahead of a recovery in new-home supply in September and accelerating sales growth in core cities. Although the sector's recent share-price correction and weak 1H26 earnings were broadly expected by the market, resilient new- and second-hand home transactions in core cities, a low base, policy support, and improving sales guidance could collectively drive the sector's performance from July to October.

Core views

The report's core views include: first, sales growth may accelerate from July to September, mainly driven by resilient transactions in core cities and a low base; second, a stronger new-home supply pipeline after September may provide further sales support; third, expectations for policy easing at the July Politburo meeting, together with local housing provident-fund policies and trade-in programs, should help stabilize the property market and household expectations; fourth, weak 1H26 earnings are not the main negative surprise, with the market more focused on sales and margin guidance; and fifth, leading developers and companies with quality land reserves and product-upgrade capabilities are more likely to benefit.

Analysis framework

The report primarily combines top-down monitoring of industry conditions with bottom-up comparisons of listed property developers: it first examines high-frequency new- and second-hand home transactions, differentiation by city tier, land supply and premiums, policy funding, and meeting signals, then maps these factors to listed developers' sales growth, land-acquisition pace, valuation discounts, target prices, and ratings.

Methodology notes

• Industry cycle and high-frequency data trackingTransaction volume, low-base effects, and policy catalyst framework

  Uses weekly new- and second-hand home transactions, city tiers, the land market, and policy signals to assess short-term inflection points in the real estate sector.

  The report focuses on new-home transactions across 34 cities, second-hand home transactions across 18 cities, first-half-of-July transactions across 15 cities, land transaction gross floor area and premiums, as well as policy variables such as the Politburo meeting and urban-renewal funding.

Asset mapping & comparison

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

• CRL

  One of the preferred picks; the report says it has been strong in land acquisitions in Shenzhen and elsewhere, with 1H26 sales up 6% year on year.

  Strengths

  Strong core-city resources, land-acquisition capabilities, and sales resilience.

  Weaknesses

  Still exposed to industry margins, sales sustainability, and the pace of policy implementation.

  Comparison

  Compared with most developers, it has achieved positive sales growth and is included among the updated preferred picks.

  Risks

  A slowdown in transactions in core cities or weaker-than-expected sell-through of new projects could impede share-price recovery.

• C&D

  One of the preferred picks; Citi has become more positive since June due to product upgrades and accelerated replenishment of land reserves.

  Strengths

  Product upgrades and accelerated land acquisitions in Shenzhen, Shanghai, Hangzhou, Wuxi, Suzhou, Fuzhou, and other cities in June.

  Weaknesses

  An accelerated land-acquisition pace may raise capital and margin-management requirements.

  Comparison

  Compared with some developers waiting for the 2H26 land-supply window, C&D accelerated land replenishment earlier.

  Risks

  Rising land prices and uncertainty over sales realization could affect investment returns.

• Beike

  One of the preferred picks, benefiting from improving activity in second-hand home transactions.

  Strengths

  Highly relevant to improving second-hand home transaction volumes and transaction resilience in core cities.

  Weaknesses

  The report focuses mainly on industry transaction activity and does not elaborate on company-level earnings details.

  Comparison

  Compared with developers, Beike provides a more direct exposure to second-hand home transaction activity.

  Risks

  If the improvement in second-hand home transactions is not sustainable, business elasticity may fall short of expectations.

• Jinmao

  One of the preferred picks; 1H26 sales grew 8% year on year.

  Strengths

  Has achieved positive sales growth and plans to seek more attractive land prices during the 2H26 land-supply window.

  Weaknesses

  Still dependent on improvements in 2H26 land supply and sales momentum.

  Comparison

  Belongs to the group of developers with positive sales growth, alongside COLI and CRL.

  Risks

  Changes in land supply, margins, and the financing environment could affect performance.

• COLI

  One of the preferred picks; 1H26 sales grew 12% year on year.

  Strengths

  Leading sales growth, with the scale and core-city resource advantages of a leading developer.

  Weaknesses

  Valuation recovery still depends on sustained sales growth and margin guidance.

  Comparison

  Among the developers with positive realized sales growth listed in the report, it has one of the higher growth rates.

  Risks

  If policy support or demand in core cities is weaker than expected, valuation recovery may slow.

• China real estate sector

  The report maintains an overall positive view and recommends positioning for a potential bull-market move from July to October.

  Strengths

  Recovery in transaction volumes, a low base, policy support, and a recovery in new-home supply from September could create a positive convergence.

  Weaknesses

  Weak 1H26 earnings and the sector's balance-sheet repair remain incomplete.

  Comparison

  Core cities are outperforming lower-tier cities, while leaders and companies with quality land reserves are outperforming the sector average.

  Risks

  Policy support weaker than expected, unsustainable transaction recovery, rising land costs, and continued margin pressure.

Key data

• New-home transactions across 34 citiesUp 18% year on year in the first week of July 2026Mainly driven by improved sell-through of projects currently on sale, particularly luxury homes and entry-level small units.
• Second-hand home transactions across 18 citiesUp 12% year on year in the first week of July 2026Tier-1 cities increased 21% year on year, with weekly transactions of 25.3k units, 6% above the 2025 average.
• Second-hand home transactions across 15 cities in the first half of JulyUp 13% year on yearFoshan, Ningbo, Shanghai, and Suzhou grew by more than 20% year on year; Chengdu, Shenzhen, Beijing, and Dongguan grew by 10% to 20%.
• Developers with positive realized sales growth in 1H26COLI +12%, Jinmao +8%, CMSK +8%, CRL +6%, COGO +15%The report believes more listed developers may turn to positive sales growth in July and August.
• Land transaction gross floor area across 300 citiesDown 22% year on year in 1H26At a 20-year low; CRIC data show land acquisitions by the Top 100 developers fell 25% year on year.
• Average land premium rate13.7% in June 2026Up 8 percentage points month on month, as constrained supply of quality plots in Shenzhen, Hangzhou, Shanghai, and other cities pushed up prices.
• Central-budget urban-renewal investmentRmb97bn, up Rmb17bn or 21% year on yearThe report views this as important policy funding supporting stability in the real estate market.
• Long-duration special treasury bond supportRmb160bn, up Rmb25bn or 18.5% year on yearUsed for urban renewal and other areas, helping sustain recovery momentum.

Impact & implications

For investment implications, the report favors positioning ahead of improving sales growth in property names with stronger core-city resources, still-discounted valuations, and potential policy catalysts while the market remains focused on weak 1H26 earnings. At the sector level, improving transaction volumes and policy expectations could drive valuation recovery from July to October; at the company level, leaders with stronger products, core-city land reserves, and sales elasticity are likely to benefit more.

Risks

• Support from the July Politburo meeting or local policies may be weaker than expected.
• The improvement in core-city transactions from July to September may be influenced by seasonality or a low base, and its sustainability remains to be verified.
• If 1H26 earnings weakness exceeds market expectations, it could constrain sector valuation recovery.
• A contraction in land supply could push up quality-plot prices and weaken future project margins.
• The pace and sell-through rate of the recovery in new-home supply from September remain uncertain.
• Balance-sheet repair at developers and improvement in household home-buying expectations may remain slower than expected.

What to watch

• Year-on-year growth in new- and second-hand home transactions in core cities from July to September.
• The new-home supply pipeline and project sell-through rates after September.
• Policy language from the July Politburo meeting regarding real estate and household balance-sheet repair.
• Implementation of local housing provident-fund policies, housing trade-in programs, and urban-renewal funding.
• Listed developers' July-August sales data and sales and margin guidance at their 1H26 results meetings.
• Land prices in core cities and the land-acquisition pace of leading developers after land supply recovers in 2H26.