Real Estate Weekly Transactions Flat, Urban Renewal Financing Details Finalized
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Real Estate Weekly Transactions Flat, Urban Renewal Financing Details Finalized
In Week 24, new and existing home sales were roughly flat year-over-year, with stable market sentiment; central ministries further clarified urban renewal funding arrangements, including 97 billion yuan in central budget investment and 160 billion yuan in ultra-long-term special government bonds.
- New home sales area rose 1% month-over-month and remained flat year-over-year; existing home sales were unchanged month-over-month but up 1% year-over-year.
- Urban renewal funding clarified: 97 billion yuan in central budget investment plus 160 billion yuan in ultra-long-term special government bonds (up 25 billion year-over-year).
- Since June, median new home sales have fallen 17% month-over-month and 25% year-over-year; existing home sales declined 2% month-over-month but grew 14% year-over-year.
- Year-to-date, new home sales are down 13% year-over-year, while existing home sales are up 1%.
- Inventory decreased 0.2% month-over-month, with a sales absorption period of 27.8 months.
- Valuations of covered property developers remain at historic lows: offshore sector average NAV discount of 27%, P/B ratio of 0.5x.
- CRL (1109.HK) outperformed this week, gaining 2%.
Report interpretation
Overview
This is a China real estate weekly report issued by Goldman Sachs, focusing on market transactions, policy developments, and changes in property developer valuations during Week 24 of 2026 (mid-June). The key conclusion is that both new and existing home sales volumes, along with overall market sentiment, are essentially in a plateau phase, with no significant breakthroughs observed. Meanwhile, central ministries have disclosed additional details regarding financing arrangements under the '15th Five-Year Plan' framework for urban renewal, providing financial support for subsequent policy implementation. The report also tracks forward-looking indicators such as new housing starts and completions, and conducts cross-sectional comparisons of valuation levels among covered property developers.
Core views
On the transaction front: In Week 24, existing home sales were lackluster. New home sales area increased slightly by 1% month-over-month but remained virtually unchanged year-over-year; existing home sales stayed flat month-over-month but edged up 1% year-over-year. Seller price expectations remained stable, though agents’ bullish sentiment weakened marginally. Year-to-date (MTD), median new home sales fell 17% month-over-month, with the year-over-year decline widening to 25%, indicating ongoing pressure since mid-June; existing homes showed relative resilience, with MTD sales down only 2% month-over-month but up 14% year-over-year. On the policy and funding front: Following the release of the '15th Five-Year Plan' urban renewal framework, the National Development and Reform Commission and the Ministry of Finance further specified funding arrangements. Specifically, 97 billion yuan from the central budget will be allocated to renovating old residential areas and dilapidated buildings, benefiting approximately 8 million households; an additional 160 billion yuan in ultra-long-term special government bonds will fund underground pipeline upgrades, representing a 25-billion-yuan increase compared to previous allocations. The Ministry of Finance also confirmed that 15 key cities will be included in the subsidy program in 2026, bringing the total number of beneficiary cities to around 50, and that a diversified toolkit—including fiscal subsidies, local government special bonds, and tax incentives—will be employed. Goldman Sachs believes these details align with the accelerated rollout of the framework, and that early implementation is crucial for cushioning economic downside risks and supporting the recovery of housing demand. On the forward-looking indicators front: Regarding completions, Goldman Sachs’s proprietary GSPC tracker shows that May saw a high-double-digit year-over-year decline in completions, with an estimated full-year drop of 1%. As for new housing starts, based on land transactions across 300 cities and national cement shipment ratios, May’s year-over-year decline was in the low-teens range. On the valuation front: Valuations of covered property developers remain at historically low levels. On the offshore market, the average NAV discount stands at 27% compared to year-end 2026, with a P/B ratio of just 0.5x; on the onshore market, the average discount is 28%, with a P/B ratio of 0.4x. Compared to historical troughs in late 2008, mid-2011, and early 2014, current discounts are deeper and P/B ratios lower.
Analysis framework
This report employs an analytical framework combining 'high-frequency data tracking + policy interpretation + forward-looking indicator validation.' For transaction data, we track weekly sales areas of new homes in about 75 cities and existing homes in roughly 20 cities using third-party sources like CREIS, comparing them against historical periods to assess market heat. Sentiment indicators include Zhongyuan Real Estate’s CSI (agent price expectation index) and CAI (seller asking price index) as supplementary verification tools. Policy analysis breaks down central ministries’ funding allocation details to evaluate policy strength and implementation pace. Forward-looking indicators leverage the float glass industry’s supply-demand model (GSPC tracker) to infer completion trends, while integrating land transaction and cement shipment data to forecast new housing start trends. Valuation relies primarily on NAV (net asset value) and P/B ratios, conducting cross-cycle and cross-market historical comparisons.
Methodology notes
Supply-Demand Framework
Central to analyzing the real estate sector is monitoring the balance between supply (new starts, completions, inventory) and demand (sales area, price expectations). This report uses weekly sales data, inventory absorption cycles, and growth rates of new starts/completions to determine whether the market is currently oversupplied or undergoing rebalancing.
NAV (Net Asset Value) Valuation
For property developers, NAV represents net asset value calculated by revaluing existing land reserves and projects under construction at market prices, then subtracting net liabilities. The report compares current stock prices with year-end projected NAV values to compute discount/premium margins—a common approach for assessing the safety margin of developer valuations. Currently, the offshore sector averages a 27% discount, while the onshore sector stands at 28%, reflecting broader market pessimism about future asset values.
Inventory Cycle and Absorption Period
The inventory absorption period (inventory months) equals current inventory divided by monthly sales volume, serving as a key indicator for gauging real estate market cycles. An absorption period of 27.8 months far exceeds healthy levels (typically 12–18 months), signaling that the market remains in a destocking phase, putting downward pressure on prices.
Indirect Verification via Upstream Raw Materials
The report utilizes shipment data for float glass (completion end) and cement (new start end) as indirect indicators of real estate construction activity. Based on the logical transmission chain of 'upstream raw material demand → midstream construction → downstream completion/sales,' this method can predict changes in physical real estate workloads one to two quarters ahead.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- CRL (China Resources Land, 1109.HK)Among covered stocks, the only leading SOE developer to post a positive weekly gain (+2% wow), rated Buy
- Strengths
- State-owned background, solid financials, outperformed peers this week
- Comparison
- Best performer among strong SOE developers, surpassing peers like CMSK, COLI, Greentown
- Longfor (Longfor Group, 0960.HK)Representative of private developers, rated Neutral
- Comparison
- Stock gained 6% MTD this week, outperforming the average for strong SOEs, but still down 2% year-to-date
- Vanke (Vanke, 000002.SZ/2202.HK)Hybrid ownership developer, rated Sell
- Comparison
- A-shares down 33% year-to-date, H-shares down 20%; underperforming peers in coverage
Key data
- New Home Sales Area (Weekly)+1% wow, 0% yoyData from about 75 cities, showing slight month-over-month increase and year-over-year stability
- Existing Home Sales Area (Weekly)0% wow, +1% yoyData from about 20 cities, remaining steady
- New Home Sales Area (June MTD Median)-17% mom, -25% yoyMonth-over-month decline widened, year-over-year pressure intensified
- Existing Home Sales Area (June MTD Median)-2% mom, +14% yoyOutperforming new homes, still posting positive year-over-year growth
- New Home Sales Area (Year-to-Date Cumulative)-13% yoy11% lower than 2024, 43% lower than 2023
- Existing Home Sales Area (Year-to-Date Cumulative)+1% yoy22% higher than 2024, 8% higher than 2023
- Inventory Absorption Period27.8 monthsSlightly decreased month-over-month, with a May average of 28.5 months
- Central Budget Investment for Urban Renewal97 billion yuanAllocated for renovating old residential areas and dilapidated buildings
- Ultra-Long-Term Special Government Bonds (Urban Renewal)160 billion yuanIncreased by 25 billion year-over-year, earmarked for upgrading underground pipelines
- Offshore Sector Property Developer ValuationsNAV discount of 27%, P/B ratio of 0.5xAt historic lows
- Onshore Sector Property Developer ValuationsNAV discount of 28%, P/B ratio of 0.4xLower than troughs in 2008, 2011, and 2014
- Estimated June Contract Sales for Top 100 Developers-7% yoyWider decline than May's -2%
Impact & implications
The report views the clarification of urban renewal financing details as a positive signal, with early implementation helping buffer economic downturn risks and support housing demand recovery. However, in the short term, the widening year-over-year decline in new home sales in June and the shift of top 100 developers’ sales growth into negative territory indicate that the foundation for market recovery remains fragile. The relative resilience of the existing home market (year-to-date +1% yoy) may reflect some demand shifting from new to existing homes. From a valuation perspective, current stock prices already fully—or even excessively—price in pessimistic expectations, yet valuation repair will require sustained improvement in sales data or tangible evidence of effective policy outcomes.
Risks
- Widening year-over-year decline in new home sales in June, insufficient momentum for market recovery
- Inventory absorption period still elevated at 27.8 months, continuing price pressure risk
- Consecutive declines in new housing starts and completions, with real estate development investment still on a downward trajectory
- Time lag in policy effects reaching the sales side, potentially resulting in implementation intensity falling short of expectations
What to watch
- Specific implementation pace of urban renewal funds and project commencement status
- Full-month June sales data for top 100 developers (estimated -7% yoy)
- Whether existing home sales can continue to outpace new home sales, and its implications for price expectations
- Sales trends during the traditional off-season of July–August