China property market and developers Report Interpretation

Overview

Goldman Sachs examines China’s August 28 property-policy package, which sets a path from presales toward completed-property sales. The institution expects a mixed near-term effect but argues that the gradual design, financing support and deposit mechanism should improve sector health over the longer term.

Core views

The August 28 policy package comprises a Notice issued jointly by MOHURD, the Ministry of Natural Resources and NFRA, plus two supporting Opinions from the PBOC/NFRA and the CSRC. The Notice directs local authorities to steadily move commodity housing sales from presales toward completed-property sales. The accompanying measures extend maximum mortgage terms to 40 years from 30 years and provide that mortgage repayments begin only when developers hand properties over to buyers. For the industry, Goldman Sachs expects the near-term impact to be mixed. It anticipates further land-sales weakness and consequently less new-project supply, which should speed the rebalancing of housing supply and demand. The report notes that 2025 land-sale volume and value were already 72% and 64% below their 2020 peaks, respectively, and that 7M26 volume and value declined 26% and 31% year on year. Longer term, it argues that the policy will support a healthier housing market, encourage developer consolidation and better protect the banking system. The completed-sales model would ordinarily be negative for developers because it delays cash inflows, increases margin uncertainty and weakens project IRRs. Goldman Sachs nevertheless sees several mitigating factors. Controls on presale deposits have tightened since 4Q21, containing misuse-related risks, while 30 provinces and cities have been trialing the transition since 2022 without a material effect on property sales or prices. The Notice is also not one-size-fits-all: projects that have already received construction-project planning permits can continue under the existing rules, and future projects may still use presales, albeit with stricter permits and deposit supervision. Local authorities will decide the exact timetable and scope. Financing architecture is central to the report’s reasoning. Under the lead-bank system, each project would have a single lead bank or bank syndicate to manage all funds and ensure reasonable financing needs. Goldman Sachs views this closed-loop arrangement as making risks more controllable and addressing credit bottlenecks. Development loans can be extended to up to seven years from three years currently, and principal repayment can be deferred until completion, better matching financing with the longer construction-to-sale cycle. The proposed sales-deposit system is intended to reduce price uncertainty by allowing developers to secure buyers and lock in average selling prices through legally collected deposits. Although deposit size is not specified, the report argues that, given slowing and smaller property-price declines year to date and its expectation that prices stabilize in most cities by late 2027E, a sizable deposit such as 10% or more of contract value could keep prospective buyers committed. The mortgage extension also supports affordability, though the numerical illustration’s household-income reduction is not stated clearly in the source. Goldman Sachs emphasizes that employment and income prospects remain the key determinants of a housing-demand and consumption recovery. For equities, Goldman Sachs continues to regard stronger SOE developers as best positioned during the downturn and states Buy ratings on CRL, COLI, Jinmao and Greentown. It sees a potentially more positive effect for select POE developers such as Longfor if project-level funding from the lead-bank system improves. The institution argues that accelerating construction on idle, quality land banks and projects in higher-tier cities is ultimately necessary both to support longer-term demand and to break the current negative feedback loop.

Analysis framework

The report traces policy terms through their effects on sales practices, developer cash flow and project returns, financing availability, housing demand and industry structure. It supports the near-term assessment with land-sales comparisons and uses existing policy trials, transition flexibility, loan-tenor changes and deposit arrangements to explain why the long-term outcome could be more constructive.

Methodology notes

• Industry AnalysisSupply-demand framework

  Housing supply-demand rebalancing

  The report links weaker land sales and lower new-project supply to faster supply-demand rebalancing in the housing market.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Policy transmission from sales rules and project financing to developers, homebuyers and banks

  The analysis explains how the sales-model reform affects developer cash timing, bank funding structures, buyer mortgage burdens and longer-term sector consolidation.

Asset mapping & comparison

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

• CRL

  A stronger SOE developer that Goldman Sachs states is Buy rated and views as better positioned in the housing downturn.

  Strengths

  Stronger SOE positioning during the downturn.

  Comparison

  Preferred relative to weaker developers in the current downturn.

• COLI

  A stronger SOE developer that Goldman Sachs states is Buy rated and views as better positioned in the housing downturn.

  Strengths

  Stronger SOE positioning during the downturn.

  Comparison

  Preferred relative to weaker developers in the current downturn.

• Jinmao

  A stronger SOE developer that Goldman Sachs states is Buy rated and views as better positioned in the housing downturn.

  Strengths

  Stronger SOE positioning during the downturn.

  Comparison

  Preferred relative to weaker developers in the current downturn.

• Greentown

  A stronger SOE developer that Goldman Sachs states is Buy rated and views as better positioned in the housing downturn.

  Strengths

  Stronger SOE positioning during the downturn.

  Comparison

  Preferred relative to weaker developers in the current downturn.

• Longfor

  A select POE developer that could benefit if it receives more project-level funding support through the lead-bank system.

  Strengths

  Potential access to project-level funding support.

  Weaknesses

  Benefit is conditional on receiving such support.

  Comparison

  Potentially more positive policy impact than for POEs without project-level funding support.

  Risks

  Funding support may not materialize.

Key data

• Maximum mortgage term40 yearsExtended from 30 years; repayments begin after property handover under the policy framework.
• 2025 land-sales volume versus 2020 peak-72%Reported decline from the 2020 peak.
• 2025 land-sales value versus 2020 peak-64%Reported decline from the 2020 peak.
• 7M26 land-sales volume-26% yoyReported year-on-year decline.
• 7M26 land-sales value-31% yoyReported year-on-year decline.
• Maximum development-loan tenor7 yearsExtended from 3 years currently under the proposed support mechanism.
• Property-price outlookStabilization in most cities by late 2027EGoldman Sachs expectation used in its discussion of sales deposits.

Impact & implications

Goldman Sachs expects a gradual policy transition to reduce the immediate shock to developers while constraining future supply and improving financing control. It sees stronger SOE developers as relatively better positioned and believes project-level bank support could improve the outlook for selected POE developers; broader housing recovery still depends on jobs, income and renewed construction activity in higher-tier cities.

Risks

• The completed-sales model could weaken developer cash-flow timing, increase margin uncertainty and reduce project IRRs.
• Further slowing in land sales could reduce new-project supply in the near term.
• Housing-demand recovery remains dependent on the jobs market and household income outlook.
• The size of sales deposits, and the local implementation timeline and scope, remain uncertain.

What to watch

• Local authorities’ implementation timing and scope for the completed-sales transition.
• Whether lead-bank arrangements provide effective project-level financing, particularly for select POE developers.
• The size and design of sales deposits and their effectiveness in locking in buyers and selling prices.
• Land-sales trends, new-project supply and progress in restarting idle quality projects in higher-tier cities.
• Housing prices, employment and household-income conditions, including the report’s expectation of price stabilization in most cities by late 2027E.