National real estate data remains under pressure, while recovery in core cities is spreading

Overview

This report is Citi's industry view update on China's May NBS data and high-frequency city data for the real estate sector. The report believes that nationwide starts, completions, real estate investment, and sales remain weak, with limited near-term visibility for a broad national recovery; however, transaction volumes, some price indicators, and the land market in 5 to 6 core cities have already shown clearer signs of recovery, and the recovery is spreading from tier-1 cities to selected tier-2 cities, from secondary homes to new homes, and from a few developers to more developers.

Core views

The core judgment is "national weakness, core cities recover first." National NBS data remains on a downward path, especially with significant pressure on real estate investment, completions, and sales area; however, tier-1 city home prices improved MoM, weekly secondary and new home transactions accelerated noticeably in early June, and secondary home listings declined, indicating marginal improvement in supply and demand in core cities. On the land side, reduced land supply in core cities in 5M26 boosted land market heat in Shenzhen, Shanghai, and other cities. If supply increases modestly in 2H26, quality developers may still have opportunities for land acquisition and sales recovery. On the policy side, the five-year urban renewal plan, central budget and ultra-long special government bond funding, as well as local housing provident fund, housing voucher, and trade-in policies, will support recovery momentum and household expectations.

Analysis framework

The report combines national monthly real estate data from NBS, CREIS 300-city land transactions, MOF land transfer revenue, high-frequency transaction data from WiND and CREIS, the 70-city home price index, and local policy tracking to conduct a comparative analysis of nationwide aggregate pressure versus structural recovery in core cities, and on this basis screens developers with land acquisition growth in 2025 and advantageous 2026E sellable resources.

Methodology notes

• Industry Monthly Data TrackingNBS Real Estate Data Framework

  Starts, completions, real estate investment, sales value, sales area, and inventory

  Used to measure aggregate pressure on the industry at the national level. In May, housing starts, completions, real estate investment, residential sales value, and sales area all declined YoY, showing that the national recovery remains fragile.

• High-Frequency Transaction TrackingWiND and CREIS City Transaction Tracking

  New home transactions in 34 cities and secondary home transactions in 18 cities

  Used to capture leading recovery in core cities through weekly city transaction data. In the first week of June, both new home and secondary home transactions improved significantly YoY and accelerated further versus April and May.

• Land Market AnalysisCREIS 300-city and MOF Land Revenue Tracking

  Land transaction area, transaction value, and government land transfer revenue

  Used to judge developers' willingness to replenish land reserves and the heat level of local land markets. In May, the decline in land transactions across 300 cities narrowed versus April, while core cities saw partial warming due to reduced supply.

• Policy Catalyst AnalysisUrban Renewal and Local Easing Policy Tracking

  Urban renewal, budget funding, special government bonds, provident fund optimization, housing voucher resettlement, and trade-in programs

  Used to assess demand expectations and the sustainability of transaction recovery. The report believes this round of local easing comes when the market already shows signs of recovery, helping strengthen upward momentum.

Asset mapping & comparison

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

• China real estate sector

  Industry allocation direction

  Strengths

  Improving transactions in core cities, declining secondary home listings, and stronger policy support suggest sales recovery may continue into 2H26E.

  Weaknesses

  National NBS starts, completions, investment, and sales remain weak, and the recovery has not yet spread comprehensively.

  Comparison

  Compared with national aggregate data, high-frequency transactions and price performance in core cities are stronger.

  Risks

  Weak 1H26 earnings, sluggish national demand, slow policy transmission, and declining prices in tier-3 cities may weigh on valuation recovery.

• Residential markets in tier-1 and core tier-2 cities

  Main vehicle of recovery

  Strengths

  Tier-1 city prices improved MoM, selected tier-2 cities are supported by industrial upgrading, and new home and secondary home transactions accelerated in early June.

  Weaknesses

  Recovery remains concentrated in 5 to 6 cities and has not yet been confirmed across a broader range of cities.

  Comparison

  Performance is clearly better than in tier-3 cities, where price declines continue to widen.

  Risks

  As supply of new launches, especially luxury projects, increases, sell-through speed may slow.

• Land markets in core cities

  Signal of developers replenishing land banks and recovering expectations

  Strengths

  Land supply in core cities in 5M26 was down 31% YoY, driving land market heat in Shenzhen, Shanghai, and other cities.

  Weaknesses

  MOF land transfer revenue remains down 27% YoY, and the national land market is still weak.

  Comparison

  The decline in CREIS 300-city land transaction value narrowed sharply in May versus April, indicating marginal improvement.

  Risks

  If land supply in core cities increases in 2H26, pressure on land prices and profit margins may rise.

• COLI, Jinmao, CRL, Poly Property, Beike, C&D

  The report's preferred stock basket

  Strengths

  The report prefers names with land acquisition growth in 2025, ample 2026E resources, and the ability to benefit from transaction recovery in core cities, and specifically notes that C&D has become more attractive after expanding in Shenzhen and upgrading its products.

  Weaknesses

  At the stock level, the summary does not disclose specific target prices, earnings forecasts, or valuation details.

  Comparison

  Compared with the broader developer universe, the report favors companies with quality land banks and core city resources.

  Risks

  If transaction recovery in core cities is interrupted, 1H26 earnings disappoint, or overheated land markets pressure profit margins, performance of these names may be affected.

Key data

• May housing starts areaYoY -25%, about 40 million sq m GFAApril was YoY -27%, and the May level was close to May 2003.
• May completion areaYoY -20%, about 22 million sq m GFAApril was YoY -19%, and the May level was close to May 2006.
• May real estate investmentabout YoY -25%April was about YoY -20%; chart data shows single-month REI at about -24.5%.
• May residential sales value and sales areaResidential sales value YoY -8%, sales area YoY -12%In April they were about YoY -6% and -9%, respectively, with the declines widening.
• 70-city home price performanceTier-1 city new home/secondary home prices MoM +0.2%/+0.4%Tier-2 cities were broadly stable, while declines widened in tier-3 cities; the numbers of cities with MoM increases in new home/secondary home prices were 16/10.
• Inventory changeCompleted but unsold inventory YoY -0.4%, inventory within three years YoY -2.8%Inventory pressure eased marginally, but nationwide sales remain weak.
• CREIS 300-city land transactions in MayTransaction area YoY -26%, transaction value YoY -9%A clear improvement from April's transaction area -28% and transaction value -40%.
• MOF land transfer revenue4M26 YoY -27%Government land revenue remains weak, indicating that an aggregate land market recovery has not yet fully unfolded.
• Secondary home transactions in the first week of June27.6 thousand units per week across 18 major cities, YoY +25%Continued to accelerate versus +23% in May and +10% in April.
• New home transactions in the first week of June22.4 thousand units per week across 34 cities, YoY +29%Reached a three-month high, with significant improvement versus +1.5% in May and +8% in April.
• Secondary home listings39 cities year-to-date -1.8%Reduced seller supply helps stabilize prices and transaction expectations.
• Policy funding2026 central budget investment Rmb97bn, ultra-long special government bonds Rmb160bnUp by Rmb17bn and Rmb25bn YoY, respectively, to support areas such as urban renewal.

Impact & implications

The investment implication is that the real estate sector should not be simply extrapolated from national data; structural recovery is more concentrated in high-tier core cities and in developers with quality land banks and ample 2026E sellable resources. Weak 1H26 earnings may bring short-term profit-taking and pullbacks, but if core city transactions continue to grow YoY from June to August, land market heat remains firm, and urban renewal policies are gradually implemented, the sector may see a better allocation window.

Risks

• National real estate data remains weak, and near-term visibility for a national recovery is limited.
• Weak 1H26 earnings may trigger profit-taking and share price volatility from June to July.
• Recovery in core cities may remain limited to 5 to 6 cities and may not spread more broadly.
• As luxury and upgrade-oriented new home supply increases, sell-through speed has already shown signs of slowing since May.
• Widening home price declines in tier-3 cities may drag on household expectations and sector valuations.
• If implementation of urban renewal, housing voucher, provident fund, and trade-in policies is slow, demand recovery may weaken.
• Macro data showing retail sales YoY -0.6% and FAI YoY -7.0% indicates continued pressure on demand and the investment environment.

What to watch

• Whether weekly new home transactions in 34 cities and secondary home transactions in 18 cities can continue to grow YoY from June to August.
• Whether secondary home listings continue to decline, especially the listing trend across 39 cities.
• Whether MoM home price improvement in tier-1 and selected tier-2 cities can be sustained and spread to more cities.
• After land supply in core cities increases in 2H26, changes in land market heat and developer profit margins in Shenzhen, Shanghai, and other cities.
• The implementation pace of the five-year urban renewal plan, Rmb97bn central budget investment, and Rmb160bn ultra-long special government bonds.
• The actual pull on transactions from local housing provident fund optimization, housing voucher resettlement, and housing trade-in policies.
• If a pullback occurs around August due to weak 1H26 earnings, whether it forms the better entry window mentioned in the report.