May Day Housing Sales Surge YoY, New Local Policies Boost Market Recovery

Overview

This report is the 18th weekly report on China Real Estate released by Goldman Sachs, focusing on the market performance during the 2026 Labor Day holiday period and the impact of recent local policy relaxations. The core conclusion states that with new rounds of easing measures launched by core cities like Shenzhen and Guangzhou, new and second-hand home sales volume rebounded significantly YoY during the holiday, and price expectations showed signs of improvement. Although YTD new home sales still show a downward trend, the second-hand market shows strong resilience. Currently, the developer sector valuation is at a historical low, especially for high-quality state-owned developers, offering a high safety margin.

Core views

On the policy front, a new wave of local easing is unfolding. Among first-tier cities, Shenzhen eased purchase restrictions in core areas, allowing local households to purchase up to 3 units, increasing quotas for non-local residents by 1 unit, and raising the individual provident fund loan cap to 700,000 RMB; Guangzhou raised the individual provident fund loan cap to 1 million RMB and introduced trade-in subsidies up to 30,000 RMB. Additionally, second and third-tier cities such as Suzhou, Tianjin, Wuhan, and Yangzhou stimulated demand through measures such as increasing provident fund limits, land repurchases, and issuing home purchase subsidies. Regarding sales data, market performance during the Labor Day holiday (May 1st to 5th) was strong. New home daily average sales in over 20 monitored cities grew 13% YoY compared to 2025, and 57% compared to 2024; second-hand home daily average sales in over 10 monitored cities grew 27% YoY compared to 2025, and 70% compared to 2024. On the price front, transaction prices in monitored cities rose 2% MoM, the Central Property Intermediary Sales Index (CSI) rose 1.7 percentage points MoM, indicating stronger intermediary expectations for rising home prices, aided by a 17% MoM decrease in newly listed inventory supply. Looking at cumulative data, YTD new home sales area averaged a 17% YoY decline, down 14% and 50% respectively compared to 2024 and 2023 same periods; meanwhile, second-hand home sales area averaged only a 4% YoY decline, up 25% and 4% respectively compared to 2024 and 2023 same periods. Regarding inventory, total monitored city inventory rose slightly 0.1% MoM, absorption cycle was 29.0 months, slightly lower than 29.3 months in April. In terms of capital market performance, covered high-quality SOE developers' stock prices rose 7% on average weekly, with China Overseas Land & Investment (0688.HK) standing out with a 12% weekly gain; private developers and other SOE developers rose 3% on average weekly. Offshore covered developers' stock prices rose 6% on average weekly, outperforming the MSCI China Index; onshore covered developers rose 3% on average weekly, outperforming the CSI 300 Index. Regarding valuation, current trading prices of offshore and onshore covered developers were discounted an average of 20% and 13% respectively relative to end-2026 Net Asset Value (NAV), with Price-to-Book (P/B) ratios of 0.6x and 0.5x respectively, falling within historical low ranges.

Analysis framework

The report adopts a combined methodology of high-frequency data tracking and policy event analysis. First, it reviews the latest real estate easing policies released by major cities to assess policy intensity and coverage. Second, it uses high-frequency sales data from third-party data agencies such as CREIS to compare sales and price changes during the Labor Day holiday against prior-year same periods and pre-holiday weeks to verify policy effects. Meanwhile, it combines Centaline Property's Intermediary Sentiment Index (CSI) and Seller Inquiry Index (CAI) to observe micro-changes in market expectations. Finally, it deduces supply-side conditions via Goldman Sachs' proprietary completion tracker (GSPC, based on float glass supply-demand models) and new commencement data, combined with stock price performance and historical valuation multiples (P/B, NAV discount) for horizontal and vertical comparisons to assess the sector's investment value.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply and Demand Framework

  Analyzing market balance by monitoring changes in new home/second-hand home sales volume (demand) and inventory/new starts/completions (supply)

  The report determines whether the market is in a state of excess demand or oversupply by comparing sales growth rates with inventory absorption cycles, thereby predicting price trends.

• Valuation MethodNAV Net Asset Value Method

  Using Net Asset Value (NAV) as the core anchor for real estate developer valuation

  Since real estate developer assets are primarily land and work-in-progress projects, their book values are often distorted; NAV reflects true value better through revaluation of net asset value. The report calculates the discount rate of stock price relative to NAV to determine the degree of undervaluation.

• Industry/Industrial Analysis FrameworkUpstream, Midstream, Downstream Supply Chain Transmission

  Inferring downstream real estate completion status through upstream building materials (such as float glass) data

  Goldman Sachs uses its own float glass supply-demand model (GSPC tracker) to indirectly estimate real estate completed area, because glass is an important material in the completion stage, and its demand is highly correlated with completion progress.

Asset mapping & comparison

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

• China Overseas Land & Investment (0688.HK)

  Representative of high-quality SOE developers, benefiting from market recovery and valuation repair

  Strengths

  Central enterprise background, low financing costs, stable finances, this week's stock performance better than peers (+12%)

  Comparison

  Outperforms among covered high-quality SOEs

• Greentown China (3900.HK)

  Hybrid ownership developer, strong product power, benefiting from release of improvement demand

  Strengths

  Stock price rose 5% this week, rose 21% YTD

  Comparison

  Performance better than private developer average

Key data

• Labor Day New Home Daily Average Sales YoY Growth Rate+13% (vs 2025), +57% (vs 2024)Data from 20+ monitored cities
• Labor Day Second-hand Home Daily Average Sales YoY Growth Rate+27% (vs 2025), +70% (vs 2024)Data from 10+ monitored cities
• YTD New Home Sales Area YoY-17%Average of approximately 75 monitored cities
• YTD Second-hand Home Sales Area YoY-4%Average of approximately 20 monitored cities
• Inventory Absorption Cycle29.0 monthsSlight MoM decline, improved compared to end-of-2025 levels
• Offshore Developer P/B Valuation0.6x 2026EDiscounted 20% compared to 2026 year-end NAV

Impact & implications

The report believes that continuous local policy easing is gradually showing results, especially in core tier-1 and tier-2 cities where market confidence has recovered. The recovery in sales data helps alleviate developers' capital pressure and subsequently reduce default risks. For investors, the current real estate developer sector valuation is at an historically extremely low level, providing a high safety margin. High-quality state-owned developers, due to financing advantages and increased market concentration, are more likely to benefit from this round of recovery. In addition, activity in the second-hand market also supports replacement demand for the new home market.

Risks

• Policy effects fail to meet expectations, sales recovery unsustainable
• Macroeconomic downward pressure affects residents' purchasing ability
• Debt risks of some real estate developers have not been fully cleared

What to watch

• Whether more cities follow suit to implement easing policies
• Whether May full-month sales data can continue the strong momentum of the holiday
• Developer financing environment and bond market performance