China Property Sales Remained Weak in July, While Soft Home Prices and Low Construction Activity Reinforce a Cautious Industry View

Overview

The report believes that China’s property market remained weak in July: although the decline in new-home sales narrowed from June, home prices, secondary-home transactions, and construction activity showed no improvement. A weak land market and limited new-project supply may continue to constrain real estate development investment and subsequent primary-home sales. The sector view remains cautious, but quality companies may outperform through recurring income, financial strength, and operational execution.

Core views

Primary-home sales remained weak despite a low base, while weaker secondary-home transactions may feed through to home prices and the primary-home market. Policy upside is limited and homebuyer willingness remains low; home prices in most markets are expected to continue declining MoM in the coming months, with declines potentially accelerating during summer, while Tier-1 city home prices may remain relatively stable. Investors should avoid broad-based exposure and focus on quality developers with reliable self-help growth capabilities.

Analysis framework

The report combines July property data from the National Bureau of Statistics, the 70-city home price index, real-time secondary-home transaction data for 25 higher-tier cities, and developer assessments across land bank, execution, scale, growth, profitability, financing, and leverage, to evaluate sector trends and the valuation and risk-reward of key companies.

Methodology notes

• Valuation methodsNet Asset Value Method

  2026E Net Asset Value

  Development properties are valued using discounted cash flow, and investment properties using capitalization rates. Net debt is deducted to derive NAV per share, with discounts applied based on developer scores.

• Valuation methodsDiscounted Cash Flow Method

  Development Property Valuation

  Discount rates for development properties are 8.0%, 8.2%, and 8.9% for China Resources Land Ltd., C&D International Investment Group Ltd., and Seazen Holdings Company Ltd., respectively.

• Valuation methodsDeveloper Scorecard

  NAV Discount

  Scoring dimensions include land bank, execution, scale, growth, profitability, financing, and leverage; covered companies generally apply NAV discounts of 30%-45%.

Asset mapping & comparison

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

• China Resources Land Ltd. (1109.HK)

  Top pick; rated Overweight

  Strengths

  Solid recurring-income base; strong scores in land bank, execution, scale, growth, profitability, financing, and leverage; a high proportion of valuation comes from investment properties.

  Weaknesses

  Still exposed to industry declines in sales, home prices, and development investment.

  Comparison

  Ranks as the top pick among the quality developers covered, ahead of Seazen Holdings Company Ltd.

  Risks

  Contracted sales weaker than expected; new mall openings slower than expected.

• Seazen Holdings Company Ltd. (601155.SS)

  One of the preferred recommendations; rated Overweight

  Strengths

  Possesses stable recurring-income characteristics, with investment properties and commercial operations providing relative support.

  Weaknesses

  Development margins and recurring-income growth may remain under pressure.

  Comparison

  Ranks behind only China Resources Land Ltd. among quality companies, with a more favorable investment rationale than cyclical exposure to pure-play developers.

  Risks

  Development business margin compression faster than expected; recurring-income growth weaker than expected; slower-than-expected progress in injecting malls into private REITs.

• C&D International Investment Group Ltd. (1908.HK)

  A pure-play developer with relatively attractive risk-reward; rated Overweight

  Strengths

  Offers attractive risk-reward at the current valuation; 2026E NAV is HK$29.69/share, applying a 35% discount.

  Weaknesses

  Primarily a development business and therefore more sensitive to changes in sales and margins.

  Comparison

  Versus other pure-play developers in the sector, the report considers it to offer superior risk-reward at the current valuation.

  Risks

  Gross margin weaker than expected; land acquisition progress slower than expected.

Key data

• National New-Home Sales Value YoY in July-8.9%-13.9% in June; -13.1% cumulatively in the first seven months.
• National New-Home Sales Area YoY in July-11.8%-14.3% in June; -11.8% cumulatively in the first seven months.
• 70-City Home Prices MoM in JulyNew homes -0.2%, secondary homes -0.3%The pace of decline was broadly similar to the prior month, but more cities saw prices remain flat or decline.
• New Construction Starts and Completions YoY in JulyStarts -28%, completions -19%Cumulative declines in the first seven months were 24% and 23%, respectively.
• Real Estate Development Investment YoY in the First Seven Months-19.2%Further widened from -18.0% in the first six months.
• China Resources Land Ltd. 2026E Net Asset ValueHK$60.54/shareIncludes HK$18.44 for development properties, HK$55.72 for investment properties, and HK$13.62 of net debt; applying a 30% discount implies a target price of HK$42.38.

Impact & implications

If secondary-home transactions remain subdued, home-price declines could accelerate and further weigh on primary-home absorption, while development investment and new-project supply would also face downside pressure. Sector-wide valuation recovery potential is limited, but companies with recurring income from investment properties and mall operations, as well as stronger financing and leverage profiles, may demonstrate relative defensiveness and alpha in a weak cycle.

Risks

• Persistently weak homebuying sentiment and further deterioration in secondary-home transactions.
• Home-price declines faster than expected and transmission to new-home sales.
• A weak land market continuing to pressure new-project supply, real estate development investment, and sector sales.
• Contracted sales, gross margins, or recurring income at key companies falling short of expectations.
• Mall openings, commercial operations, or asset securitization progressing more slowly than expected.

What to watch

• MoM changes in new-home and secondary-home prices across 70 cities, especially whether Tier-1 cities can remain stable.
• Whether real-time secondary-home transactions in higher-tier cities can stabilize and recover.
• National new-home sales value, sales area, and absorption pace.
• YoY changes in new construction starts, completions, and real estate development investment.
• Changes in land transactions and new-project supply.
• Contracted sales, recurring income, margins, and mall-opening progress at China Resources Land Ltd., Seazen Holdings Company Ltd., and C&D International Investment Group Ltd.