China real estate sales decline widened in June, with short-term recovery still weak

Overview

This report tracks the June sales performance of China's real estate sector. The core conclusion is that sales of major developers weakened further in June, with attributable sales of the Top 100 developers down 13% YoY and the Top 50 down 11% YoY. Although the year-to-date decline has narrowed slightly, the report believes the physical market recovery remains fragile, and new home sales and housing prices may remain under pressure in the coming months.

Core views

The report maintains a cautious view on the recovery of China's physical real estate market. First, developers' sales weakened again in June, as policy effects and the release of pent-up demand are fading. Second, divergence among developers is evident, with SOEs continuing to outperform thanks to advantages in brand, financing, and saleable resources in tier-1 and tier-2 cities. Third, although falling share prices have brought sector P/B valuations back to historical lows, uncertainty around the short-term sales recovery, potentially weak 1H26 results, limited upside for policy support from the July Politburo meeting, and flow-related disturbances still pose pressure. The report recommends waiting for better entry points while continuing to focus on high-quality alpha names with credible self-help improvement capabilities.

Analysis framework

Based on CRIC, CREIS, and Morgan Stanley research data, the report compares monthly attributable sales, YoY changes, and year-to-date sales performance of the Top 50, Top 100, and 25 key developers, and combines this with sales divergence across ownership types, secondary home transaction trends, marginal policy changes, valuation levels, and company-level NAV/discount frameworks to form sector and stock views.

Methodology notes

• Sector TrackingMonthly Sales Tracking

  Measure sector conditions through developers' attributable contracted sales and YoY changes.

  The report focuses on comparing June sales, year-to-date sales, and YoY changes of the Top 50, Top 100 developers, and 25 key developers to assess demand, supply, and divergence trends among developers.

• Valuation MethodNAV Discount Method

  Calculate NAV using DCF for development properties, capitalization rates for investment properties, and net debt, then apply discounts based on the developer scorecard.

  In the stock valuation section, the report uses 2026e NAV and applies discounts of 30%-45% based on scores for land bank, execution, scale, growth, profitability, financing, and leverage.

• Risk-Reward ScreeningQuality Alpha Screening

  When sector recovery is uncertain, prioritize companies with resilient EPS prospects and medium-term rerating potential.

  The report believes that without a clear recovery in the physical market, companies such as CR Land, C&D, and Seazen with self-help improvement capabilities are relatively more attractive.

Asset mapping & comparison

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

• CR Land (1109.HK)

  Preferred high-quality alpha name and Top Pick in the report

  Strengths

  Strong SOE background, brand, and financing advantages; the report notes its resilient EPS prospects and medium-term rerating potential.

  Weaknesses

  Still affected by uncertainty in sector sales recovery and pressure on home prices.

  Comparison

  Compared with most private developers and weaker mixed-ownership developers, SOE developers as a group have shown stronger sales performance.

  Risks

  Contracted sales weaker than expected, new mall openings or investment property operations below expectations, and weaker rental growth.

• C&D International (1908.HK)

  Preferred high-quality alpha name in the report

  Strengths

  The report believes its risk-reward is more attractive at current valuations and that it has a better EPS outlook.

  Weaknesses

  The company’s sales YoY in the June table was negative, and it still faces the impact of weakening sector demand.

  Comparison

  Against the backdrop of overall sector pressure, it is included in the relatively preferred basket.

  Risks

  Sales recovery below expectations, margin compression, and insufficient policy support.

• Seazen (601155.SS/1030.HK)

  Preferred high-quality alpha name in the report

  Strengths

  The report believes its risk-reward is more attractive at current valuations, and that it has medium-term rerating potential.

  Weaknesses

  Sales remain under pressure, and the disclosed stock valuation framework is quite sensitive to both development operations and investment properties.

  Comparison

  Relative to weaker private developers, the report still lists it as a name with self-help improvement potential.

  Risks

  Contracted sales below expectations, margin compression, weaker rental growth for investment properties, or slower-than-expected land acquisition pace.

• China real estate sector equities

  Sector allocation view

  Strengths

  Sector P/B valuations have retreated to historical lows, supply-demand conditions are better in some tier-1 cities, and quality developers offer relative alpha.

  Weaknesses

  The June sales decline widened, secondary home transactions slowed, and policy effects and pent-up demand may fade.

  Comparison

  SOE developers have outperformed most private developers and some mixed-ownership developers.

  Risks

  Weaker sales in 3Q, faster MoM declines in home prices, weak 1H26 results, flow-related disturbances, and unmet policy expectations.

Key data

• Top 100 developers June attributable sales YoY-13%CRIC data shows that the sales decline of the top 100 developers widened significantly in June from -2% in May.
• Top 50 developers June attributable sales YoY-11%Sales of major developers weakened, and the sales decline of the Top 50 also widened from May.
• Top 50 developers year-to-date sales YoY-14%The year-to-date decline narrowed slightly after June.
• Top 100 developers year-to-date sales YoY-16%Year-to-date sales of the top 100 developers still showed a double-digit decline.
• 25 key developers June sales YoY-19%This narrowed from -26% in May, while year-to-date sales declined 25% YoY.
• YoY growth in secondary home transaction volume across 25 citiesabout 10%This was significantly below about 30% in April and 25% in May, and the report expects it may turn negative in 3Q.
• Industry viewIn-LineThe report discloses an Analyst Industry View of In-Line.

Impact & implications

In the short term, declining sales and cooling secondary home transactions imply that the recovery of the physical real estate market remains unstable, and the MoM decline in home prices may accelerate. Even though sector equity valuations are at low levels, conditions are lacking for an immediate broad rerating. In the medium term, divergence will continue to drive investment opportunities: developers with resources concentrated in core cities, stronger brands, more stable financing, and higher EPS visibility are more likely to outperform the sector.

Risks

• Sales recovery falls short of expectations, especially if secondary home transactions turn negative YoY in 3Q.
• Reduced saleable resources for new homes lead to continued YoY declines in new home sales.
• The MoM decline in home prices accelerates in the coming months.
• Developers' 1H26 earnings may be weak, weighing on sector sentiment.
• The July Politburo meeting may have limited room for policy upside, resulting in insufficient policy catalysts.
• Continued sector flow-related disturbances drag on valuation recovery.
• At the individual stock level, risks include weaker-than-expected contracted sales, margin compression, weaker rental growth, and slower land acquisition pace.

What to watch

• Subsequent monthly YoY changes in attributable sales of the Top 100 and Top 50 developers.
• Whether secondary home transaction volume in 25 key cities turns negative YoY in 3Q.
• Whether home prices in tier-1 cities see modest upside due to better supply-demand dynamics.
• Whether the July Politburo meeting delivers better-than-expected real estate policy support.
• 1H26 earnings, EPS visibility, and cash flow performance of quality developers.
• Changes in sales, investment property operations, and valuation discounts of preferred names such as CR Land, C&D, and Seazen.