According to the research report released by GTJA Securities, TOP50 real estate developers' sales performance showed marginal improvement in May following March, with a YoY decrease of 31%, a narrowing decline of 16pct and a weak recovery. The real estate industry still adheres to dual-end allocation, namely core assets after clearing capacity and restructuring targets. The PB strategy for resolving financial risks is still preferred. GTJA recommends two ends of the industry, the first is core assets, such as Poly Developments and Holdings Group (600048.SH), China Merchants Shekou Industrial Zone Holdings (001979.SZ), and China-Singapore Suzhou Industrial Park Development Group (601512.SH), and the second is restructured targets, with CIFI Hold GP (00884) and Sunac (01918) being the beneficiaries.

In May 2024, TOP50 real estate developers' sales performance showed marginal improvement after March, with a YoY decrease of 31%, a narrowing decline of 16pct and a weak recovery. According to CRIC data (same below), the TOP50 real estate developers had a single-month sales volume of 219.6 billion yuan in May based on equity sales, down 31% YoY, and the decline rate narrowed by 16pct. Among them, the sales volume of the top 10 real estate developers accounted for 59%, higher than the annual average of 55% in 2023, and the resilience of leading real estate developers continued to show. In terms of absolute scale, although the sales volume in May increased by 9% MoM compared with April, it was still lower than the monthly average in the second half of 2023, and as a whole, it remained at a low level. As of the end of May, the TOP50 real estate developers had accumulated sales of 938.8 billion yuan, down 45% YoY, corresponding to a significant decrease in the threshold of various real estate developers: the thresholds of the TOP10, TOP30 and TOP50 real estate developers were reduced to 23.8 billion yuan, 7.9 billion yuan and 5.4 billion yuan, respectively, down 53%, 51% and 44% YoY.

Central SOEs took the lead in recovery, with the sales volume ratio rising to 72%, and all seven real estate developers with single-month sales exceeding CNY10 billion were central SOEs. In May, the equity sales volume of central SOEs, state-owned enterprises and private enterprises among the TOP50 real estate developers was CNY107.8 billion, CNY49.5 billion and CNY62.3 billion, respectively, down 23%, 15% and 49% YoY, and the decline rate narrowed by 17pct, 36pct and 7pct, respectively. Thus, from an overall perspective, the marginal improvement of central SOEs was greater, and it further promoted the increase of their sales ratio by 3pct MoM to 72%. In addition, the number of real estate developers with equity sales exceeding CNY1 billion in a single month rebounded to seven in May, all of which were central SOEs, including Poly, Greenland, Vanke, China Resources, China Merchants, Greentown, and Jianfa. The list remained consistent with that of March, and Poly ranked first with an equity sales volume of CNY27.4 billion.

The intensive implementation of policies in May will help to further improve sales data in June. The relaxation of demand-side policies represented by interest rate cuts and the progress of government de-stocking will be the focus of policy observation in the future. Despite the intensive launch of central and local policies in May, the market feedback showed that the increase in sentiment was more reflected in indicators such as project visits and second-hand house viewings, and there was no significant boost to sales data, which can be attributed to the short policy time and heavy wait-and-see sentiment among home buyers. In June, with the continuous fermentation of policies, synchronously advancing efforts from residents and the government, and real estate developers' promotions for the mid-year, sales data is expected to further improve. Looking ahead to future policies, considering that the monthly repayment amount is currently the main constraint for residents, the more important policy is the interest rate policy. Therefore, the pace of interest rate adjustment and the evolution of the de-stocking policy will be the core indicators for predicting future sales.