Citic Securities: H1 property losses narrow to 79.1B yuan; Aug 28 policy seen widening divergence

By Zhu Jin

Industry Losses Narrow; Hong Kong, Commercial, and Core City Developers Show Stronger Profit Resilience

In the first half of 2026, total revenue of 157 listed real estate developers fell 19% year-on-year to RMB 1,178.7 billion. The industry recorded a combined net loss of RMB 79.1 billion, narrowing by RMB 23.4 billion compared to the same period last year. This improvement was primarily driven by a rebound in gross margins, reduced impairment losses, and lower expense ratios.

The top ten developers by net profit attributable to shareholders were:

• China Resources Land
• Sun Hung Kai Properties
• CK Asset Holdings
• China Overseas Land & Investment
• Times China Holdings
• Henderson Land Development
• Swire Properties
• Sino Land
• Longfor Group
• Poly Developments and Holdings

These ten companies achieved a combined net profit of RMB 50.7 billion, up 18% year-on-year, demonstrating stronger earnings resilience.

The "828 New Policy" is expected to have limited impact on developer earnings for 2026–2027. From 2028 onward, the industry is likely to see a decline in settlement scale but an improvement in profit quality, with performance divergence among developers becoming more pronounced.

Leverage Levels Stable; Cash Flow Improves

As of end-June 2026, the 157 listed developers reported an overall asset-liability ratio of 68.1% and an interest-bearing debt ratio of 29.9%, both flat compared to end-2025.

The aggregate net cash change of sample developers turned positive, shifting from a net decrease of RMB 45.2 billion in the same period last year to a net increase of RMB 12.7 billion. This improvement was mainly due to:

• Controlled development spending
• Accelerated sales collections
• Monetization of existing assets

These factors contributed to a RMB 76.6 billion increase in net operating cash inflows year-on-year.

Leading developers continued to benefit from lower financing costs in the first half of 2026. Under the 828 New Policy, short-term interest-bearing debt demand and net gearing ratios may rise, but diversified financing support over the medium to long term could enhance financial security.

Sales Decline Narrows; Investment Intensity Weakens; Concentration Among Top Developers Rises

In the first eight months of 2026, the top 100 developers recorded total contracted sales of RMB 1,897.7 billion, down 15% year-on-year—a 5-percentage-point narrowing from the full-year 2025 decline. Total land acquisition spending reached RMB 542.1 billion, down 25% year-on-year, with an overall investment intensity of 28.6%, down 4.2 percentage points from 2025.

The top 10 developers accounted for 52.6% of total sales and 64.9% of total land acquisition among the top 100, up 3.0 and 10.3 percentage points respectively from full-year 2025.

Under the 828 New Policy, sales and investment declines are expected to widen in 2027, but pressure may ease from 2028 onward. The share of top developers and core cities is likely to increase further.

828 New Policy Reshapes Real Estate Fundamentals; City and Developer Divergence to Continue

We remain positive on high-quality developers in the Hong Kong, commercial, and core city segments.

Key Risks

1. Sales below expectations: Continued downside or slower-than-expected recovery in property sales could impact developers' business scale.
2. Settlement delays: Construction progress may be affected by multiple factors, leading to delays in revenue recognition.
3. Slow credit recovery: Some highly leveraged private developers may still face distress, slowing overall industry credit repair and affecting public market debt financing scale and costs, thereby increasing completion and cash flow pressure.
4. Macroeconomic volatility: Uncertainty in the external economic environment may affect household income expectations and homebuying willingness.

About the Analyst

Zhu Jin – Head of the Real Estate, Cyclical, and Small-to-Mid Cap Research Team; Chief Analyst for the Real Estate and Construction Industries. He holds a Master's degree in Finance from the National School of Development at Peking University and has 13 years of securities industry experience. He specializes in real estate and property management research. Awards include: Best Industry金牛 Analyst (Real Estate) for three consecutive years (2018–2020), New Fortune Best Analyst (Real Estate) Finalist (2020), Institutional Investor–Caixin Capital Markets Analyst Achievement Award (Real Estate) Mainland Finalist (2020), and Crystal Ball Award for Sell-Side Analysts (Real Estate) 5th Place (2020).

Securities Research Report Title: Industry Losses Narrow; New Policies to Widen Developer Divergence – Real Estate Development Industry 2026 Interim Report Review

Release Date: September 23, 2026

Issuing Institution: China Securities Co., Ltd.

Analyst: Zhu Jin SAC No.: S1440519120002 SFC No.: BPU491

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