China Securities Co., Ltd.: First-tier cities in September maintain high land premium rates, optimistic about high-quality commercial real estate companies.

China Securities Co., Ltd. released a research report stating that the volume and price of real estate sales continued to be weak. In September, the national commodity housing sales area decreased by 10.5% year-on-year, and in October, the new housing transaction area in 38 cities decreased by 30% compared to the same period last year. In September, the price index of second-hand residential housing in 70 large and medium-sized cities in the country decreased by 0.6% month-on-month, with prices falling in September in all 70 cities compared to the previous month. In September, the year-on-year decrease in real estate development investment was 21.3%, expanding by 1.8 percentage points compared to August. Developers continued to focus on first-tier cities with strong certainty. In September, the premium rate for land transactions in first-tier cities remained at a high level of 14%. China Securities Co., Ltd.'s main points are as follows: The National Bureau of Statistics released data on the real estate market in September 2025. In September, the monthly sales area, investment amount, new construction area, and completed area were 85.31 million square meters, 739.7 billion yuan, 55.98 million square meters, and 34.35 million square meters, respectively. The year-on-year growth rates were -10.5%, -21.3%, -14.4%, and +1.5%, respectively. The previous values were -10.6%, -19.5%, -20.3%, and -21.4%. Market sales continued to be weak. In September, the national commodity housing sales area decreased by 10.5% year-on-year, with a slight narrowing of the decrease by 0.1 percentage point compared to August. The latest data shows that as of October 17, the new housing transaction area in 38 cities decreased by 30% year-on-year, indicating continued market sales pressure. Housing prices remained weak, with the price index of second-hand residential housing in 70 large and medium-sized cities in the country dropping by 0.6% in September compared to the previous month, with prices falling in all 70 cities in September. Investment continues to be under pressure, with high premium rates for land sales in first-tier cities. In September, the year-on-year decrease in real estate development investment was 21.3%, expanding by 1.8 percentage points compared to August. In September, the year-on-year decrease in new construction area was 14.4%. Completed area increased by 1.5% year-on-year, with the growth rate turning positive due to the low base effect from the same period last year. The sustainability of the growth needs further observation. Against the backdrop of continued weakness in the overall market sales, developers continue to focus on first-tier cities with strong certainty, with the premium rate for land transactions in first-tier cities remaining at a high level of 14%. Positive outlook for high-quality commercial real estate companies and developers and property management companies with a focus on core cities. Risk alert: The main risks in the real estate industry are sales, turnover, and the possibility that the credit repair of real estate companies may not meet expectations. 1. Sales below expectations: The real estate market sales are still at a bottoming out stage, with the risk of continued downturn or recovery falling below expectations in the future; 2. Turnover below expectations: Weak sales lead to poor sales receipts for real estate companies, tightening sources of funds, impacting project construction progress, or leading to turnover below expectations. 3. Credit repair of real estate companies below expectations: There is still the possibility of defaults for some highly leveraged real estate companies, leading to slow progress in the overall industry's credit repair, affecting the size and cost of financing for real estate companies in the public market, thereby exacerbating the pressure on industry completion and cash flow.