Open source Securities: The fundamentals of the real estate industry are still at the bottom, and first-tier cities are leading the way in stabilizing.

Open source securities research report states that in the first quarter of 2026, real estate data continued the trend of trading volume for price, with sales, completion, and investment still under pressure. However, structurally, positive signals are beginning to emerge: transactions in first-tier cities are more resilient, prices are rebounding month-on-month, second-hand housing transactions in Beijing and Shanghai reached a new high in recent years in March, and a "little spring" market is beginning to appear. With the continuous relaxation of policies and the concentrated promotion of new projects by real estate companies, it is expected that the decline in sales data will continue to narrow, and the second quarter may be a window period for industry fundamentals and policy resonance, with sector valuations expected to continue to recover. The main points of the open source securities are as follows: In the first quarter, sales data compared year-on-year are still declining, with first-tier cities showing more resilience. The National Bureau of Statistics released data on real estate investment and sales from January to March 2026. From January to March, the sales area of commercial residential buildings nationwide was 195 million square meters, a decrease of 10.4% year-on-year (compared to -13.5% for January-February), with the sales area of residential buildings decreasing by 13.1% year-on-year. The sales revenue of commercial residential buildings from January to March was 1.73 trillion yuan, a decrease of 16.7% year-on-year (compared to -20.2% for January-February), with the sales revenue of residential buildings decreasing by 18.5% year-on-year. The average selling price of commercial residential buildings in January-March was 8841 yuan per square meter, a decrease of 7.0% year-on-year. In March 2026, the sales area and amount of commercial residential buildings nationwide decreased by 7.4% and 13.3% year-on-year, respectively, while the average selling price increased by 0.7% month-on-month, showing signs of stabilization. According to the bank's tracking of key city transaction data, the first 15 weeks of 2026 saw a... The scale of land acquisition continues to decrease, and the area of completion and completion is still shrinking year-on-year. From January to March 2026, the new construction area of residential buildings nationwide was 104 million square meters, a decrease of 20.3% year-on-year (compared to -23.1% for January-February), with the new construction of residential buildings decreasing by 22.0% year-on-year. According to Wind's tracking of 322 cities in the first quarter of 2026, the transaction area of residential land increased by 22% year-on-year. The decrease in land acquisition may continue to affect subsequent new construction data. From January to March, the completed area of residential buildings was 98 million square meters, a decrease of 25.0% year-on-year (compared to -27.9% for January-February). In March 2026, the year-on-year change in the completed area of residential buildings nationwide was -17.4% and -19.3%, with the year-on-year decreases in new construction area from 2022 to 2025 all exceeding 20%. The bank expects that the year-on-year rebound in the scale of completion and completion in the industry from 2026 will be more difficult. The decrease in development investment has expanded, and the financial pressures of real estate companies still exist. From January to March 2026, real estate development investment amounted to 1.77 trillion yuan, a decrease of 11.2% year-on-year (compared to -11.1% for January-February), with residential development investment decreasing by 11.0% year-on-year. The decline in new construction and completion data and the low-level operation of sales data continue to affect investment willingness. From January to March, real estate development enterprises received 2.05 trillion yuan in funds, a decrease of 17.3% year-on-year (compared to -16.5% for January-February), with domestic loans, self-raised funds, deposits and prepayments, and individual mortgage loans decreasing by 23.7%, 5.3%, 20.1%, and 34.6% year-on-year, respectively (compared to -13.9%, -5.9%, -21.5%, and -41.9% for January-February). The year-on-year decrease in domestic loans widened, and under the impact of weak sales, the funds returned from sales to real estate companies decreased by more than 20%. Recommended targets (1) Strong credit real estate companies with a good foundation in cities and adept at grasping the needs of improving customers: GREENTOWN CHINA, C&D INTL GROUP, China Merchants Shekou Industrial Zone Holdings, CHINA JINMAO, CHINA OVERSEAS, Xiamen C&D Inc., Hangzhou Binjiang Real Estate Group, YUEXIU PROPERTY; (2) Driven by both residential and commercial real estate sectors, benefiting from the recovery of the real estate market and consumption promotion policies: CHINA RES LAND, Seazen Holdings, LONGFOR GROUP; (3) Quality property management targets highlighted under the policy of "good houses, good service": CHINA RES MIXC, GREENTOWN SER, POLY PPT SER, China Merchants Property Operation & Service, BINJIANG SER, C&D PROPERTY. Risk warning: (1) Industry sales recovery is slower than expected, financing improvement is slower than expected, and the financial risks of real estate companies are further increased. (2) Policy relaxation is slower than expected.