Yamato: The sales of Naibu in May further improved, first-tier cities are showing signs of recovery. Preferred options are CHINA RES LAND (01109) and CHINA OVERSEAS (00688).

Daiwa released a research report stating that CRIC has released the forecast sales data for the top 100 real estate companies in May 2026 and the first five months of the year. The data shows that the contract sales for domestic real estate maintained a steady momentum in May, with the contract sales area and sales amount of the top 100 real estate companies decreasing by 10% and 2% respectively compared to the same period last year, narrower than the decrease of 15% and 12% in April. Month-on-month, the contract sales area and sales amount in May increased by 9% and 15% respectively, compared to the 3% and 3% growth in the same period last year, indicating that the improvement is not only driven by seasonal factors, but also showing that underlying demand is truly recovering. In addition, the average selling price in May increased significantly by 9% year-on-year, rising by 6% month-on-month to 22,842 yuan per square meter, reflecting an increase in contributions from first-tier cities and high-end projects, driving an improvement in the sales mix. Although the accumulated contract sales amount and sales area in the first five months still decreased by 17% and 21% year-on-year, the bank expects the pace of decline to further slow down in the second quarter. The bank pointed out that the gap between leading real estate companies and lagging real estate companies widened further in May. Benefiting from strong sales performance in first-tier cities, leading state-owned real estate companies generally recorded double-digit year-on-year growth in contract sales in May. According to CREIS data, the sales of these state-owned enterprises in first-tier cities increased by 9% to 134% year-on-year, with Shenzhen's year-on-year growth reaching 180% to 1,523%. The bank believes that the key catalyst for this growth was Shenzhen relaxing its purchase restrictions at the end of April. In contrast, private real estate companies continued to perform poorly, with even companies focusing on Hangzhou, such as Hangzhou Binjiang Real Estate Group and GREENTOWN CHINA, recording a decline in sales. Other surviving private real estate companies, such as SEAZEN, experienced a sharp drop in sales in May, mainly due to limited new projects and inadequate deployment in first-tier markets. Daiwa stated that with the domestic real estate sector's stock prices declining by more than 10% from their May peak, the bank's attitude towards the industry has become more positive, as the May sales data supports the prediction of a bottoming out and recovery in first-tier cities. The bank reiterated its positive outlook for leading state-owned enterprises with substantial business deployments in first-tier cities, and maintained a cautious stance on private real estate companies faced with the risk of rating downgrades as sales momentum diminishes. The bank's top picks in the sector remain CHINA RES LAND and CHINA OVERSEAS, both maintaining a "buy" rating.