Goldman Sachs: Mainland September new home price decline narrows slightly; construction and completions underperform expectations

Goldman Sachs released a research report stating that the decline in average selling prices in the mainland primary market narrowed slightly in September, with first-tier cities continuing a positive trend; the secondary market also showed structurally positive signals, with the month-on-month decline in average secondary prices in September similar to August, but gains in first-tier cities widened and declines in lower-tier cities narrowed. In September, the number of cities among the 70 cities recording month-on-month increases in average primary and secondary home prices rose to 17 and 9, up from 15 and 3 in August. Goldman Sachs noted that price trends are encouraging, but national primary sales volume and sales value in September were still down 21% and 20% year-on-year respectively, below the bank's expectations. Meanwhile, construction activity remained weak, with completions particularly underperforming, reflecting the continued downturn in fixed asset investment and the land market. Goldman Sachs noted that developers' land investment intensity has diverged markedly since the 828 policy. Large state-owned enterprises with relatively sound balance sheets, such as China Overseas Land & Investment (00688), CHINA RES LAND (01109), and China Merchants Shekou Industrial Zone Holdings (001979.SZ), maintained active replenishment of land reserves, while CHINA JINMAO (00817) and GREENTOWN CHINA (03900) turned more cautious. Looking ahead to October, the bank expects month-on-month declines in average primary and secondary selling prices to be similar to September, with recovery momentum in first-tier cities continuing; year-on-year declines in new home sales volume and sales value may remain in the high double digits, with attention on whether first-tier cities will show signs of price stabilization or bottoming in the future.