The property sector remains in an adjustment phase, with developers showing continued divergence in performance, according to a GLMS SEC research report. As high-quality projects gradually deliver, some developers may see a turning point in gross margins. For Q4, sales could face pressure year-on-year due to high-base effects from policy stimulus, though core urban land acquisitions earlier this year may provide some support.

The report recommends focusing on developers securing plots in prime areas of tier-1 and strong tier-2 cities, potential turnaround plays, and competitive real estate platforms. Key insights include:

**Financials: Weak Performance Persists, Divergence Widens** In the first three quarters of 2025, revenue for 23 sampled developers fell 12.5% YoY (narrowing from 2024), while net profit attributable to parents plunged 161.6%. Binjiang Group and Urban Development posted growth, while China Enterprise turned profitable. Overall gross margin dipped slightly to 13.0%, though state-backed firms saw margin recovery. Contract liabilities dropped 28.7% to ¥1.21 trillion, covering revenue at 1.4x. Total assets shrank 10.5% to ¥7.4 trillion, with debt-to-asset ratio edging up to 77.0%.

**Operations: Sales Slowdown, Land Market Rationalizes** National property sales value and area declined 7.9% and 5.5% YoY, respectively (less severe than 2024). Top 100 developers saw sales drop 12.8%, with C&D, China Jinmao, and Yuexiu bucking the trend with growth. Land transactions in 300 cities fell 7.6% in area but rose 11.9% in value, as leading state-backed and quality-focused developers like China Overseas, Greentown, and Poly actively replenished prime urban inventories.

**Financing: Gradual Recovery, State Backing Favored** Developer bond issuance rebounded 3.9% YoY in Jan-Sep 2025, with average rates sliding from 5.5% (2021) to 2.8% (H1 2025), hitting 2.5% in July-August. Outstanding bonds stood at ¥2.14 trillion (70.4% credit bonds), with ¥143bn maturing in Q4 and ¥664bn in 2026. Shimao, CR Land, and Poly face high refinancing needs amid persistent liquidity stratification.

**Risks**: Policy underperformance; worsening developer liquidity; weaker market sentiment.