Citi turns bullish on China property after 31% May Day sales jump

Citigroup Inc. has upgraded its view on China’s real estate sector to “Positive,” adding its voice to a growing chorus of analysts who see signs of a bottom after a multi-year slump. The call comes as secondary home transactions in 25 key cities jumped 31% year-over-year during the recent May Day holiday, the latest in a string of data points suggesting government stimulus is starting to take hold.

"This is the lowest down payment requirement in history, which will be very helpful in boosting the property market," Yan Yuejin, deputy director at E-house China R&D Institute, said, referring to one of Beijing's key support measures.

The holiday sales data provided a strong signal of improving sentiment. Beyond the 31% aggregate increase in secondary transactions, primary sales in cities like Wuhan and Hefei surged 120% and 70% year-over-year, respectively, according to Citi’s report. The bank named China Overseas Land & Investment Ltd. (00688.HK) and China Jinmao Holdings Group Ltd. (00817.HK) as its top picks, citing their sales growth and ample resources.

A sustained property recovery is crucial for Beijing’s broader economic goals, as policymakers seek to restore household confidence and pivot toward consumption-led growth. While the recent data offers the most significant "green shoots" to date, the sector's contribution to GDP has fallen from a peak of 25% to nearly 18% in 2025, and a return to its former dominance is unlikely.

A Policy-Driven Rebound

The nascent recovery is not accidental. It follows a comprehensive and sustained policy push from Beijing throughout 2024 and into 2025. Authorities have systematically dismantled many of the restrictions put in place during previous boom years.

Key measures include lowering the minimum down payment ratio for first- and second-home purchases to a historic low of 15%, according to the People's Bank of China. Additionally, tax policies have been optimized, with a lower 1% deed tax extended to larger properties and a nationwide value-added tax exemption for homes held over two years. According to the China Index Academy, over 300 cities introduced more than 700 such easing policies in the first 11 months of last year.

A Chorus of Cautious Optimism

Citi is not alone in its newfound optimism. Bank of America Global Research also sees indications a recovery is taking hold, favoring developers with heavy exposure to top-tier cities like China Resources Land Ltd. and China Overseas Land & Investment Ltd. Asset manager Eurizon SLJ Capital said 2026 will likely be the year the market bottoms.

“It certainly looks like the shape is bottoming,” said Leonid Mironov, a portfolio manager at Gavekal Capital Ltd. This growing consensus marks a significant shift in sentiment after years of negative headlines and developer defaults.

Déjà Vu? The Specter of False Dawns

Still, the history of China's property crisis is littered with premature calls for a turnaround. Goldman Sachs Group Inc. declared an “inflection point” in 2024, only for the downturn to deepen. That lesson has led some analysts to remain skeptical.

Morgan Stanley believes the recent uptick may be flattered by base effects and pent-up demand, questioning its sustainability and noting the recovery remains elusive in lower-tier cities. Indeed, the recent improvements have been most pronounced in the used-home markets of megacities like Beijing and Shanghai. With a large overhang of unsold homes and structural challenges like a shrinking population, the path to a balanced, healthy market remains long.

This article is for informational purposes only and does not constitute investment advice.