Goldman Sachs sees China developers' cash earnings rising 30% to 50%

Goldman Sachs projects China's top developers could see cash earnings surge 30% to 50% by 2028 as tier-1 home prices stabilize.

Goldman Sachs said tier-1 Chinese home prices are showing signs of stabilization, projecting cash earnings at CHINA OVERSEAS and CHINA RES LAND could rise 30% and 50% respectively by 2028 under an optimistic scenario.

"Home prices in China's tier-1 cities have shown encouraging signs of stabilization, and the equity market has consistently acted as a leading indicator in previous real estate cycles," Goldman Sachs said in a report dated June 1.

Since end-March 2026, mainland developers under Goldman's coverage have gained 6% on average, while state-owned developers rose 17%. CHINA OVERSEAS and CHINA RES LAND each surged about 30%. The bank applied its four-pillar recovery framework — evaluating demographics, income, affordability and supply conditions — across tier-1 and tier-2 cities, identifying Shanghai and Shenzhen as leading the current turning point.

Beyond Shanghai and Shenzhen, Goldman selected 15 cities to form a "leading cities" cluster. If home prices in these cities reach an inflection point — achieving the 15% increase projected for Shanghai and Shenzhen by end-2028 — CHINA OVERSEAS, with over 80% of its saleable resources in leading cities, would be the biggest beneficiary in contracted sales growth. CHINA RES LAND may also see improved mall performance and rental income from the wealth effect of rising home prices.

Under Goldman's optimistic scenario, CHINA OVERSEAS' cash earnings are projected to increase by more than 30% by 2028 compared with 2026 estimates, while CHINA RES LAND's could rise more than 50%. The projections reflect a market that may be pricing in a broader recovery than the bank's base-case scenario.

The current rebound suggests investors are looking beyond near-term headwinds in China's property sector. State-owned developers with concentrated exposure to tier-1 and leading cities are best positioned to capture the upside, Goldman said. The bank's analysis marks a notable shift in tone from earlier in the cycle, when most global investment banks maintained cautious stances on Chinese real estate amid prolonged price declines and developer liquidity crises.

Four-Pillar Framework Points to Divergent Recovery

Goldman's framework evaluates four dimensions across cities: demographics, income levels, housing affordability and supply conditions. The analysis shows tier-1 cities scoring highest across all pillars, while lower-tier cities face structural headwinds from population outflows and excess inventory. This divergence means the recovery is likely to be concentrated in the 15-city leading cluster rather than broad-based across the country.

For CHINA OVERSEAS, the bank's analysis implies contracted sales growth could materially outpace peers given its land bank concentration in premium locations. For CHINA RES LAND, the dual exposure to property development and commercial real estate — where malls benefit from rising consumer confidence tied to home price appreciation — provides an additional earnings lever.

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