Summary of Key Points
In the first half of 2026, over 80 A-share listed real estate companies released their performance forecasts, reflecting a sector characterized by overall pressure and structural differentiation: most companies experienced declining profits or losses due to factors such as weak market demand, low-profit projects being carried forward, and asset impairment (e.g., Vanke, OCT Group A, etc.). A few companies, however, managed to improve their performance by controlling the pace of deliveries, disposing of existing assets, and optimizing their business structures (for example, Zhongzhou Holdings through revenue from main operations, and Jinke Co., Ltd. by selling off assets). The industry is still in a period of transition between old and new development models, and profit recovery will depend on the stabilization of the new housing market, the concentrated delivery of high-profit projects, and the resolution of debt risks. The pace of recovery varies significantly among different companies.
Why Are Most Real Estate Companies Struggling? — Three Core Reasons for Profit Compression
1. Weak Market Demand + Poor Quality of Projects Carried Forward
With few new homes sold in the first half of the year, many companies had to rely on projects acquired in previous periods. These projects were either acquired at high land prices (resulting in lower profits when sold at current prices) or were of low quality and in excess inventory. For instance, although China Merchants Shekou's completed and delivered area increased, its net profit after deducting non-recurring items decreased by more than 90% due to reduced margins from industry-wide price cuts to clear inventory. JinDi and ShouKai also mentioned a lack of high-quality projects for carryover, leading to declining revenue and profits.
2. Asset Impairment Adding to the Trouble
To quickly recover funds, companies sold properties at reduced prices, which caused the value of their existing assets to decline. According to accounting rules, they had to record "asset impairment losses" (essentially anticipating potential losses), which significantly increased their financial losses. For example, Fuxing Co., Ltd. and OCT Group A suffered substantial losses due to difficulties in selling off their properties.
3. Other Hindering Factors
Some companies were also affected by secondary businesses or special events: the cement business of Jinyu Group saw a decline in demand, leading to overall profit shrinkage; Beijing Hualian Department Store experienced reduced revenue from commercial and cinema operations due to sluggish consumption, plus temporary losses related to REITs applications; *ST Huangting saw increased losses due to judicial asset disposals and higher taxes.
How Did a Few Companies Manage to Break Through? — Two Typical Approaches
1. Profiting from Main Operations
These companies owned high-profit projects acquired earlier (e.g., in prime locations at low prices) and delivered them during the first half of the year, directly driving profit growth. Zhongzhou Holdings reported increased real estate settlement revenue and higher gross margins, achieving a positive performance forecast. However, this type of growth is temporary as these high-profit projects will be depleted over time.
2. Turning Losses into Profits through Unexpected Income
These companies did not rely on sales but instead turned around by disposing of assets and collecting debts (non-recurring gains). For example, Jinke Co., Ltd. reported a profit of 17-25 million yuan in the first half of the year (compared to a loss of 7.5 billion yuan in the same period last year) through business optimization and debt collection; Xinhuangpu benefited from asset securitization; *ST Yuncheng reversed losses by selling off existing assets.
What Is the Current Situation of the Industry? — Experts Say It's Still in a "Bottom Adjustment Phase"
Liu Shui from the China Index Academy believes:
- The industry is still in the painful transition between old and new development models (from high debt, high turnover, and high leverage to a more stable approach).
- Profit recovery will only happen when three conditions are met: the new housing market stabilizes, high-profit projects are delivered in large quantities, and debt and non-performing asset risks are completely resolved.
- The pace of recovery varies greatly among companies; only those with quality land reserves and rental businesses (such as office leasing) can maintain profitability, while most still need to persevere.
Are the Breakthrough Strategies Sustainable?
Liu Shui highlights the following differences:
- Zhongzhou Holdings' Growth: Based on high-profit project carryover, it's like "living off past gains," which won't be sustainable in the long term.
- Jinke Co., Ltd.'s Turnaround: A combination of business optimization, cost reduction, and debt collection provides a more solid foundation for recovery, but future performance depends on ongoing operations.
- Profit Increases from Troubled Companies: Many are due to one-time accounting gains from debt restructuring (e.g., creditors forgiving part of the debt, recorded as profits), which do not reflect actual improvement in business conditions.
What Should Real Estate Companies Do Moving Forward? — A Survival Guide for Smaller Companies
Liu Shui advises smaller companies to:
- Differenciate and Focus: Avoid widespread expansion and concentrate on core cities, focusing on high-quality projects.
- Dispose of Non-Performing Assets: Get rid of unsold or unfinished properties to reduce burdens.
- Emphasize Light Asset Models: Engage in services like construction management (charging for building projects) and urban renewal (upgrading old buildings) without significant capital investment to stabilize cash flows.
In summary, the real estate industry is currently a mix of challenges and opportunities: most companies are still struggling, but those with the right strategies are beginning to see improvement. For a true recovery, the market needs to regain confidence, and debt issues must be resolved.