Developers' sales remain sluggish despite mortgage subsidy

According to CREIS, the top 100 developers' aggregate sales Y/Y decline modestly widened from -11% in September to -13% in October, which is softer than expected as we thought the mortgage subsidy (effective from October 1) would have at least had a mild short-term boost to sales in low-tier cities. Although primary sales remain sluggish, momentum in secondary sales is still solid. According to the Iceberg Index, the top cities' secondary sales Y/Y growth was >20% in October, mildly accelerating from 19% Y/Y in September. We forecast secondary sales to maintain >10% Y/Y growth in 4Q26. By our estimate, while 22% of primary units may qualify for the mortgage subsidy, 40% of secondary homes may qualify nationwide. Thus, relatively secondary homes should benefit more. Year-to-date, the top 100 developers' sales have declined 13% Y/Y, and we maintain our forecast of a 12% decline for FY26. We remain selective on stocks, and prefer CR Land, CR Mixc and KE Holdings (covered by Daniel Chen).