---
title: "The deep waters of the real estate sector: Insights into how property developers navigate cycles."
type: "Topics"
locale: "zh-HK"
url: "https://longbridge.com/zh-HK/topics/31836391.md"
description: "At the end of June 2024, CRIC released the TOP100 sales ranking of Chinese real estate companies for the first half of 2025. The data shows that in June 2025, the TOP100 real estate companies achieved a single-month sales operation amount of 338.96 billion yuan, a month-on-month increase of 14.7%. According to the latest data from the National Bureau of Statistics on July 15, in the first half of 2025, the sales area of newly built commercial housing nationwide fell by 3.5% year-on-year, and the sales amount of commercial housing fell by 5.5%. The sales prices of newly built commercial residential properties in first-, second-, and third-tier cities remained sluggish..."
datetime: "2025-07-16T00:33:05.000Z"
locales:
  - [en](https://longbridge.com/en/topics/31836391.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/31836391.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/31836391.md)
author: "[锦缎研究院](https://longbridge.com/zh-HK/profiles/2576456.md)"
---

> 支持的語言: [English](https://longbridge.com/en/topics/31836391.md) | [简体中文](https://longbridge.com/zh-CN/topics/31836391.md)


# The deep waters of the real estate sector: Insights into how property developers navigate cycles.

**In late June 2024, CRIC released the TOP100 sales ranking of Chinese real estate companies for the first half of 2025. Data shows** that in June 2025, the TOP100 developers achieved a single-month sales operation amount of 338.96 billion yuan, a month-on-month increase of 14.7%.

According to the latest data from the National Bureau of Statistics on July 15, in the first half of 2025, the sales area of newly built commercial housing nationwide fell by 3.5% year-on-year, and the sales amount of commercial housing dropped by 5.5%. The sales prices of newly built residential properties in first-, second-, and third-tier cities remained sluggish, indicating the industry is still in a deep bottoming-out phase.

**Having bid farewell to the stormy downturn, the industry has entered a relatively stable but challenging new phase—this may become the norm for the coming years.**

From an investor's perspective, rather than obsessing over when the industry will rebound, it's better to focus on companies that have quietly demonstrated resilience and growth potential amid adversity. In the recovery after the noise fades, it is often these companies that first emerge from the bottom with differentiation that harbor stronger recovery potential.

Looking at the domestic market: On one hand, data updated in March 2025 by the National Enterprise Credit Information Publicity System shows that as of early March, 427 real estate companies nationwide were in bankruptcy liquidation or restructuring proceedings.

On the other hand, some high-quality leading developers have delivered performance significantly better than the market. For example, Longfor Group achieved total contracted sales of 35.01 billion yuan and contracted sales area of 2.614 million square meters from January to June 2025, far outperforming the overall level of the TOP100 developers.

So, what is the logic behind this differentiation? The experience of Japan's real estate industry offers valuable insights. Companies that successfully survived the bubble burst cycle, such as Mitsui Fudosan, Sumitomo Realty, and Mitsubishi Estate, all demonstrated key commonalities during the industry's bottoming-out phase, which can be considered the three critical elements for real estate companies to smooth out cycles:

1\. During a downturn, having commercial and rental real estate projects that can generate continuous cash flow.

2\. Clear planning for external debt, ensuring at least 1-3 years of financial stability.

3\. Strict adherence to government guidance after the bubble burst, focusing on high-quality development and transitioning from broad to refined business operations. Our in-depth research found that domestic companies like Longfor, which are showing early signs of cycle resilience, follow the same pattern.

## **01 Cash Flow Generation: Optimizing Revenue Structure Through Operational Businesses**

The primary foundation for cycle resilience lies in building stable "cash flow generators." In Issue 17 of the _Peking University Financial Review_ this year, Chen Yingnan, Associate Professor of Finance at Jinan University's School of Economics, published a research article on real estate developers overcoming cycles. Using Mitsui Fudosan as a case study, Chen derived the core capability for cycle resilience—high-liquidity cash flow from leasing (i.e., operational businesses) that helps companies to endure cycles.

Operational businesses have long been Longfor's strongest-performing sector since its transformation, becoming its "second growth curve." For example, in the 2024 annual report, Longfor's operations and services business generated revenue of 26.71 billion yuan, contributing 21% to the group's total revenue. Amid challenges in the real estate sector, this segment supported the group's overall profitability.

A horizontal comparison is even more telling. Thanks to the strong performance of its operational businesses, Longfor's revenue quality in 2024 was significantly higher than the industry average. We analyzed all A-share and Hong Kong-listed real estate developers and found that Longfor's ratio of net operating cash flow to revenue reached 23.3%, far exceeding the industry average of 1.8%. Among all developers with revenue exceeding 100 billion yuan, Longfor ranked second.

Figure: Revenue quality data for 100-billion-yuan developers. Source: Choice Financial Terminal, compiled by Jinduan Research Institute.

This year, Longfor's operational and service businesses have continued steady growth. From January to June, its operational income reached approximately 14.15 billion yuan, setting a new half-year record. Many forward-looking operational metrics also performed well:

In commercial operations, Longfor adheres to a "one-store-one-strategy" differentiated approach, capitalizing on the "first-store economy" by introducing flagship and specialty stores to create fresh brand combinations.

As of the end of the first half, Longfor had 90 commercial properties in operation, with an overall occupancy rate of 97%. Despite an increasingly complex consumption environment, it maintained a high industry position and achieved over 20% year-on-year growth in both turnover and foot traffic through refined operational efficiency.

In terms of Longfor's smart asset management, its "Guan Yu" brand, focused on core cities, had over 300 stores and nearly 127,000 rooms in operation by the first half of 2025, ranking second in the industry. The occupancy rate for stores open for more than three months was 96.6%, far above the domestic apartment average.

In refined operations, Guan Yu's proprietary channels had attracted 4 million users, with nearly 60,000 daily active app users. Its "Guan Qi Hui" platform had deep collaborations with nearly 30,000 enterprises. High digitalization also laid the groundwork for smart asset management, enabling precise "one-room-one-price" differentiated pricing to maximize operational value.

In services, as of the end of 2024, Longfor's smart living property management covered 410 million square meters across over 2,200 projects, with customer satisfaction exceeding 90% for 16 consecutive years.

The construction agency sector also performed well. Longfor's smart construction arm added 26 new agency projects in the first half of 2025, totaling 4.32 million square meters. Cumulatively, it has secured over 110 agency projects, exceeding 21 million square meters.

In summary, like its predecessors who navigated cycles, Longfor has built its own cash flow moat through operational businesses.

## **02 Financial Resilience: A Balance Sheet in a Virtuous Cycle**

While improving revenue structure through operational income is a sound strategy for cycle resilience, a stable financial and debt structure is equally essential. Mitsui and Mitsubishi Estate's ability to generate cash flow through leasing was inseparable from refinancing via J-REITs and consortium support, which stabilized their debt positions during the bubble era.

Returning to Longfor, aside from its strong operational performance, another key factor behind its differentiated results is its exceptional financial resilience.

**First, Longfor's current debt ratio is very healthy.** Since 2023, Longfor has actively reduced debt with positive net cash flow, maintaining a "safe" development pace. By 2024, Longfor had achieved positive operating cash flow for two consecutive years, cumulatively reducing interest-bearing debt by over 30 billion yuan.

According to 2024 financial data, Longfor's interest-bearing debt fell to 176.3 billion yuan, with a net debt ratio of 51.7% (down 4.2 percentage points) and a post-advance liability ratio of 57.2% (down 3.2 percentage points), cumulatively dropping 10.2 percentage points over three years.

Horizontally, among 100-billion-yuan real estate companies, Longfor's debt ratios (with or without advances) were far below the industry average, ranking in the top two.

Figure: Debt ratio comparison for 100-billion-yuan developers. Source: Choice Financial Terminal, compiled by Jinduan Research Institute.

**Second, Longfor's debt repayment schedule is orderly.** In the first half of 2025, Longfor redeemed approximately 7 billion yuan in domestic public bonds, all on schedule.

For debts maturing in the second half of the year, Longfor's management outlined clear plans at the June shareholders' meeting. On July 3, Longfor redeemed "22 Longfor 04" as scheduled, totaling over 1.7 billion yuan in principal and interest. For the medium-term note due on July 15 and other subsequent bonds, Longfor has already made preparations.

**Finally, over the long term, Longfor's positive cash flow can cover future interest and debt, while continuous debt structure improvements will lower financing costs, creating a virtuous cycle.**

According to its annual report, Longfor's operating income coverage ratio for dividends and interest rose to 2.39x, a significant year-on-year increase.

Longfor's debt structure has also improved. As of the end of 2024, 83% of its financing came from bank indirect financing, with costs hitting a five-year low of 4.0%. The average debt maturity extended to 10.27 years, with a series of financial metrics maintaining industry-leading levels.

Longfor's management stated that by year-end, the company will complete its debt transition, making 2025 the final year of its debt cycle.

Overall, Longfor exhibits strong financial resilience. Its relatively stable capital expenditures have solidified its debt foundation. From a purely financial perspective, Longfor faces neither long-term nor short-term concerns.

## **03 Long-Term Strategy: Aligning with Industrial Policy**

With a cash flow foundation and debt repayment capabilities secured, the final challenge for companies during the real estate cycle's bottoming-out phase is: How to plan for the future and identify new growth engines and directions.

This question may seem abstract, but it holds significant practical importance. All industries face choices after cycle-driven consolidation. For example, in the white goods sector, companies pursuing OEM, branding, or overseas expansion took entirely different paths.

Scaling up, the same applies to real estate. Take Mitsui Fudosan as an example again: It returned to Japan's top tier by redeveloping a prime plot in Tokyo Midtown.

The core of Mitsui's resurgence was aligning with policy post-consolidation. For the Tokyo Midtown project, it adopted a refined, high-quality development + long-term operation strategy, unlike Mitsubishi's land-hoarding approach.

In China's real estate market, policy trends this year have emphasized high-quality supply. The March Government Work Report highlighted "sustained efforts to stabilize the real estate market" and "promoting the construction of safe, comfortable, green, and smart 'good housing,'" High-quality supply-side development became a clear theme.

Also in March, the General Office of the CPC Central Committee and the State Council issued the "Action Plan to Boost Consumption," supporting rigid and improved housing demand.

On May 1, the national "Residential Project Standards" took effect, marking the transition from concept to implementation for "good housing." The new regulations set requirements across six areas: basics, living environment, space, structure, indoor environment, and building equipment, formalizing policies for improved housing.

Figure: Provincial focus areas for "good housing" guidelines. Source: E-House Research Institute.

**Longfor has been one of the earliest adopters of the "good housing" policy, even ahead of the curve:** For a long time, the industry followed a scale- and revenue-first approach. Longfor was among the few to recognize the shift toward high-quality development and complete this transition.

For example, its premium project Chongqing Yuhujing exemplifies high-quality housing, from entryways to spatial details: an 8-meter-high, 200-meter-wide entrance and a 3,800-square-meter club, with property quality and service management reaching top-tier standards.

Another example is Beijing Zhongguancun Guancui, awarded "2024 National Top 10 Quality Projects." Based on a first-prize design from the China Exploration and Design Association's "Good Housing" competition, it became China's first "good housing" pilot, introducing innovations like elevated ground floors, covered walkways, and balcony designs.

The results prove that even during a downturn, good supply can create demand. Chongqing Yuhujing sold out twice by end-June, with cumulative sales of 1.1 billion yuan. Beijing Zhongguancun Guancui sold 281 units in the first half of 2025, ranking fifth in Beijing and first in Changping District.

The alignment between policy and product may seem like trend-following, but it stems from Longfor's 30+ years of expertise in development, operations, management, and construction—a trinity that even preceded policy.

This may be the deeper reason for Longfor's comparative advantage during the industry's bottoming-out phase.

## **04 Conclusion**

In summary, Longfor's practices clearly outline a path for real estate companies to navigate cycles: **building a lifeline with stable operational cash flow, fortifying a safety net with financial resilience, and anchoring future direction with forward-looking strategy.**

These three "elements" are not isolated but mutually reinforcing—operational income creates space for financial optimization, financial security buys time for strategic transformation, and forward-looking strategy ensures sustainability.

For the industry, if the rapid downturn reshaped the landscape, the new normal of bottoming-out differentiation further screens for future rare assets.

Longfor has already submitted a high-quality answer sheet for the industry to reference.

This article is based on public information and is for informational purposes only, not constituting any investment advice.

$LONGFOR GROUP(00960.HK) $GREENTOWN CHINA(03900.HK) $Vanke(000002.SZ)

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