Events
On January 26, 2022, Anhui Provincial Development and Reform Commission issued the notice on printing and distributing several measures to further promote consumption in the near future, which mentioned that "guide real estate, automobile and household appliance sales enterprises to expand commodity consumption in the peak consumption season of the Spring Festival by means of installment free handling fees, gift deduction vouchers, reducing the down payment ratio, subsidy replacement and so on." (the Provincial Department of economy and information technology, the Provincial Department of Commerce, the Provincial Department of housing and urban rural development and the Provincial Department of finance are responsible according to the division of responsibilities)
Commentary
Anhui development and Reform Commission guided the reduction of down payment, and the positive signal on the demand side was obvious. In our report "increasing urgency, the introduction of policy combination is expected" issued on January 16, 2022, we clearly put forward that it is urgent to introduce policies that will help stabilize sales in the next two weeks, and also proposed that reducing the down payment ratio is one of the relaxation paths. Since then, many cities have issued relevant policies. For example, on January 18, 2022, Zigong City, Sichuan relaxed the policy of identifying the number of housing units and implemented "only recognizing loans but not houses"; This week, Zizhong County, Sichuan Province issued the implementation plan of "two awards and one subsidy" for those who meet the national two child and three child Fertility Policies and reasonable housing needs to buy commercial housing. Previously, these policies were mostly issued by a single urban subject alone. This time, Anhui Provincial Development and Reform Commission issued a notice for the whole province, clearly proposing to guide real estate consumption. We believe that this means that Anhui Province, including new first tier cities such as Hefei, Wuhu, Ma'anshan and other economically relatively developed cities, will usher in the implementation of policies related to reducing the proportion of down payment. This is a positive indicator for other hot second tier cities and third and fourth tier cities. It is also clearly mentioned in this release that Anhui Provincial Department of housing and urban rural development is responsible for the recommendations according to the division of responsibilities. We expect the follow-up implementation will be faster. In the future, the adjustment of housing and loan recognition in other cities and even the relaxation of purchase and loan restrictions in individual cities are also worth looking forward to.
The demand side still needs more policy assistance. The bank's mortgage lending has been positive year-on-year since October last year. From October to November 2021, the year-on-year growth rate of mortgage loans in the source of development funds of real estate enterprises was + 1.0% and + 10.6% respectively. However, in December 2021, the year-on-year growth rate of mortgage loans turned negative again, at - 7.9%. We believe that the core reason behind this is the continuous decline in sales. The year-on-year growth rate of commercial housing transaction area in 30 large and medium-sized cities was - 23% in December 2021, including - 45% in third tier cities. In the case of a sharp decline in sales, the liberalization of mortgage is like cooking without rice. Even if the bank is willing to speed up the issuance, it can have little effect. At present, the confidence of home buyers is still weak, and we believe that more policy assistance is still needed on the demand side.
Short term supply side policy adjustment is still necessary. Recently, disputes over project funds have occurred frequently all over the country, which reflects that the payment of project funds is still a major difficulty for all real estate enterprises. Considering that March 2022 is a debt repayment peak for real estate enterprises, and it still takes time from the implementation of improvement policies to the stabilization of sales, in the short term, we believe that some policy adjustments on the supply side are still necessary. At present, financial institutions and state-owned enterprises are accelerating mergers and acquisitions, which can certainly solve some risks, but the cash flow of real estate enterprises that have not yet been out of danger is still tight. We believe that it is necessary to rationalize the regulation of pre-sale funds. At present, there are great differences in the supervision proportion and strict degree of implementation of pre-sale funds across the country, and even tightness exists at the same time. We believe that in this regard, the central government's unified instructions may be more conducive to short-term stability.
The stabilization of real estate can be expected, and we are optimistic about the valuation and repair of private property management companies. With the continuous implementation of real estate improvement policies, we believe that the risk of follow-up high-quality private real estate enterprises will be gradually reduced. At present, the valuation differentiation of state-owned enterprises and private enterprises in the property management sector may change. From the perspective of PEG (growth rate of PE in 2022 / net profit attributable to parent company in 2022), at present, the average peg of property management companies with three affiliated real estate enterprises of China Resources Vientiane life, poly property and CNOOC property as state-owned enterprises is 0.86x, while the average peg of property management companies with three affiliated real estate enterprises of country garden service, Xuhui Yongsheng life and Binjiang service as relatively stable private enterprises is only 0.38x, The former is 2.3 times that of the latter. We believe that the core reason behind this is that the market is too worried about the safety of private housing enterprises. With the effectiveness of the subsequent real estate relaxation policy, the security of the affiliated real estate enterprises of private property management companies will be marginally improved. At the same time, because the performance growth rate of private property management companies is higher, the elasticity of valuation repair will be greater in the future.
Investment advice
We believe that the focus of follow-up market attention will gradually switch from steady state-owned enterprises to highly flexible private enterprises, such as rongchuang China and Seazen Holdings Co.Ltd(601155) . In addition, we are still optimistic about the real estate enterprises with contrarian sales growth in 2021-22 represented by green city China. In the property sector, we are optimistic about high-quality private property management companies with greater flexibility, such as country garden service and Jinke service.
Risk tips
The introduction of real estate improvement policies was slower than expected; The implementation effect of real estate improvement policies is less than expected
