Core view
On February 24, 2022, the Ministry of housing and urban rural development held a press conference to introduce the high-quality development of housing and urban rural construction.
Adhere to the principle of “housing without speculation” and maintain the stable operation of the real estate market. The meeting pointed out that we should continue to adhere to the positioning of “houses are for living, not for speculation”, steadily implement the long-term mechanism of real estate, further implement the main responsibility of cities, and strengthen the supervision and guidance responsibility of provincial governments. We expect that this year’s regulation and control policies will focus on the implementation of policies by local entities due to the city. At the same time, the Ministry of housing and urban rural development emphasizes that the risk of overdue delivery of real estate projects will be resolutely dealt with. We expect that the probability of significantly relaxing the supervision of pre-sale funds is not large.
Guarantee the rigid demand for housing and meet the reasonable improvement demand at the same time. The meeting pointed out that “we have more than 11 million new urban employees every year, and the rigid demand for housing is relatively strong. At the same time, a large number of old residential areas built before 2000 have small housing area, poor supporting facilities and low quality, and the people’s requirements for improving the living environment and living conditions are more urgent”. We believe that the policy direction in the future will give consideration to meeting rigid needs and improving needs. At the right time, we may also see supporting policies for improving needs issued in various places.
We will vigorously increase the supply of affordable rental housing and reduce the scale of the shed reform plan. The meeting pointed out that we should promote the structural reform of housing supply side, and hope to build and raise 2.4 million affordable rental housing units (942000 units in 2021, year-on-year + 154.8%) and 1.2 million shantytowns (1.65 million units in 2021, year-on-year – 27.3%). We believe that the future development direction of the real estate market will continue to focus on key urban agglomerations, and the support for the third and fourth tier real estate market may not be very strong. At the same time, the meeting also proposed to vigorously promote the “new urban construction”, that is, the construction of new urban infrastructure based on digitization, networking and intelligence, or bring investment opportunities to relevant fields.
Investment proposal and investment object
Since 2022, the downward trend of the market has continued, and the default events of private developers are still happening. Although in the sinking market (third and fourth tier cities), commercial banks began to increase credit support, reduce the proportion of down payment and reduce the interest rate of new housing loans at the practical level, and the number of LPR + points in first tier cities also decreased to a certain extent, but the range is limited. From the meeting of the Ministry of housing and urban rural development, although there is some support for the real estate market at the level of public opinion, the current policy strength has maintained considerable restraint. This shows that there are still differences in the regulatory attitude towards real estate, which may need to be promoted by clearer fundamental data. In addition, the meeting stressed that the risks of problematic real estate enterprises will be dealt with in a market-oriented and legalized manner, and direct credit relief may not become a reality. We believe that based on this decision-making logic, the policy may show an average force at both ends: the supply side promotes the clearing of industries, the projects are taken over by state-owned enterprises and high-quality private enterprises, and some cities with little pressure on house price rise at the demand side can further relax regulation. Based on this framework, looking for marginal real estate enterprises is not a good strategy. We continue to be optimistic about the sustainability of the real estate industry and recommend the combination of state-owned enterprises and high credit private enterprises. A shares: Poly Developments And Holdings Group Co.Ltd(600048) ( Poly Developments And Holdings Group Co.Ltd(600048) , buy), Gemdale Corporation(600383) ( Gemdale Corporation(600383) , buy), China Vanke Co.Ltd(000002) ( China Vanke Co.Ltd(000002) , buy). It is recommended to pay attention to China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) ( China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , not rated), Hangzhou Binjiang Real Estate Group Co.Ltd(002244) ( Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , not rated), etc; Hong Kong stocks: Longhu group (00960, buy), Xuhui holding group (00884, buy). It is suggested to pay attention to China Overseas Development (00688, not rated), Vanke enterprise (02202, not rated), China Resources Land (01109, not rated), etc.
Risk tips
The impact of the deterioration of the external environment on policy objectives. The credit shock caused by the continuous default of enterprises.
