Event: on March 1, Zhengzhou implemented the policy of “recognizing loans but not houses”. At the same time, it stimulated the demand side at the levels of mortgage interest rate, monetized resettlement, house purchase subsidies and relatives who can buy a new house.
Does the policy underpinning turn to stimulation mean that the old road is going again?
Compared with the more restrained adjustment of provident fund policy in some cities before the Spring Festival, many cities, including Heze, Chongqing, Foshan and other places, recently lowered the down payment ratio of commercial loans, and Guangzhou, Shenzhen, Hangzhou, Suzhou and other places continuously lowered the mortgage interest rate. Combined with the implementation of Zhengzhou’s policy of “recognizing loans but not recognizing houses”, it means that the current real estate policy stimulus cycle has entered. Then, compared with the cycle reversal caused by loose policy in 2008 and 2014, does the deepening of this policy adjustment mean that we have embarked on the old road of real estate saving the economy?
First of all, according to the latest statement made at the meeting of the Ministry of housing and urban rural development, we still continue to adhere to the positioning of “housing without speculation” and emphasize the need to enhance the coordination and accuracy of real estate regulation policies. Therefore, from the overall perspective, it does not mean a comprehensive shift of policies. Although some cities have entered the marginal adjustment channel under the framework of “urban implementation” based on the changes of current fundamentals, However, for the core first tier cities, we still emphasize that there is no possibility of loosening the existing purchase, loan and sales restriction policies. Although the market expects the transaction volume of core cities to drive the improvement of demand side expectations, so as to reverse the downward trend of fundamentals, combined with the current background of de leveraging of industries and enterprises, the policy evolution in the future should still avoid the sharp rise of house prices, Effectively resolving the current real estate financial risks is the focus of policy optimization.
Secondly, for the stimulation effect of the demand side, although it is in the same broad currency market environment as in 2008 and 2014, the degree of damage to the enterprise credit side is different. The credit risk exposure of real estate enterprises has increased day by day since this year, which will inevitably affect the expectations of home buyers for commencement and delivery; In addition, the current situation that the monetization support logic of shed reform in non core cities no longer exists and house prices are still at an absolute high still restricts the significant recovery of residents’ purchase ability and willingness, which leads to the significant lag or failure to meet expectations of the effect of this round of demand side stimulus policies. Therefore, we prefer to think that the adjustment of the current policy is an appropriate correction in the downward cycle of the industry, Instead of stimulating real estate to drive economic stabilization, it is a more effective policy evolution path for some cities to adjust for rigid demand and improved demand.
Will more cities follow up the corresponding policies in the future? What other tools are still on the way?
According to the high-frequency data we tracked and the fact that the data of the top 100 real estate enterprises decreased significantly year-on-year in the first two months, the current industry potential energy can no longer support the stabilization of the total industry in the whole year. Therefore, if the downward slope of the industry is further increased, it will inevitably lead to a significant deviation from the overall economy. We believe that from the perspective of cycle, the current second, third and fourth tier cities have the basis for loose policy adjustment, which also means that March will enter the intensive introduction period of urban demand side stimulus policies. It is expected that cities with poor subsequent fundamentals and high land financial dependence of local governments will follow up the loose policy. The tools for policy optimization include the adjustment of the purchase and loan restriction policy, the reduction of the real interest rate of housing loans, the increase of the loan amount of provident fund, the reduction and exemption of transaction taxes, house purchase subsidies, etc. it is expected that the adjustment space of such policies will be strengthened step by step to achieve the purpose of stabilizing the economy. In addition, from the perspective of long-term mechanism, Affordable rental housing and the transformation of old residential areas will continue to receive relevant policy support, and the industry development orientation will gradually explore in the direction of “ensuring people’s livelihood”.
When will the fundamentals turn around? Can crisis enterprises seize the time window to save themselves?
Previously, we predicted in the annual strategy report that the improvement of the current round of financial environment is expected to lead to the centralized release of demand in key cities. At the current time point, with the in-depth support of real estate credit and the optimization of demand side policies, real estate enterprises are expected to accelerate the pace of pushing the market and further activate the market by superimposing the shortening of lending cycle. At the same time, taking into account the base effect, We expect the industry to see a bottom recovery in growth at the end of the second quarter. For some enterprises in crisis, they will also enter the peak period of repayment of maturing debts. Since financial institutions are unable to provide financing for such enterprises from the perspective of risk aversion, and it still takes a long period to sell assets with market-oriented solutions to resolve risks, some real estate enterprises will still face great pressure in the short term, resulting in negative feedback effects of sales and investment, We believe that for crisis enterprises, accelerating the realization of core assets in their hands and seeking negotiated solutions from creditors are more realistic solutions at present.
Broad credit background + policy deregulation, alpha beta
In the context of steady growth, we believe that the release of policies will be strengthened step by step, non hot cities will break the shackles of excessive regulation in the past, and the subsequent industry fundamentals are expected to usher in recovery with the gradual improvement of policies. For real estate enterprises, with the reconstruction of the industry pattern and development model in the future, the operation and management efficiency and credit acquisition ability of real estate enterprises will be the key factors to be paid attention to in the medium and long term. Accelerating the liquidation within the industry means the emergence of opportunities to improve the concentration. We suggest paying attention to real estate enterprises with relatively stable operation and finance, and continue to recommend China Vanke Co.Ltd(000002) , Poly Developments And Holdings Group Co.Ltd(600048) , Gemdale Corporation(600383) China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) . China’s overseas development.
Risk tip: the re outbreak of the epidemic has an impact on the economic expectation, the expectation is tightened, the real estate sales and settlement are significantly lower than expected, the regulation policies of the real estate industry exceed the expectation, and the house price falls more than expected.
