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From December 8 to 10, 2021, the central economic work conference was held in Beijing. The meeting mentioned that “we should adhere to the positioning that houses are used for living rather than speculation, strengthen expected guidance, explore new development models, adhere to the simultaneous development of rental and purchase, accelerate the development of long-term rental housing market, promote the construction of indemnificatory housing, support the commercial housing market to better meet the reasonable housing needs of buyers, and promote the virtuous circle and healthy development of the real estate industry due to urban policies.”
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The general tone of “real estate without speculation” has not changed, but it does not mean that we should be pessimistic about real estate in the future. The central economic work conference since 2018 has mentioned “no speculation in housing”, which is in line with expectations. We believe that “housing without speculation” is the general tone of this round of real estate regulation, which will not change, but it does not mean that we should be pessimistic about real estate in the future.
The biggest change is from “stabilizing the market” to “stabilizing the industry”. We believe that the biggest change in the description of real estate in the central economic work conference is from “promoting the stable and healthy development of the real estate market” to “promoting the healthy development and virtuous cycle of the real estate industry”, which reflects the shift of the focus of the government’s work from “stabilizing the market” to “stabilizing the industry”. The regulation before this year, such as purchase and loan restrictions, were aimed at market regulation, and the core was to stabilize house prices. This year, especially since the second half of the year, real estate enterprises have experienced a series of thunderstorms. On the one hand, this is because some real estate enterprise bosses underestimated the central government’s determination to “live without speculation”, did not really implement the reduction of leverage and transferred their liabilities from on balance sheet to off balance sheet. On the other hand, the current round of regulation and control may also overestimate the asset quality of real estate enterprises, and some regulation and control measures are too urgent and tight. The superposition of the two has accelerated the storm of real estate enterprises. After the tightening of regulation at the financing end, the continuous thunder has led to a credit crunch in the credit heavy real estate industry, which is gradually turning into a sales crisis. We believe that this expression becomes “stabilizing the industry”, the core of which is to maintain that sales will no longer accelerate the decline and allow normal financing to restart, so that “lying flat” real estate enterprises are willing to continue to participate in local auction and promote the stable and healthy development of the whole industry.
“Support to meet the reasonable needs of property buyers” and allow the implementation of policies due to the city to verify the warming of the regulation attitude again. This meeting once again mentioned “supporting the commercial housing market to better meet the reasonable housing needs of buyers and promoting the virtuous cycle and healthy development of the real estate industry due to urban policies”. We believe that on the one hand, the central and local governments have unified their understanding and warmed up their attitude towards real estate; On the other hand, it also shows that the central government has allowed local relaxation. Recently, Xiamen, Jingmen, Nantong, Kaifeng, Baoding and other cities have launched preferential policies for house purchase. We expect that more cities will introduce marginal relaxation policies in the future. As predicted in our report in mid October, Harbin’s “Sixteen articles” will become a template for more and more cities.
The “virtuous circle” requires the normal operation of soil rackets. At present, the cooling of the local auction market is obvious, which will not only affect the overall supply next year, bring the pressure of rising house prices, but also increase the financial pressure of local governments. We expect that in the future, supporting policies will be introduced in three aspects of sales, financing and asset revitalization to help high-quality real estate enterprises resume normal operation. On December 10, 2021, Baolong real estate successfully issued USD 130 million bonds, indicating that the overseas refinancing function of private real estate enterprises has begun to recover. We expect more private real estate enterprises to carry out overseas refinancing in the future.
The construction of affordable housing cannot produce great support for the new construction next year. Beijing and Shanghai are the main cities providing affordable rental housing. Shanghai has made it clear that during the “14th five year plan” period, it plans to build and raise more than 470000 affordable rental housing units, including 240000 affordable rental housing units from 2021 to 2022. We believe that the supply of 240000 new rental housing units this year and next year cannot be met entirely through new construction. Because on the one hand, the provision of affordable housing by stipulating that 15% of residential land is self-supporting will affect the land acquisition enthusiasm of real estate enterprises. The transfer of special leased land will also reduce the number of residential land in that year, because the index of leased land is also included in the total index of land supply in the whole year. On the other hand, it is too late to provide sufficient affordable housing through new construction. Therefore, we think that the completion of the plan depends on the transformation of stock, such as the change of commercial office to rent, the transfer of social rental by the government when it expires, self-supporting completion in the past few years, etc. We expect the proportion of stocks to be close to half. The stock transformation can not drive new construction, so we believe that affordable rental housing will not support new construction next year.
Investment advice
We maintain our bullish judgment on the real estate and property sector. This is because: ① money is likely to be marginal loose in the future; ② It is expected that more cities will have marginal improvement in policies. Rongchuang China and Poly Developments And Holdings Group Co.Ltd(600048) are recommended. In addition, with the improvement of real estate policies, we believe that the valuation of the property sector will also be repaired, and the rebound strength may be greater than that of the real estate sector. Recommend Jinke service, Jianye new life, and pay attention to country garden service.
Risk statement
The implementation effect of real estate improvement policies is less than expected; The decline of national commercial housing sales exceeded expectations
