The 2022 government work report puts forward the following suggestions for real estate: “Continue to ensure the housing needs of the masses. Adhere to the positioning that houses are used for living rather than speculation, explore new development models, adhere to the simultaneous development of rental and purchase, accelerate the development of the long-term rental housing market, promote the construction of affordable housing, support the commercial housing market to better meet the reasonable housing needs of buyers, stabilize land prices, house prices and expectations, and promote a virtuous cycle of the real estate industry due to urban policies And healthy development. “
This round of stable demand relies more on local governments to support the bottom from bottom to top
Recently, after Zhengzhou took the lead in realizing the autonomous breakthrough of purchase and loan restriction at the local level, more commercial loans and provident funds in third and fourth tier cities have followed up and adjusted at the level of purchase, loan and sales restriction. We believe that in the stage of rapid deterioration of the industry fundamentals and the credit expectations of real estate enterprises (the sales amount of the top 100 real estate enterprises in February was – 46.3% year-on-year, with a growth rate of – 6.2pct compared with January, falling for eight consecutive months; at the credit level, the asset scale of more than 10 billion real estate enterprises defaulted and downgraded at home and abroad since 2021 totaled 16.77 trillion, accounting for 15.8% of the total assets of the industry in 2020), The continuity and stability of real estate regulation at the central level do not conflict with the trend relaxation of urban policies at the local level. Local cities need to make more reasonable adjustments according to the irrational changes of fundamentals in the current period, and moderately break the boundary where the previous purchase and loan restrictions were not easy to relax, so as to alleviate the pressure of too fast downward fundamentals through bottom-up local support.
Rigid demand bottom support to improve demand gradient replacement
We believe that the traditional administrative regulation can effectively identify the initial rigid demand, but it is difficult to accurately distinguish between investment demand and improvement demand. In the rapid upward stage of the industry, the traditional loan restriction policy may cause some injuries to the reasonable improvement demand, especially the strict identification of the standard of housing and loan recognition, which does not rule out more cities to follow up the adjustment and release the improvement demand elasticity. In addition, with the reduction of the proportion of local down payment, the CBRC The central bank has strengthened its support for new citizens’ housing financial services (the notice on strengthening new citizens’ financial services proposes to support commercial banks to implement differentiated housing credit policies according to urban policies to meet the reasonable purchase credit needs of new citizens; improve the service level of new citizens’ housing provident fund; optimize new citizens’ housing financial services, etc.), Through the bottom support of rigid demand and the improvement of gradient replacement, it is expected to activate the market transaction intention and drive the improvement of fundamentals.
Coexistence of new industry development model and market-oriented clearing
We believe that the new development models include: 1) guide real estate enterprises to get rid of the extensive development model of high leverage, high turnover and scale orientation, and participate in promoting the high-quality development of new urbanization and the operation and transformation of existing properties; 2) Establish a multi-channel supply market mechanism, improve the construction of the rental market, and guide the reasonable return of market expectations through demand diversion. The demand space of indemnificatory housing is difficult to fully undertake the shift of industrial production capacity. The traditional development and sales model is still under the pressure of medium and short-term market clearing. We insist that on the premise of stable demand, supply side reform and market-oriented income M & A will still be the main path to solve the problem.
Grasp the beta of loose policy structure and the alpha of M & A
Whether the quantitative change of industry data can lead to the qualitative change of policy remains to be further observed. The systematic relaxation of real estate regulation depends on the phased demands of steady growth on real estate at the industry fundamentals, credit and macro levels. With the formation of a new policy boundary between non speculation in housing and urban implementation, local policies are expected to play a greater role in a new round of underpinning cycle. It depends on the industry’s capacity adjustment and policy recommendations in the future; Alpha focuses on the repair of the balance sheet and profit margin of key real estate enterprises by M & A, the accuracy of countercyclical plus leverage, and the long-term excavation of the value of housing scenarios.
Continuous recommendation: 1) high quality leaders: Gemdale Corporation(600383) , Poly Developments And Holdings Group Co.Ltd(600048) , China Vanke Co.Ltd(000002) , Longhu group, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , etc; 2) High quality growth: Jinke Property Group Co.Ltd(000656) , Seazen Holdings Co.Ltd(601155) , Xuhui holding, etc; 3) Quality property management: Country Garden service, China Merchants Property Operation & Service Co.Ltd(001914) , poly property, Xuhui Yongsheng service, etc.
Risk warning: industry credit risk spread; The downward cycle of industry sales begins; Administrative regulation remained high-pressure, and the pilot strength of real estate tax exceeded expectations
