Key investment points
In February, the medium and long-term loans of residents increased by – 45.9 billion yuan, which was negative for the first time since statistics. Further marginal changes in policies are expected to increase, and attention is paid to investment opportunities in real estate stocks.
The mortgage is negative for the first time, which is mainly caused by three factors: weak demand, seasonal factors and the amount of mortgage repayment reaches a certain volume with the growth of mortgage balance. It is true that real estate fundamentals continue to weaken, but it does not mean that real estate fundamentals and mortgage demand decline precipitously.
1. Weak demand. The sales amount of commercial housing has decreased significantly since August last year, and the single month year-on-year from August to December were – 19.7%, – 16.9%, – 24.1%, – 17.2%, – 19.6% respectively. According to the data of the top 100 real estate enterprises, the sales from January to February this year are also weak.
2. Seasonal factors. The sales amount in February was low seasonally, and the medium and long-term of new residents was also low seasonally.
From 2017 to 2021 (excluding 2020), the average medium and long-term loans of new residents in February were 74% of the monthly average of that year, accounting for an average of 6% of the medium and long-term loans of new residents in the whole year.
3. At present, the mortgage repayment has reached a certain volume, and the significant reduction of sales is easy to bring negative mortgage growth. It is true that the fundamentals of real estate continue to weaken, but it does not mean that the demand for mortgages has dropped precipitously. Mortgages are still growing this year.
Assuming that the sales in February decreased by 20% year-on-year, it is estimated that the mortgage issuance amount in February is 228.5 billion, while the mortgage repayment amount is 253.2 billion, RMB 21.2 billion, and the net increase of mortgage is – 45.9 billion, which is a negative growth. At present, the mortgage repayment has reached a certain volume. It is estimated that the normal repayment in February is 145.3 billion yuan. This part is the normal monthly repayment of principal and interest, which is relatively stable and not affected by sales fluctuations; The total early repayment was 57.9 billion yuan, mainly related to the transaction of second-hand houses; Part of the early repayment is 49.9 billion yuan, which is relatively high from February to April every year, which is related to the payment of year-end awards. For specific calculation, refer to the 2019 in-depth report “series in-depth report of the real estate industry 8: residents are adding leverage to residents”.
It is estimated that this year, mortgage is still growing. In extreme cases, assuming that the annual sales decline by 20% this year, it is estimated that the mortgage issuance is 6.9 trillion, and the total mortgage repayment and RMBs are 4.5 trillion, then the net mortgage increase is 2.4 trillion, which is still growing. If the sales amount maintains this volume and the mortgage repayment continues to grow with the increase of the balance, the mortgage may grow negatively after 6-7 years.
Further changes in demand side policies are expected. At present, the mortgage interest rate is down, but the range is not large. The first set of interest rate in February was 5.47%, which is still significantly higher than LPR; The proportion of down payment has changed, but the scope is limited and needs to be further changed.
The supply side reform of the industry has a clear trend. At present, the financing advantages of high-quality real estate enterprises are obvious, and the share of land acquisition has increased. The third batch of centralized land supply last year accounted for about 70% of the land acquisition by state-owned and central enterprises, and 40% of the first batch. The profit margin of the land market improved due to the reduction of competition heat, the decline of premium rate and the adjustment of land transfer rules. High quality real estate enterprises will benefit relatively and usher in greater development opportunities.
Investment suggestion: Residents’ medium and long-term loans grew negatively in February, and further marginal changes in demand side policies are expected. The supply side reform of the industry has a clear trend. Continue to recommend development leaders Poly Developments And Holdings Group Co.Ltd(600048) , Vanke A, Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , and China Merchants Property Operation & Service Co.Ltd(001914) , Shenzhen New Nanshan Holding (Group) Co.Ltd(002314) , etc.
Risk tip: mortgage and other house purchase leverage funds have been significantly tightened, policy changes are less than expected, and the credit risk of the industry has intensified
