Matters:
The National Bureau of statistics released the national real estate development investment and sales data from January to February 2022, of which the investment was 1.4 trillion yuan, a year-on-year increase of 3.7%; New construction of 150 million square meters, a year-on-year decrease of 12.2%; Completed 120 million square meters, a year-on-year decrease of 9.8%; The land purchase area was 8.38 million square meters, a year-on-year decrease of 42.3%; The land transaction price was 36.9 billion yuan, a year-on-year decrease of 26.7%; The sales area of commercial housing was 160 million square meters, a year-on-year decrease of 9.6%; The sales volume was 1.5 trillion yuan, a year-on-year decrease of 19.3%; The funds in place of real estate enterprises were 2.5 trillion yuan, a year-on-year decrease of 17.7%.
Ping An View:
Investment has achieved positive growth, and short-term downward pressure remains. Real estate investment increased by 3.7% year-on-year from January to February, higher than the single month (- 13.9%) in December 2021, or due to the continuous growth of construction area (1.8% year-on-year from January to February), superimposed with the delayed payment of part of the land price of the third batch of centralized land supply in the previous year. Looking back, considering that the sales is still at the bottom stage, the financial pressure of real estate enterprises is still large and lack of confidence, it is expected that the stabilization of the investment side will lag behind the sales side, maintaining the previous judgment. Under the neutral assumption, the real estate investment is expected to decline by 2.6% year-on-year in 2022.
New construction continued to be sluggish and completion was also weak. From January to February, 150 million square meters of new construction was started, a year-on-year decrease of 12.2%, which is also lower than the same period in 2019 (190 million square meters). The cement output from January to February decreased by 17.8% year-on-year, confirming the downturn of new construction in real estate. In the future, considering that the capital pressure of real estate enterprises is still under way and the decline of land transactions in 2021h2 affects the volume of goods available for construction in the future, the construction rate will probably slow down under the background of giving priority to insurance delivery to some insurance companies, maintaining the judgment that the new construction will be reduced by 12% year-on-year in 2022. Affected by the tight sales capital environment and the spread of credit risks, the pace of completion and delivery of real estate enterprises has further slowed down. From January to February, the cumulative completion of the whole country decreased by 9.8% year-on-year, the growth rate is lower than that of a single month (+ 1.9%) in December 2021, and the growth rate of flat glass production from January to February decreased to 2.0% (8.4% in 2021). The demand for completion of downstream real estate in India is weak. In the future, the short-term completion may still be in the doldrums, but if the financial pressure of subsequent real estate enterprises is significantly eased, and under the background of the peak delivery period, the completion and repair speed will be faster than the commencement, and the completion is still expected to achieve positive growth in 2022.
Sales price for quantity, short-term bottom stage. From January to February, the sales area and sales volume of commercial housing decreased by 9.6% and 19.3% respectively year-on-year. Compared with the single month growth rate (- 15.6% and – 17.8%) in December 2021, the decline in sales volume further expanded, and the decline was significantly greater than the sales area, which means that real estate enterprises have accelerated the elimination of price for volume, especially in the central and western regions with smaller sales decline. From the performance of micro real estate enterprises (the sales of top 100 real estate enterprises of Kerry Rui fell by more than 40% in February) and the continuous accumulation of national commercial housing inventory for sale, the pressure of market deregulation still exists, and it is expected that the pressure of short-term sales is still large. The 2022 government work report conveys the signal of stabilizing the economy and real estate. Due to the city’s implementation of policies to promote the virtuous cycle and healthy development of the real estate industry, the central bank and the China Banking and Insurance Regulatory Commission have issued documents to support the reasonable purchase credit demand of new citizens, and Zhengzhou and other places have also relaxed the regulation of the real estate market. It is expected that the follow-up policies on both supply and demand are expected to increase efforts to drive the gradual stabilization of the sales end.
The capital side has not improved, and the decline of mortgage loans has expanded. From January to February, the funds in place of real estate enterprises decreased by 17.7% year-on-year, of which Chinese loans, deposits, advance receipts and personal mortgage loans decreased by 21.1%, 27.0% and 16.9% year-on-year respectively. Both Chinese loans and mortgages were weak, reflecting the cautious attitude of financial institutions towards real estate loans, especially the decline of mortgage loans, which was significantly larger than (- 8.0%) in December 2021, It is negative to the medium and long-term loans of new residents in February 2022, which also reflects the relatively low prosperity of the real estate market. Referring to historical experience, when the residents’ medium and long-term loans are at a historically low level, the mortgage interest rate will often improve significantly, and the subsequent mortgage interest rate is expected to accelerate the decline.
Investment suggestion: from January to February, real estate investment bucked the trend and achieved positive growth, but sales, new construction, completion and funds in place are weak, real estate fundamentals are still under pressure, and short-term investment sales are still difficult to be optimistic. In terms of investment suggestions, whether from the overall situation of “stable growth” or avoiding systemic risks in the industry, the policy side is expected to increase efforts, and the sector valuation is expected to continue to repair. In the medium and long term, with the withdrawal or contraction of some real estate enterprises in the painful period of this round, the overall pattern of the industry is expected to be optimized, and the market share and profitability of brand real estate enterprises with financing and control advantages are expected to be improved. The development sector pays attention to the leading real estate enterprises Poly Developments And Holdings Group Co.Ltd(600048) , Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , China Vanke Co.Ltd(000002) and other leading real estate enterprises with strong short-term pressure resistance and prominent medium and long-term competitive advantages, and moderately pays attention to the elastic second-line targets, such as Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , Seazen Holdings Co.Ltd(601155) . With the improvement of the valuation of the high-quality services such as Kingstar Park and bisun, driven by the recent decline in the valuation of the high-quality services of Kingstar Park and bisun, it is expected that the high-quality services such as property development and bisun will also be brought about by the continuous improvement of the valuation of the high-quality services such as Kingstar Park and bisun. In addition, it is suggested to pay attention to upstream and downstream industrial chain opportunities such as cement, waterproof and glass.
Risk tips: 1) reduce the risk of supply adequacy: if the local city continues to be cold and the new land storage scale of real estate enterprises is insufficient, it will have a negative impact on the subsequent supply of goods, and then affect the sales, commencement, investment and completion of the industry. 2) Pressure risk on the performance of real estate enterprises: if the de chemical pressure of the real estate market exceeds the expectation and the sales are greatly changed by price, it will bring the risk of impairment of some early high prices and pressure on settlement profits. 3) Risk that the policy care is not as good as expected: if the effectiveness of the policy is insufficient and the adjustment range and time of the real estate market exceed expectations, it will have a negative impact on the development of the industry.
