Investment summary:
Talk every Monday: the fundamentals are still weak, and multiple departments sound to boost market confidence
In terms of fundamentals, according to the release of real estate meso data from January to February this week, in addition to the year-on-year increase of 3.7% in real estate investment, which is slightly better than expected, the data of sales, new construction, completion and capital sources are weak. From the perspective of policy, most departments issued a voice on Saturday to send a positive signal to the market. At the same time, it was clear that the trial point of real estate tax will not be expanded this year, and the industry confidence will gradually return under the guidance of policy.
The investment in real estate development was slightly better than expected, mainly due to the high year-on-year growth rate of land purchase fees: the completed investment in real estate development increased by 3.7% year-on-year from January to February, down 0.7 percentage points from the previous month, and the year-on-year growth rate in a single month rose by 17.6 percentage points. If the year-on-year growth rate of land purchase fees from January to February is reduced to 0%, the growth rate of real estate investment from January to February will drop to – 1.9%. In addition, the price rise of rebar, cement and other raw materials related to real estate construction has also increased the amount of real estate investment to a certain extent.
The commercial housing market is still weak: the sales area and sales amount of commercial housing decreased by 9.6% and 19.3% respectively from January to February, an increase of 6 percentage points and a decrease of 1.5 percentage points compared with December 2021. The monthly year-on-year growth rate of sales area was negative for seven consecutive months, second only to 10 months in 2008, 8 months in 2011 and 13 months in 2014.
The source of funds at the financing side continued to be repaired and the source of funds at the demand side weakened: the source of funds for real estate development decreased by 17.7% year-on-year from January to February, an increase of 1.6 percentage points over December 2021. Compared with December 2021, the year-on-year growth rate of Chinese loans, self raised funds, deposits and advance receipts, and personal mortgage loans increased by 10.5 percentage points, 3.7 percentage points, 1.1 percentage points and 8.9 percentage points respectively.
The year-on-year negative growth rate of newly opened buildings narrowed, and the completed area remained depressed. From January to February 2022, the newly started area decreased by 12.2%, the completed area decreased by 9.8% and the construction area increased by 1.8%, respectively 19 percentage points higher, 11.7 percentage points lower and 37 percentage points higher than December 2021.
In terms of policy, on March 16, six departments made a collective voice to the real estate industry. We believe that the main concerns include: (1) not expanding the pilot cities of real estate tax during the year is the most direct benefit, eliminating the short-term uncertainty of the real estate market and improving the expectations of buyers; (2) Encourage institutions to carry out M & A loans, and focus on supporting high-quality real estate enterprises to acquire high-quality projects of difficult real estate enterprises. The M & A of high-quality real estate enterprises will also be further supported, and institutions other than real estate enterprises will also participate in M & A and provide new sources of funds; (3) The CSRC said that it would actively cooperate with relevant departments to effectively resolve the risks of real estate enterprises: the risks at the level of real estate enterprises have received further attention and will be more effective and practical risk disposal in the future; (4) As many as six departments speak at the same time, which itself is a strong policy guidance signal, and the policy’s attention to real estate risk has been further improved.
Data tracking (March 7-march 13):
New housing market: the transaction area of 30 cities is – 46 PCT in one week and – 30 PCT in cumulative year-on-year, first tier cities – 46 PCT, – 27 PCT, second tier cities – 69 PCT, – 66 PCT, third tier cities – 6 PCT and + 21 PCT respectively.
Second hand housing market: the transaction area of second-hand housing in 13 cities was – 26 PCT year-on-year in a single week and – 29 PCT year-on-year in total.
Land market: the cumulative construction area of land supply in 100 cities is + 14 PCT year-on-year, the cumulative construction area of transaction is – 20 PCT year-on-year, the cumulative transaction amount is – 61 PCT year-on-year, and the land transaction premium rate is 1.63%.
City market month on month: Beijing (+ 38 PCT), Shanghai (- 20 PCT), Guangzhou (- 9 PCT), Shenzhen (+ 0.4 PCT), Nanjing (- 28 PCT), Hangzhou (+ 17 PCT), Wuhan (+ 11 PCT)
Investment strategy: it is suggested to pay attention to the leading real estate enterprises Poly Developments And Holdings Group Co.Ltd(600048) , Vanke A and Longhu group with stable operation and good credit background. Focus on high-quality real estate enterprises Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , Greentown China, etc. under the product-oriented logic. With the further confirmation at the bottom of the policy, attention can be paid to the repair opportunities of high-quality private enterprises, such as Seazen Holdings Co.Ltd(601155) , Jinke Property Group Co.Ltd(000656) , etc.
Risk tip: the sales market is down, and some real estate enterprises have a storm of debt default.
