Mortgage interest rates in Nanjing and Suzhou were lowered, and the national average mortgage interest rate decreased significantly in March
On March 16, after the meeting of the Finance Committee and the statements of many ministries and commissions, the positive attitude of underpinning the real estate policy was basically confirmed. On March 22, according to the financial Associated Press, the mortgage interest rates in Nanjing and Suzhou were further reduced by a considerable margin: the proportion of mortgage loans for the first house of many banks in Suzhou fell to the same level as LPR; Nanjing not only lowered the mortgage interest rate, but also significantly relaxed the second house loan policy. According to the data of Shell Research Institute, the national average mortgage interest rate of the first house in March has dropped to 5.34%, down 13bps from February, a sharp increase. The policy trend continues to verify our judgment. It is expected that the mortgage interest rate will continue to decrease in the next six months, and there is considerable room for reduction.
The policy space can be expected, the policy is relaxed, and the city’s energy level is expected to continue to improve
We expect that the follow-up real estate support policy will continue to be introduced, and the relaxed urban energy level will be further improved. At present, the recovery of industry fundamentals is not optimistic. According to Kerry’s data, in February 2022, the sales area of the top 100 real estate enterprises in the industry decreased by 43% year-on-year. The capital situation of real estate enterprises improved limited and still faced great credit risk. In addition, the land acquisition of the industry is still in the doldrums. According to the data of the Bureau of statistics, the year-on-year growth rates of the area of land purchased by the industry and the transaction price of land from January to February 2022 were – 42.3% and – 26.7% respectively, and the financial pressure of local governments increased. In the same period, the new construction area of houses was 149 million square meters, a year-on-year decrease of 12.1%, and the industry investment will still face great downward pressure. Considering that there is a time lag between sales recovery and investment recovery, it is necessary for industry sales to recover rapidly before they can be transmitted to the investment side within the year and play the role of “stable growth”. On the other hand, this round of market recovery still needs to be driven by high-energy cities. Affected by the weakening demand, the policy effect of the fourth and fifth tier cities is expected to be limited, while the change of regulation policies in the first tier cities will be greatly limited. Key second tier cities and strong third tier cities are the key to the overall recovery of the market. We believe that key cities will continue to implement policies according to the city, and the regulation policies are expected to be flexibly adjusted within the framework of “housing, housing and non speculation”, reasonably guide the expectation of house prices, and realize the market repair from point to area.
Inefficient enterprises continue to be cleared, and high-quality enterprises have long-term and healthy development opportunities
The “double high” business model has been completely broken. With the pressure drop of leverage ratio, the fault tolerance rate at the project level of real estate enterprises has been greatly reduced, and the difficulty of capital turnover has increased significantly. In the past, inefficient enterprises relying solely on leverage development may not be able to maintain the original business scale in the future, while high-quality enterprises will continue to increase the support of policies and financial institutions, and their competitive advantage in the land market will continue to expand. Considering the trend of population mobility, the main new housing market in the future will be the high-energy urban agglomeration with continuous population inflow. In the past, the “double high” enterprises mainly engaged in low-energy market lack market entry conditions, and the enterprises with deep cultivation ability of high-energy cities will obtain long-term and healthy development opportunities.
Investment advice
We continue to be optimistic about the allocation opportunities of the real estate sector in 2022, the policy continues to improve, the inefficient production capacity continues to be cleared, and the industry pattern has improved significantly. High quality enterprises have the basis for long-term valuation improvement. Beneficiary objects: (1) Poly Developments And Holdings Group Co.Ltd(600048) , Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , China overseas development, Xuhui holding group and other robust leaders; (2) Seazen Holdings Co.Ltd(601155) , commercial real estate leader represented by Baolong commerce.
Risk warning: the recovery of industry sales is not as expected; Policy regulation changes beyond expectations
