Recently, the real estate policy has been relaxed and accelerated significantly
Loose policy: since the central government repeatedly mentioned “two maintenance” in September 2021, the real estate policy has been significantly relaxed. Since the outbreak of the epidemic in March this year, the pressure for steady growth has further increased, and local real estate policies show signs of acceleration.
Fundamentals: deleveraging is coming to an end, and borrowing capacity will hit the bottom and pick up. The introduction of the “three red lines” on August 20, 2020 has greatly limited the scale of new interest bearing liabilities of real estate enterprises, which has brought a heavy blow to the real estate development industry that relies on the leveraged turnover operation. By the end of 2021, most Chinese real estate enterprises have entered the green and yellow grades, and the deleveraging process is coming to an end. We expect that 80-90% of real estate enterprises will enter the green file in 2022, and the borrowing capacity of Chinese real estate enterprises will gradually hit the bottom and pick up.
Continuous adjustment of real estate policy is the requirement of steady growth
We estimate that the added value of the real estate industry chain accounts for 16-17% of China’s GDP. If the policy adjustment is not sufficient, only considering the 8-10% decline in the growth rate of real estate investment and the corresponding downturn in the transaction of primary and second-hand houses, China’s GDP growth may fall to the level of more than 4% in 2022. If considering the contribution of real estate to finance, the actual situation may be more severe. We estimate that if we want to achieve gdp5 With an economic growth of about 5%, the growth rate of real estate investment should achieve about 0 growth or only a slight negative growth. The recent policy adjustment is in line with our previous expectations, and we also expect that the policy will continue to be adjusted.
How did the real estate sector perform in previous policies of Panasonic?
At present, it is in the third round of easing period of the real estate industry since 2008.
The first round was from October 2008 to November 2009. The excess return of the sector was significant, and the private real estate enterprises won. This may be mainly because the industry is in a growth period, and private enterprises show greater flexibility and growth.
The second round of easing was from June 2014 to March 2016. During this period, the market experienced a bull market and the sector achieved excess. During this round of rise, large real estate enterprises performed well, which is mainly due to the significant increase in the share of leading enterprises with the intensification of competition, so they enjoyed the double-click effect of valuation and profitability.
Who is expected to win this round of easing cycle?
We believe that under the dual catalysis of steady growth and undervalued value, the current real estate sector still has upward mobility. The current Pb of real estate is at the quantile level of 9.28% undervalued value in the past 10 years. With the improvement of policy margin, the industry may usher in a new era.
At the individual stock level, robust medium and large real estate enterprises may be expected to win. From the quantitative perspective, it is suggested to pay attention to the individual stock opportunities of China overseas development, China Resources Land, China Vanke Co.Ltd(000002) , Jinke Property Group Co.Ltd(000656) , Jiangsu Zhongnan Construction Group Co.Ltd(000961) .
Risk tips
1) the easing policy is less than expected; 2) The epidemic has led to an unexpected decline in demand; 3) The Fed’s interest rate hike led to increased capital outflows.
