Introduction to the report / core points
From the start-up time, the 14th five year plan has set quantitative indicators for urban renewal, which means that urban renewal has been started in an orderly manner. Urban renewal is a strong variable and fast variable of real estate investment. It is expected to play a driving role in real estate investment in 2022; From the past investment scale and current investment planning estimates, it is estimated that the investment scale of urban renewal during the 14th Five Year Plan period will be more than 10-12 trillion, and the average annual investment scale during the period will be more than 2-2.5 trillion. Considering the strong demand for steady growth in 2022, there may be the characteristics of pre force in the 14th five year plan; According to the estimation of 70% and 30% of real estate and infrastructure investment respectively, the contribution to the growth rate of real estate investment in the whole year is about 7% - 8%. We expect that the real estate investment in 2022 will exceed the expectation and maintain the annual growth rate of real estate investment of 5.4%. The short-term equity assets are expected to grow steadily, and the performance of relevant sectors will continue; In terms of interest rate bonds, it is expected that the yield of 10-year Treasury bonds will further rise to 3% in Q2.
It is estimated that the investment in urban renewal during the 14th five year plan will be 10-12 trillion yuan, and the demand for steady growth in 2022 is strong, which may be the driving force in advance
In the column on new urbanization construction in the 14th five year plan, it is pointed out that during the 14th Five Year Plan period, the urban renewal work needs to "complete the transformation of 219000 old urban communities built before the end of 2000, basically complete the transformation of old factories in big cities, transform a number of large old blocks, and transform a number of urban villages according to local conditions". At present, there are both subjective and objective indicators in the urban renewal target system of the 14th five year plan, It means that urban renewal has been started in an orderly manner. Urban renewal is both a strong variable and a fast variable of real estate investment. It is expected to play a driving role in real estate investment in 2022.
From the comparison of past investment scale, Li Xiaolong, director of the general office of the Ministry of housing and urban rural development, pointed out at the press conference of the state information office in February 2022: "by the end of 2021, a total of 23000 urban renewal projects have been implemented in 411 cities across the country, with a total investment of 5.3 trillion yuan". The systematic proposal of the concept of urban renewal at the national level is in 2019. If it is estimated based on this, the average annual investment scale is expected to be between 1.5-2 trillion. The investment scale is expected to further increase after the urban renewal is included in the five-year plan for the first time in the 14th five year plan.
According to our statistics, according to the current investment planning estimation of some cities, some provinces or provincial capital cities have published the construction objectives or project list of urban renewal investment through different channels. The provincial planning includes Liaoning, Henan, etc; The provincial capitals and municipalities directly under the central government include Guangzhou, Chengdu, Wuhan, Nanchang, Qingdao and Shenzhen. According to our estimation and statistics, the planned scale of urban renewal investment in the above-mentioned regions alone has reached 4.7 trillion yuan during the 14th Five Year Plan period. Considering that the GDP of the above-mentioned regions accounts for only 16% of the country and the population accounts for only 16% of the country, we believe that the investment scale of urban renewal during the 14th Five Year Plan period is more than 1-1.2 trillion yuan, and the average annual investment scale during the period is more than 2-2.5 trillion yuan, which is further higher than the average investment level before 2021. In addition, considering the strong demand for steady growth in 2022, and the current economic stage is disturbed by the epidemic, the urban renewal investment planning has the possibility of leading the force and contributing to steady growth.
Although only 21 cities were selected as the pilot areas of urban renewal in the official documents, the actual nationwide steady progress was made. In November 2021, the Ministry of housing and urban rural development issued the notice on carrying out the first batch of urban renewal pilot work, and selected 21 cities to carry out urban renewal pilot work. However, we believe that the selection intention of the pilot cities is to take typical cities as the starting point to explore the operation system of urban renewal, It does not mean that urban renewal is only carried out in 21 cities. For example, Guangdong Province is not a pilot area, but it is actually in the leading state in the field of urban renewal in China; Shanghai is not a pilot area, but it also promotes and sets up a special urban renewal fund. In addition, according to the statistics of the central index, since 2021, more than 30 provinces and cities in China have issued policies related to urban renewal, which is much larger than the pilot cities.
During the gradual development of urban renewal from the first and second tier to the third and fourth tier, the proportion of real estate investment may gradually increase to 70%. Both real estate development investment and infrastructure investment are involved in urban renewal. According to our estimation, the scale of real estate investment in urban renewal may further develop to 70% in the future. The deduction logic is as follows:
According to the interpretation of statistical indicators issued by the National Bureau of statistics, real estate development investment refers to all the investment completed by real estate development enterprises this year for housing construction projects and land development projects, as well as public welfare buildings and land purchase fees. According to the answer to the question of investment and real estate statistics of the Bureau of statistics, the real estate development enterprises included in the statistical scope are all real estate development business legal entities with development and business activities. The legal entities that meet the statistical scope can be included in the statistics, not limited to listed companies. According to the above statistical standards, we take the proportion of the total development area participated by real estate enterprises (including real estate development in the business scope) in urban renewal projects as the approximate estimation index of the proportion of real estate investment in urban renewal investment. If we take some typical cities in Guangdong Province as an example: the planned announcement projects of urban renewal and old transformation in Shenzhen in 2021 are taken as samples, and the area to be demolished is taken as the statistical object. The total area of projects in charge of real estate development enterprises in the business scope accounts for about 53%; This data accounts for 77% of the urban renewal in Guangzhou; In the urban renewal of Dongguan, this data accounts for 72%; On average, taking Guangdong Province as the sample area, we approximately estimate that the proportion of urban renewal real estate investment in China is about 60% - 65%.
From the current development of urban renewal investment (including comprehensive consideration of specific investment, urban renewal planning and the establishment of urban renewal Fund), the first and second tier cities are still relatively important development main forces. For example, the 14th five year plan of Guangzhou clearly states that "the investment scale of urban renewal project during the 14th Five Year Plan period will reach 331.5 billion yuan"; Shanghai has set up a total of 90 billion urban renewal fund to support relevant construction. However, from the perspective of the current pilot scope of urban renewal, it basically covers all major regions of the country. Therefore, in the future, urban renewal may further expand from the first and second tier cities to the third and fourth tier cities. In the initial stage of the development of the third and fourth tier cities, it is more likely to form real estate investment by means of old community transformation and demolition. It is expected that the proportion of real estate investment in it may further increase to 70% in the future.
Urban renewal is expected to contribute 7% - 8% to the growth rate of real estate investment and maintain the annual growth rate of real estate investment of 5.4%
According to our estimation above, it is estimated that the investment scale of urban renewal during the 14th Five Year Plan period will be more than 10-12 trillion, and the average annual investment scale during the period will be more than 2-2.5 trillion. Considering the strong demand for steady growth in 2022, there may be the characteristics of pre force in the 14th five year plan; If further estimated by 70% and 30% of real estate and infrastructure investment, urban renewal is expected to contribute about 7% - 8% to the growth rate of real estate investment in the whole year.
On the whole, we expect that the real estate investment in 2022 will exceed the expectation and maintain the judgment that the annual growth rate of real estate investment will be 5.4%. Under this background, the equity assets are expected to grow steadily, and the performance of relevant sectors will continue; In terms of interest rate bonds, it is expected that the yield of 10-year Treasury bonds will further rise to 3% in Q2.
Risk warning: the sample of urban renewal enterprises in some cities has deviation from that in the whole country; Investment in urban renewal is less than expected.
