Industry comments
This week, the performance of real estate and property sectors were slightly corrected. This week, Shenwan A-share real estate sector rose or fell by – 2.9%, ranking 15th among all sectors; Wind Hong Kong stocks and real estate sector rose or fell by – 1%, ranking 15th among all sectors. This week, the Hang Seng property service and management index rose or fell by – 3.4%, the Hang Seng China enterprise index rose or fell by – 1.4%, and the Shanghai and Shenzhen 300 index rose or fell by – 1%; The relative returns of the property index to Hang Seng China enterprise index and CSI 300 were – 2% and – 2.4% respectively.
The local auction market continues the trend of low temperature. This week, 6.44 million square meters of residential land was sold in 300 cities across the country, with a month on week increase of + 51% (there were few local auctions during the Qingming Festival last week), a year-on-year increase of – 56% and an average premium rate of 3%. Since the beginning of 2022, a total of 109.91 million square meters of residential land has been sold in 300 cities across the country, with a cumulative year-on-year increase of – 53%. The local auction market is still dominated by central enterprises, state-owned enterprises and platform companies.
On Monday, hand house sales rose month on month and fell year-on-year, still at a low level. This week, commercial housing transactions in 40 cities totaled 3.54 million square meters, with a week-on-week ratio of + 13% and a week-on-week ratio of – 54%, including – 4% and – 51% in first tier cities; Second tier cities had a week-on-week ratio of + 19% and a week-on-week ratio of – 50%; Third and fourth tier cities were + 6% mom and – 72% yoy.
This week, the sales of second-hand houses increased month on month and decreased year on year. Second hand housing transactions in 17 cities totaled 1.42 million square meters this week, with a week on week ratio of + 33% and a week on year ratio of – 43%, including + 43% and – 34% in first tier cities; Second tier cities + 27% mom and – 44% YoY; Third and fourth tier cities were + 93% mom and – 63% yoy.
The introduction of easing policies was accelerated to help the industry gradually build a bottom. Since we issued the report “stepping on the right track of a virtuous cycle, the layout of real estate is at the right time”, Chongqing, Suzhou, Nanjing, Kunming and other first and second tier cities and Yangtze River Delta cities have successively issued loose regulatory policies to support consumers to buy houses by relaxing purchase and sales restrictions, reducing the down payment ratio, reducing housing loan interest rates and other measures; On April 15, the central bank announced to cut the deposit reserve ratio by 0.25 percentage points, and the action of steady growth continued to increase; From the changes in the sales price of commercial housing in 70 large and medium-sized cities in March 2022, although the number of cities with declining prices is still more than the number of cities with rising prices, the number of cities with declining prices has gradually decreased. We believe that with the help of the favorable policies already issued and the loose policies expected to be issued in the future, the real estate industry is expected to gradually bottom at the end of the second quarter.
Local governments may bail out local high-quality private real estate enterprises. At present, although the loose regulation of the industry is accelerating, due to the lagging response of market sales, some real estate enterprises still face great financial pressure in the short term. We expect that local governments will increase the rescue assistance to local high-quality real estate enterprises, or take measures such as directly issuing rescue funds, relaxing the supervision of pre-sale funds of real estate enterprises, coordinating resources to help real estate enterprises finance, joint development of state-owned assets at the project level and capital injection at the company level. On the one hand, the local government’s rescue assistance to high-quality private real estate enterprises can alleviate the short-term capital pressure of real estate enterprises, on the other hand, it can increase enterprise credit and ensure the safe and steady development of real estate enterprises. It is expected that the undervalued high-quality private real estate enterprises will gradually enter the valuation repair stage.
Investment advice
We expect that in the future, industry-oriented easing policies will continue to be introduced, and direct rescue assistance for enterprises will gradually increase. In the real estate sector, we recommend green city China, China Construction Development International and Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , which have contrarian sales growth and strong performance certainty. In the property sector, we are optimistic about the valuation repair flexibility of private property companies after the liquidity crisis of related real estate enterprises is lifted, and recommend Jinke service and country garden service.
Risk tips
Loose regulation is less than expected; The epidemic affected the implementation of policies and market recovery
