Sales continued the bottom building process, and the policy was loose and needed to be upgraded. In the first quarter of 2022, the cumulative year-on-year growth rates of commercial housing sales area and sales amount were – 13.8% and – 22.7% respectively, down 4.2 and 3.4 percentage points respectively compared with the previous two months; In March, the monthly growth rates of sales area and amount were – 17.7% and – 26.2% respectively, down 8.1 and 6.9 percentage points respectively compared with the previous two months, and the monthly sales have increased negatively for eight consecutive months. From the high-frequency data of key cities we tracked, the sales area of commercial housing in March decreased by 42.9% year-on-year, further expanding the decline compared with the previous two months. From the perspective of trend, it reflects the weak trend of overall sales. Although some cities have successively relaxed regulation and control under the framework of urban policy implementation, the spread of the epidemic and residents’ willingness to increase leverage have been squeezed, and the market expectation has not shown signs of reversal. From the current policy feedback effect, the scope and intensity of easing need to be upgraded before it is possible to gradually break the negative feedback situation of industry supply and demand. In the future, the lag of policy transmission effectiveness is superimposed, and the industry credit risk is still under pressure. It is expected that the sales will still be difficult to repair quickly in the short term, and the fundamentals will still be in the process of bottoming in the second quarter. From the perspective of house price performance, the price index of new commercial housing in 70 large and medium-sized cities decreased by 0.1% month on month, which was the same as the growth rate in February, with a year-on-year increase of 0.7%, and the growth rate decreased by 0.5 percentage points compared with February; In March, house prices fell month on month, and the number of cities reached 38, down 2 from February. Under the current pattern of weak supply and demand, the change of price dimension is not obvious, but the degree of differentiation between cities is increasing. Stimulated by the improvement of housing loan level, the trading volume of new houses and second-hand houses in core first and second tier cities has shown marginal signs of recovery, further raising house price expectations. Even under the support of policies, it is expected that it is difficult for cities with weak demand to reverse the continuous decline of house prices.
Investment growth will continue to bottom out in the second quarter. In the first quarter, the investment in real estate development increased by 0.7% year-on-year, and decreased by 2.4% year-on-year in a single month in March. The growth rate decreased by 3 and 6.1 percentage points respectively compared with the previous two months. Considering the pressure on the capital chain of real estate enterprises and the downturn at the sales end, the decline in the growth rate of real estate investment is still expected. From the perspective of land purchase, the heat of the first batch of land auction in the year was slightly better than that of the third batch last year with the improvement of the quality of land supply by the government, but it is still difficult to say that it was significantly improved. The year-on-year growth rates of land purchase area and land transaction price in the first quarter were – 41.8% and – 16.9% respectively, Compared with the previous two months, it increased by 0.5 percentage points and 9.8 percentage points respectively. In terms of construction, the construction area increased by 1% year-on-year in the first quarter, but the construction growth rate fell to – 21.5% due to the limited resumption of work in a single month in March. It is expected that the growth rate of the follow-up construction end will stabilize with the resumption of work, but the recovery of the land end still needs the substantive recovery of policy signals and sales. Therefore, we comprehensively judge that the growth rate of real estate investment in the second quarter will continue to reach the bottom, and the third quarter is expected to usher in the inflection point of stabilizing and returning to the positive growth rate of single month investment.
New construction is hovering at a low level, and the pace of completion is expected to speed up. In terms of new construction, the cumulative growth rate of new construction in the first quarter was – 17.5%, and the year-on-year growth rate in March was – 22.2%, which increased by 5.3 and 10.1 percentage points respectively compared with the previous two months. The deep-seated reason for the weak construction still lies in the willingness to start under the liquidity pressure of real estate enterprises. Combined with the lack of land transactions in the second and third batches last year, the level of available projects is facing an absolute decline, so the subsequent new construction will remain low. In terms of completion, the year-on-year growth rates in the first quarter and March were – 11.5% and – 15.5% respectively, and the growth rates increased by 1.7 and 5.7 percentage points respectively compared with the previous two months. Despite the high slowdown in completion in the short term, under the pre-sale fund supervision system, real estate enterprises need to speed up completion to ensure cash collection and delivery, further narrowing the decline in completion growth rate.
Capital continues to be under pressure, and targeted prescriptions are more needed in difficult situations. From the perspective of funds in place in the industry, the cumulative growth rate in the first quarter was – 19.6%, and the growth rate in a single month in March was – 23%, down 1.9 and 5.3 percentage points respectively compared with the previous two months. According to the structural observation, the monthly growth rate of personal mortgage loans was – 22.1%, an increase of 5.2 percentage points over the previous two months. Although the support for mortgage loans has increased since October 2021, the mortgage lending cycle has been significantly shortened and the mortgage interest rate has also been significantly reduced, at present, after the centralized release of the backlog of mortgage loan demand in the early stage, the incremental level is still subject to the downturn on the demand side, In the first quarter, the medium and long-term loans of new residents increased by 910 billion yuan less than that of the same period last year, which can reflect the current low willingness to buy houses. The monthly deposit and advance payment decreased by 37.5% year-on-year, with a decrease of 10.5 percentage points compared with the previous two months. The trend corresponds to the continuous decline in sales growth. The proportion of deposit and advance payment also decreased to 32.1% from 36.8% at the end of 2021. At the financing level, the year-on-year growth rate of Chinese loans in the first quarter was – 23.5%, and the single month growth rate in March was – 29.7%; The year-on-year growth rate of self raised funds was – 4.8% in the first quarter and – 2.3% in a single month in March. The real estate enterprises are still in the process of slow recovery through external financing. The policy direction and strength of the rescue of crisis real estate enterprises need to be more targeted. Under the background of Limited sales collection and fundamental improvement of financing, the industry capital still faces key risk nodes in the upcoming debt repayment peak.
As the policy strength and scope under the framework of urban implementation policy are expected to be further released, the real estate sector will continue to benefit from the valuation and repair dividend in the second quarter. All indicators of the industry showed a downward trend in the first quarter. Superimposed on the impact of the spread of the epidemic on the overall economy, the pressure on the annual economic growth target increased sharply. Therefore, the policy level at both ends of real estate supply and demand still needs to be further strengthened and relaxed. Recently, the policy introduction intensity under the framework of urban policy implementation has increased significantly, and the scope of cities involved has been further extended to some second tier cities, but generally speaking, the scope and intensity of easing still have great room for improvement. At the same time, the central bank and the State Administration of foreign exchange proposed on April 18 to implement differentiated housing credit policies, reasonably determine the minimum down payment ratio and minimum loan interest rate requirements of commercial individual housing loans within their jurisdiction, and further clarify the attitude of continuing to increase the support on the demand side. For the supply side, under the background of Limited sales collection and no fundamental improvement in financing, Real estate enterprises still need more targeted rescue policies to cope with the upcoming debt repayment peak. From an overall perspective, the policy tools for real estate will be further improved with the continuous bottoming of economic fundamentals.
We continue to recommend development categories: China Vanke Co.Ltd(000002) , 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; Property management: China Merchants Property Operation & Service Co.Ltd(001914) , country garden service, poly property, Xuhui Yongsheng service, xinchengyue service.
Risk tip: the epidemic has escalated again, which has an impact on the real estate sales end, the house price has fallen more than expected, the regulatory policy has been continuously high-pressure, the improvement of the financing environment is less than expected, and the liquidity risk of the industry has increased
