Investment summary:
Talk every Monday: Housing fundamentals continue to be under pressure, and there is an urgent need for policy adjustment
The real estate meso data released in March this week showed that all indicators were lower than the data from January to February, and the pressure on industry fundamentals increased. Under the background of “stable growth”, there is not enough time for fundamental recovery. We can further expect policy easing, especially the further opening of the space and scope of “urban implementation”. Construction and installation investment and land purchase are both weak, and real estate investment continues to be under pressure in the short term:
The cumulative year-on-year growth rate of real estate development investment was 0.7%, down 3 percentage points from the previous month, and the year-on-year growth rate in a single month was – 2.4%, down 6.1 percentage points from the previous month. The cumulative land purchase fee increased by 0.6% year-on-year, decreased by 6.2% year-on-year in a single month, and decreased by 17.5 percentage points month on month. The cumulative year-on-year growth rate of construction and installation investment was 0.7%, decreased by 0.8 percentage points compared with the previous month, and the year-on-year growth rate of a single month was – 0.3%, decreased by 1.9 percentage points compared with the previous month.
In March, land purchase fees and construction and installation investment showed a downward trend, leading to a further decline in real estate investment. The increase of land purchase fee fell sharply to – 0.3% from 11.8 percentage points year-on-year in a single month. At the same time, the construction end remained weak, and the real estate investment fell further. With the settlement subject of land transaction price gradually transferred to 2022, the weak impact of land market transaction will gradually appear, and the short-term real estate investment will still be under pressure. The monthly growth rate of sales has been at a historic low, and policy adjustment still needs to be made:
The sales area and sales amount of commercial housing decreased by 22.7% and 13.8% respectively year-on-year in March, 3.5 percentage points and 4.2 percentage points month on month. The sales area and sales volume were – 26.2% and – 17.7% respectively on a month-on-month basis, with a month-on-month decrease of 6.9 and 17.7 percentage points.
The year-on-year growth rate of sales area and sales in a single month in March has been the lowest since November 2008 (early 2020 without considering the impact of the epidemic). Under the influence of the epidemic, the heat of the originally weak commercial housing market has further weakened, and the demand side sentiment urgently needs policy regulation for counter cyclical intervention. Sales funds further declined, and the source of development funds continued to be under pressure:
The sources of real estate development funds decreased by 19.6% year-on-year, 1.9 percentage points month on month, 23 percentage points year-on-year and 5.3 percentage points month on month in March. The monthly growth rates of Chinese loans, self raised funds, advance payment of deposits and mortgage loans were – 29.7%, – 2.3%, – 37.5% and – 22.1% respectively.
The source of funds on the supply side is relatively stable, and the source of funds on the demand side follows the market downward. The monthly year-on-year growth rate of mortgage loans and deposit advance receipts decreased for 4 and 7 consecutive months respectively, which is in strong consistency with the sales market. In the future, we still need to wait for the demand to recover; China’s loans fell again, while self raised funds continued to rise, showing positive growth year-on-year in a single month for the first time, and the financing environment improved slightly. New construction, completion and construction are weak:
In 2022, the newly started area of real estate enterprises decreased by 17.5% year-on-year, the completed area decreased by 11.5% year-on-year, and the construction area increased by 1% year-on-year, with a decrease of 5.3, 1.7 and 0.8 percentage points respectively compared with the previous month. From a monthly perspective, the newly started area decreased by 22.2%, the completed area decreased by 15.5% and the construction area decreased by 21.5%, with a month on month decrease of 10.1, 5.7 and 23.3 percentage points respectively.
The performance of new construction, completion and construction was weak in March. New construction is mainly affected by the weakening of land acquisition by real estate enterprises and cautious investment psychology. At present, the push is mainly based on the supply of started goods, resulting in a large year-on-year decline; Due to its pre-sale fund supervision policy, the completion has a low contribution to the capital flow of real estate enterprises, and the priority lags behind. It also shows a slight decline, but the overall downward space under the “guaranteed delivery” policy is limited. Data tracking (April 11-april 17):
New housing market: the transaction area of 30 cities was – 52pct and – 37pct in one week and cumulative year-on-year respectively, first tier cities – 66pct, – 35PCT, second tier cities – 72pct, – 69pct, third tier cities – 19pct and + 10PCT.
Second hand housing market: the transaction area of second-hand housing in 13 cities was – 37pct year-on-year in a single week and – 31pct year-on-year in total.
Land market: the cumulative construction area of land supply in 100 cities is + 9pct year-on-year, the cumulative construction area of transaction is – 13pct year-on-year, the cumulative transaction amount is – 50pct year-on-year, and the land transaction premium rate is 1.79%. City market month on month: Beijing (+ 106pct), Shanghai (- 26pct), Shenzhen (+ 15pct), Nanjing (+ 15pct), Hangzhou (+ 112pct), Wuhan (+ 23pct)
Investment strategy:
There is great pressure on the fundamentals of the industry. Under the background of “stable growth”, the urgency of fundamental recovery is increasing day by day. In the follow-up, we can further look forward to the further easing of policies, especially the improvement of urban energy level and relaxation intensity of “implementing policies according to the City”.
Guard against the face change of the annual report of real estate enterprises and the outbreak of capital risks before the improvement of fundamentals. Strategically, give priority to the stable operation of leading enterprises. The valuation and repair market of private enterprises can be paid continuous attention, but it is necessary to pay close attention to the overall trend of the industry index and the actual situation of the enterprise itself. Follow the trend and participate carefully.
It is suggested to select the leading real estate enterprises Poly Developments And Holdings Group Co.Ltd(600048) , China Vanke Co.Ltd(000002) , Longhu group with stable operation and good credit background; High quality real estate enterprises Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , Greentown China, etc. under the product-oriented logic; Jianfa international and Yuexiu real estate, leaders of local state-owned and central enterprises with good credit background and development potential; Pay attention to the repair opportunities of high-quality private enterprises, such as Xuhui holding, Seazen Holdings Co.Ltd(601155) , Jinke Property Group Co.Ltd(000656) , etc; Green City Management Holdings, the industry leader recommended in the field of agent construction.
Risk tip: the sales market is down, and some real estate enterprises have a storm of debt default.
