Key investment points
Q2 fundamentals are not stabilized, and the trend of policy relaxation remains unchanged. Before March 2022, the real estate policy has been continuously relaxed, but from the results, the relaxation is still insufficient: in March, both sales and investment showed a year-on-year decline and expansion trend; The cumulative sales and investment performance from January to March were also poor; Guided by the sluggish performance of the real estate market, the land market in Dongguan, Ningbo and other places remained in decline on the whole in April, and the enthusiasm of developers to acquire land was not high. In April, the policy relaxation speed was significantly accelerated. At present, at least 10 cities have relaxed the restrictions, and the intensity has increased significantly. We believe that Q2 is the key time window for the stabilization of industry demand, and more cities will increase their weight in the direction of coordinated relaxation of the “four limits”, especially those with high inventory pressure.
Loan restrictions have been relaxed, and purchase restrictions have been followed up. Since February 2022, some “non restricted cities” have reduced the proportion of down payment. On April 18, the central bank and the safe issued a document to raise the adjustment of the proportion of down payment and loan interest rate, which means that the loan restriction policy is expected to continue to be relaxed. We believe that the relaxation of the loan restriction policy has both advantages and disadvantages: the reduction of the down payment ratio can reduce the purchase threshold, but it also means heavier monthly supply pressure, and the space for the reduction of the down payment ratio is limited. The relaxation of the identification standard of the first house is more conducive to the release of reasonable demand. In terms of purchase restriction, according to the recent performance of the Pearl River Delta and Yangtze River Delta markets, we believe that the further relaxation of the purchase restriction policy is conducive to the release of rigid demand and rigid reform demand, and will not cause the rapid overheating of the market under the background of the current market downturn. Therefore, we can expect the follow-up action of 22q2 in the deregulation of purchase restriction.
The time required for this round of repair is longer than that in the past. In this cycle, the policy relaxation is mainly concentrated at the local level, and the purchase and loan restrictions will not be relaxed until March 2022. In addition, this round of policy regulation also extends to the supply side, and the liquidity crisis of real estate enterprises also has a negative effect on the demand side. The point like outbreak of the national epidemic has also delayed the emergence of the demand inflection point. In 2022q1, the year-on-year decline of national commercial housing sales area has been similar to that in 2015 and March 2020, while only 6 cities at the bottom of the cycle in 2015 are still limited to purchase, but at the current time point, more than 50 cities in China have not liberalized the purchase restriction policy. We believe that there is still room for further opening up the purchase restriction policy in this cycle, and the demand repair needs the combination of policies at both ends of supply and demand.
The medium and long-term demand is about 1.5-1.6 billion square meters. We believe that the short-term demand for real estate is vulnerable to fluctuations due to policy regulation, but the fluctuations will focus on the medium and long-term basic trading volume, which is mainly affected by population growth and urbanization rate. We calculate that the reasonable center of the medium and long-term demand for commercial housing is about 1.5-1.6 billion square meters, and the total growth has become a structural growth trend.
The beta market of the sector is not over. The market duration of the real estate sector was 14 months in 2008, 14 months in 2011 and 22 months in 2014 respectively, and the increase of Shenwan real estate was 169%, 34% and 136% respectively. The end sign of the three rounds of sector cycle is the same. When the month on month growth rate of house prices turns positive for the first time in this cycle, the expectation of policy tightening is strengthened, and the sector market comes to an end. In this cycle, the real estate index increased significantly from November 2021 to January 2022 and from March 16 to April 8 2022 (19% and 36% respectively). After the bottom of the policy appeared in September 2022, the cumulative increase was only – 7%. The supply side of this cycle ushered in structural optimization, and the leading real estate enterprises have prominent advantages in financing, debt structure and operation and management. Vanke, Poly Developments And Holdings Group Co.Ltd(600048) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Gemdale Corporation(600383) and the weighted average cumulative excess return of market value of the four leading companies has been about 5% since September 2021, 24% higher than that of Shanghai and Shenzhen 300. Compared with the historical valuation range, the current PE and Pb valuations are only slightly higher than the historical lowest level. We believe that there is still room for further repair of the valuation of leading companies before the end of the beta market brought by policy relaxation.
Risk tip: the speed and intensity of policy introduction are lower than expected; The aggravation of the epidemic affects the need for repair
