Events
On April 29, 2022, the Political Bureau of the CPC Central Committee held a meeting to analyze and study the current economic situation and economic work. The meeting stressed the need to effectively control key risks, hold the bottom line of no systemic risks, adhere to the positioning that houses are used for living rather than speculation, support all localities to improve real estate policies based on local conditions, support rigid and improved housing demand, optimize the supervision of commercial housing pre-sale funds, and promote the steady and healthy development of the real estate market.
Commentary
The main tone of regulation and control of “housing, housing and non speculation” remains unchanged, but it will be more practical. Since the concept of “housing without speculation” was put forward at the end of 2016, it has always been the main tone of this round of real estate regulation, and the positioning of “housing without speculation” will not be shaken in the future, but it does not mean pessimism about the real estate industry. The meeting proposed for the first time to “support all localities to improve real estate policies based on local conditions”, indicating that the central government has a more moderate attitude towards real estate regulation and control, and the future real estate regulation and control policies will be more realistic. At the same time, it will also bring greater confidence boost to the industry.
Emphasizing “effective prevention and control of key risks”, the severe situation of the industry has been paid attention to. At present, the situation of the real estate industry is grim: ① sales continue to be sluggish, and the sales amount of commercial houses nationwide decreased by 23% year-on-year from January to March 2022; ② Real estate enterprises are not willing to start new projects and acquire land. From January to March 2022, the new construction area of real estate in China decreased by 18% year-on-year, and the transaction area of residential land in 300 cities in China decreased by 60% year-on-year; ③ Since 2021, the default events of real estate enterprises have occurred frequently, affecting social stability. The meeting proposed for the first time that “we should effectively control key risks and hold the bottom line of no systemic risk”, indicating that the central government pays full attention to the severe situation of the industry, and once it worsens, it may cause systemic risks. We expect that the loose policies with many dimensions, wide scope and great strength will continue to be introduced in the future.
Support the “improvement of real estate policies based on reality”, and it is expected that local regulation will be relaxed on a large scale. At present, the national real estate sales and local auction market are mostly in the doldrums, and loose policies are needed to promote the industry to return to the normal level. The meeting mentioned that “support all localities to improve real estate policies based on local conditions and support rigid and improved housing demand”. It is expected that local governments will have higher regulation flexibility. At present, Zhengzhou, Suzhou, Nanjing and other key cities have successively issued loose policies to promote the demand for house purchase; Many cities have increased the willingness of real estate enterprises to acquire land by reducing land prices, raising the upper limit of house prices and prolonging the time of land payment. We expect that after the setting of the meeting, the easing of local regulation will continue to increase, focusing on: ① on the demand side, the scope of cities that relax the purchase and sale restrictions will be expanded, the purchase and sale restrictions of other cities outside the core 22 city will be further cancelled, and the cities within the 22 city will also be relaxed in disguise; ② On the supply side, the threshold of local land auction will continue to be lowered, and the profit margin of real estate enterprises is expected to increase; ③ On the credit side, the overall mortgage interest rate may continue to decline, and the application of 20% down payment may make a breakthrough in more cities.
“Optimize the supervision of commercial housing pre-sale funds”, and the short-term cash flow of real estate enterprises is expected to improve. Since the introduction of the national pre-sale fund supervision policy in February, the first and second tier cities have taken the lead in loosening the supervision of pre-sale funds. Recently, the supervision of pre-sale funds in some third and fourth tier cities has also been relaxed, and the application scope of bank guarantee replacement supervision funds has been expanded. We expect that after the central government proposes to “optimize the supervision of commercial housing pre-sale funds”, the supervision of more low-energy cities will be relaxed. In addition, local governments will bail out local housing enterprises Financial institutions will also strengthen the fixed-point assistance to problematic real estate enterprises, and the short-term cash situation of real estate enterprises is expected to improve.
After the implementation of a series of loose policies, the sales of the first and second tier cities with good fundamentals and the Yangtze River Delta may take the lead in stabilizing and warming up. The two key factors determining market sales are market fundamentals and market confidence. We expect that after a series of loose policies are implemented one after another, market confidence will gradually recover, and urban sales with good market fundamentals will take the lead in stabilizing and warming up. From the aspect of inventory on sale, by the end of March 2022, the average inventory removal cycle of new houses on sale in 20 key cities in China was 11.2 months, and the inventory removal cycle of new houses in Hangzhou, Shanghai and Hefei was less than 6 months. The sales of such high-quality first and second tier cities and Yangtze River Delta cities are expected to recover before the market, thus driving the steady recovery of enterprises in the national market.
Investment advice
We believe that this meeting has defined the tone of easing. It is expected that easing policies with more dimensions, wider scope and greater intensity will continue to be introduced, and the sales of first and second tier cities and cities in the Yangtze River Delta with good fundamentals may take the lead in stabilizing and warming up. It is the first time to promote the real estate enterprises that focus on the first and second tier cities with high quality and strong product service ability in the Yangtze River Delta, and their sales performance is expected to recover rapidly, such as green city China, China Construction Development International (including Xiamen C&D Inc(600153) ), Hangzhou Binjiang Real Estate Group Co.Ltd(002244) ; We will steadily select the head state-owned enterprises and central enterprises with low leverage and abundant cash flow, and recommend Poly Developments And Holdings Group Co.Ltd(600048) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) .
Risk tips
Loose regulation is less than expected; The epidemic affected the implementation of policies and market recovery
