Core view
The Bureau of Statistics announced the operation of the real estate market in April 2022. The sales area, sales amount, investment amount and new construction area of real estate were 87.22 million square meters / 813.4 billion yuan / 1138.9 billion yuan / 99.01 million square meters respectively, with a year-on-year growth rate of – 39.0% / – 46.6% / – 10.1% / – 44.2% and a previous value of – 17.7% / – 26.2% / – 2.4% / – 22.2%.
The sales price has fallen sharply, and the fundamentals are still bottoming out. In April, the average sales price was 9326 yuan / m2, down 12.5% year-on-year and up 0.8% month on month. Affected by the impact of economic cycle plus normalization epidemic prevention and control on production and consumption, the monthly sales scale in April has fallen below 10000 m3, which is the worst sales performance in a single month in recent five years (excluding January and February), which once again proves that the current demand side is still weak. Recently, more than 70 cities have significantly loosened their policies on purchase and loan restrictions. The central bank has lowered the lower limit of mortgage interest rate, and the policy environment of the industry has been significantly improved. We believe that as the epidemic situation in key cities gradually subsides, the real estate fundamentals are expected to initially bottom at the end of the second quarter and gradually rise with the economic recovery.
The decline of new construction projects has expanded, and the investment has a double-digit negative growth. New construction continued to decline, reaching the worst level in nearly 10 years (excluding January and February). We think the main reasons are as follows: the core is weak sales and insufficient motivation for enterprises to replenish inventory; Secondly, the land transfer area in 2020 and 2021 decreased by 1.1% and 15.5% respectively, and the cumulative land transfer area decreased by 46.5% from January to April 2022. The insufficient land storage of enterprises had a negative impact on the subsequent new construction; Under the pressure of ensuring delivery, completion also has a certain crowding out effect on new construction. In April, the decline of real estate development investment reached double digits, and the sharp decline of investment also played a catalytic role in policy easing.
The capital of real estate enterprises continued to tighten, and sales collection became the main drag. From the perspective of capital, in April, the capital in place of real estate enterprises was 1036.3 billion, with a year-on-year growth rate of – 35.5%, and the previous value was – 23.0%. The overall capital was further tightened. In terms of sub items, China’s loan financing was 131.2 billion, with a year-on-year growth rate of – 28.0% and the previous value of – 29.7%, which was slightly improved, and the credit policy was gradually put in place. On the demand side, deposits and advance receipts amounted to 310.5 billion yuan, with a year-on-year growth rate of – 53.0%, the former value of – 37.5%, and personal mortgage loans amounted to 166.8 billion yuan, with a year-on-year growth rate of – 37.3%, the former value of – 22.5%. Under the bottom line of preventing systemic risks, the financial system has increased its support for enterprises. At present, the drag on the capital of real estate enterprises is mainly sales collection, and insufficient demand has become the core factor affecting the capital of enterprises.
The industry concentration is still declining, and the sales of the top 100 real estate enterprises are weaker than the industry average. From January to April 2022, the year-on-year growth rates of sales amount of top 10, top 10-20, top 20-50 and top 50-100 real estate enterprises were – 46.0%, – 54.5%, – 54.8% and – 49.0% respectively. From January to April, the sales concentration of TOP10 decreased to 22.7%
Investment proposal and investment object
Various statistical indicators of the real estate industry fell in an all-round way this month. Affected by the superposition of cyclical factors and epidemic situation, the current industry fundamentals are still in the process of bottoming. From the perspective of capital, the financing environment of enterprises is still tight, and more importantly, prepayment and mortgage continue to decline, which shows that the core crux of the current industry recovery is the weakness of the demand side. Previously, the policy showed a balanced force at both ends of supply and demand, but from the results, it was not enough to reverse consumer confidence and restore the credit level of private real estate enterprises. Therefore, the pressure of weakening on both sides of supply and demand still exists. The recent adjustment of mortgage interest rate and the gradual liberalization of purchase and loan restrictions and other key policies in some high-energy cities show that the policy strength is expected to break through the early framework. With the gradual promotion of resumption of work and production, we believe that there is a turning point in sales in the middle of the year. The recovery of the market will not be achieved overnight. Low rated real estate enterprises are still in a state of continuous blood loss. At this stage, it is still not a good strategy to find marginal real estate enterprises. Continue to recommend the combination of state-owned enterprises and high credit private enterprises, and propose to gradually layout the elastic targets with the market recovery. We are optimistic about the first-line leaders with stable performance, and recommend Poly Real Estate ( Poly Developments And Holdings Group Co.Ltd(600048) , buy) and Vanke A ( China Vanke Co.Ltd(000002) , buy); Purchase performance of Xuhui group (60084), longhui group (6003), and Yulong group (60084). At the same time, we are optimistic about the property management and business management industry that is growing rapidly and benefiting from the recovery of real estate. We recommend Country Garden Service (06098, buy), poly property (06049, buy), China Merchants Property Operation & Service Co.Ltd(001914) ( China Merchants Property Operation & Service Co.Ltd(001914) , overweight), New Dazheng Property Group Co.Ltd(002968) ( New Dazheng Property Group Co.Ltd(002968) , buy), rongchuang service (01516, buy) and Xingsheng Commerce (06668, buy).
Risk tips
Sales were significantly lower than expected. The intensity of policy regulation exceeded expectations. There is uncertainty in the financing environment.
