Core view
Sales continued to be weak, and there was room for the reduction of mortgage interest rates. From January to April 2022, the cumulative year-on-year growth rates of commercial housing sales area and sales amount were – 20.9% and – 29.5% respectively, down 7.1 and 6.8 percentage points respectively from January to March; In April, the year-on-year growth rate of sales area and sales amount in a single month was – 39% and – 46.6%, down 21.3 and 20.4 percentage points respectively compared with March. The sales growth rate in a single month hit a record low, with negative growth for nine consecutive months. The number of newly-built houses slowed to 36.02% for three consecutive months, and the number of new houses fell slightly compared with the number of cities around the city for three consecutive months. From the perspective of trend, sales continue to be weak. Despite the frequent occurrence of loose control policies in April, the point spread of the epidemic and the decline in income expectation under the background of economic weakness have led to the decline of residents’ willingness to increase leverage, and the market expectation has not yet shown signs of reversal. On May 15, the central bank and the China Banking and Insurance Regulatory Commission issued a notice on issues related to the adjustment of differentiated housing credit policies. For resident families who buy ordinary self owned houses with loans, the lower limit of the interest rate of commercial individual housing loans for the first set of houses is adjusted to not less than the quoted interest rate in the loan market for the corresponding period minus 20 basis points. We believe that after the central bank lowered the lower limit of mortgage interest rate, the space for local governments to reduce mortgage interest rate will be further opened, and the decline of residents’ house purchase cost is expected to boost the depressed market demand.
The cumulative growth rate of investment turned negative, and the growth rate of land construction and installation both weakened. In terms of investment growth, the cumulative investment in real estate development from January to April 2022 was – 2.7% year-on-year, from positive to negative, down 3.4 percentage points from January to March; The monthly investment growth rate in April was – 10.1%, down 7.7 percentage points from March. From the perspective of construction area index, the cumulative growth rate from January to April decreased to 0%, and the single month construction growth rate in April was – 38.7%, down 17.2 percentage points from March. From the perspective of land transactions, the cumulative growth rates of land purchase area and land transaction price from January to April were – 46.5% and – 20.6% respectively, down 4.7 and 3.7 percentage points from January to March. In April, the growth rates of land purchase area and transaction price in a single month were – 57.3% and – 28.3% respectively. Compared with March, it decreased by 16.3 and 27.6 percentage points respectively. At present, the land auction rate of Baicheng continues to rise to 37.6%, the premium rate is still low, and the total transaction volume and heat of the land auction market are both weak. At present, real estate enterprises are at the peak of debt repayment in the second quarter. At the same time, the market continues to be depressed, resulting in insufficient payment collection, and their willingness to obtain land is still weak. We expect that with the gradual liberalization of local demand side policies, the willingness of real estate enterprises to acquire land will show a marginal trend of improvement. We expect that the second batch of soil auction heat in key cities will be higher than that in the first batch.
New construction continues to be in the doldrums, and the medium-term pressure is difficult to ease. The cumulative growth rate of new construction from January to April 2022 was – 26.3%, down 8.8 percentage points from January to March, and – 44.2% in April, down 22 percentage points from March. On the one hand, the current land acquisition area is still accelerating the decline, and the lack of follow-up land resources will continue to drag down the growth rate of new construction. On the other hand, subject to the pressure of the capital chain and the lack of sales momentum, the real estate enterprises’ willingness to push the market and start construction is still insufficient, and the growth rate of subsequent new construction is still under pressure. In terms of completion, the cumulative growth rate of completion from January to April 2022 was – 11.9%, down 0.4 percentage points from January to March. It is expected that the growth rate of completion in the second half of the year will be gradually repaired.
Single month long-term loans turned negative again. From the perspective of funds in place in the industry, the cumulative growth rate from January to April 2022 was – 23.6%, down 4 percentage points from January to March; The monthly growth rate in April was – 35.5%, down 12.5 percentage points from March. In terms of sales collection, the cumulative growth rate of personal mortgage loans was – 25.2%, down 6.4 percentage points from January to March; At the same time, the medium and long-term loans of new residents decreased by 31.4 billion yuan in April, and showed negative growth again after February, with a year-on-year decrease of 523.2 billion yuan. As the delivery of mortgage loans lags behind the sales data for 1-2 months, the current sales momentum has not improved significantly, and the follow-up mortgage loans are expected to continue to weaken. The deposit and advance collection decreased by 37% year-on-year, 6 percentage points lower than that from January to March; A year-on-year decrease of 53% in a single month, 15.5 percentage points lower than that in March. The proportion of deposit and advance payment decreased from 36.8% at the end of 2021 to 31.6%, indicating that the expectation of home buyers has not improved and the wait-and-see mood is still strong. From the perspective of single month financing growth, the growth rate of Chinese real estate enterprises rose by – 3.4% year-on-year, with a year-on-year growth rate of – 3.4%, down from – 1.4% in 3-4 consecutive months. At present, the financing channels of state-owned enterprises and central enterprises are relatively smooth, and the proportion of bond issuance is significantly higher than that in 2020. At the same time, the financial rescue policies for private real estate enterprises are more detailed and targeted. Recently, country garden, Longhu and Midea real estate have been selected as model real estate enterprises by regulators. They will issue RMB loans this week and assist private real estate enterprises to gradually restore the financing function of the open market by issuing credit protection tools including private CDs or crmw.
Administrative and financial policies work together and are optimistic about the valuation and repair of real estate stocks. In April, all indicators showed a downward trend, superimposing the impact of the spread of the epidemic on the overall economy, and the pressure on the annual economic growth target increased sharply. Recently, the policy introduction intensity under the framework of urban policy implementation has increased significantly, and the policy intensity and urban energy level have improved. Second tier cities have relaxed restrictive policies for some regions and specific groups, but the release effect of the policy is not as expected, and the downward trend of the commercial housing market continues. We believe that there is a certain time lag effect in the implementation of policies, and there is still much room for improvement in the easing scope of restrictive policies. On May 15, the central bank and the China Banking and Insurance Regulatory Commission lowered the lower limit of the first house loan interest rate by 20bp from the national level, reflecting the government’s determination to continue to make efforts on the financial side of real estate and reverse the expected downturn in the real estate sales market. We believe that after the national unified lower limit adjustment, the space for local governments to reduce housing loan interest rates will be further opened. At the same time, we believe that the subsequent synchronization needs to be solved also includes the problem of high down payment ratio. Therefore, the identification standard for the first house will become the direction that needs to be adjusted in the tool boxes around the country in the next step. It is expected that the nationwide adjustment for the reduction of down payment ratio and the identification standard for the first house will begin.
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
