Industry comments
This week, the rebound of the real estate property sector index is weak. This week, Shenwan A-share real estate sector rose or fell by + 0.6%, ranking 26th among all sectors; Wind Hong Kong stocks and real estate sector rose or fell by + 3.5%, ranking 14th among all sectors. This week, the Hang Seng property service and management index rose or fell by + 3%, the Hang Seng China enterprise index rose or fell by + 4.6%, and the Shanghai and Shenzhen 300 index rose or fell by + 2.2%; The relative returns of the property index to Hang Seng China enterprise index and CSI 300 were – 1.6% and + 0.8% respectively.
No key cities focus on local auction, and the local auction market continues to be low. This week, 3.48 million square meters of residential land was sold in 300 cities across the country, with a month on week ratio of – 57%, a year-on-year ratio of – 86% and an average premium rate of 4%. Since the beginning of 2022, a total of 149.68 million square meters of residential land has been sold in 300 cities across the country, with a cumulative year-on-year increase of – 56%; Since the beginning of the year, the amount of equity land acquisition of Jianfa real estate, Greentown China, China Resources Land, CNOOC real estate and Hangzhou Binjiang Real Estate Group Co.Ltd(002244) has ranked among the top five in the industry.
Loose policies continue to be introduced, and it still takes time for sales to recover. Since March 2022, in addition to the first tier cities, most cities across the country have introduced loose policies to stabilize the property market. This week, new first tier cities such as Hangzhou and Chengdu with good market fundamentals have also introduced deregulation and purchase restriction policies. However, due to market sentiment, the time of policy implementation and the impact of the epidemic, market sales are still relatively low: from January to April 2022, the sales amount of commercial housing across the country decreased by 29.5% year-on-year and 46.6% year-on-year in a single month in April; From the high-frequency data, this week (May 14 to May 20), new commercial housing transactions in 40 cities totaled 3.89 million square meters, with a week-on-week ratio of – 8%, a week-on-week ratio of – 45%, a monthly cumulative year-on-year ratio of – 49% and an annual cumulative year-on-year ratio of – 41%; The transactions of second-hand houses in 17 cities totaled 1.4 million square meters, with a week-on-week ratio of – 13%, a week-on-year ratio of – 34%, a monthly cumulative year-on-year ratio of – 24% and an annual cumulative year-on-year ratio of – 35%. The recovery of market sales still needs time.
The lower limit of the first house loan interest rate was lowered, superimposed with the reduction of the five-year LPR, and the mortgage interest rate continued to decline. After the central bank and the China Banking and Insurance Regulatory Commission lowered the lower limit of the first house loan interest rate (- 20bp) on May 15, the central bank lowered the five-year LPR by 15bp to 4.45% on May 20, the largest single decline since the implementation of the LPR mechanism, far exceeding market expectations. The top-down interest rate adjustment also led to the decline of local mortgage interest rates. In May, the loan interest rates of the first and second homes in shell 100 cities were 4.91% and 5.32% respectively, down 81bp and 66bp respectively from the highest point in October 2021. Compared with the historical mortgage interest rate level, we believe that there is still some room for decline in the current mortgage interest rate level.
Five private enterprises have obtained credit protection tools, and private enterprise financing is expected to resume. On May 16, country garden, Longhu and Midea real estate were selected as model real estate enterprises by regulators. Their bonds were supported by credit protection tools (including credit default swaps, credit risk mitigation certificates, etc.), and domestic credit bonds were successively issued this week. On May 19, Xuhui and Xincheng also received the support of credit protection tools and will issue financing products next week. Five private real estate enterprises started financing with credit protection tools, which can stabilize the cash situation of relatively high-quality private enterprises before the recovery of market sales on the one hand, and moderately improve market confidence on the other hand. Relevant real estate enterprises are expected to obtain alpha income.
Investment advice
We believe that there is still room for the decline of mortgage interest rates. Cities will continue to introduce loose regulatory policies to promote the stability of the property market. The first and second tier cities with good market fundamentals and the Yangtze River Delta are expected to take the lead in stabilizing and warming up. For the real estate sector, it is recommended to focus on green city China, China Construction Development International and Hangzhou Binjiang Real Estate Group Co.Ltd(002244) . In the property sector, we believe that Jinke service has the opportunity of oversold and rebound in the short term. In addition, the property companies with strong growth ability also have long-term configuration value. Country garden service is recommended.
Risk tips
The loose policy did not give a good boost to the market; The epidemic situation affects market recovery; Several real estate enterprises have defaulted on their debts
