Core view:
The market sales boom reached the worst in history and is expected to stabilize in the second quarter. In 2021, the growth rates of sales amount and sales area were 4.8% and 1.9% respectively. In December, the growth rates of sales amount and sales area were – 18% and – 16% respectively. After a brief narrowing in November, the decline in sales picked up the trend of accelerating downward again, and the prosperity has been worse than any period since 2010. At present, the fundamentals have not reached the bottom, and the market is still in a negative cycle. It takes time to digest risk events and restore house purchase confidence. The recovery of sales is longer than before, and it is expected to stabilize in the second quarter of this year. We expect the year-on-year growth rate of national commercial housing sales in 2022 to be about – 7.7%.
In December, the growth rate of land acquisition area hit a new low in the year, and the premium rate was at a historical low. In December, the growth rate of land purchase area in a single month was – 33%, down 20 PCT from the previous month, a new low in the year. In 21 years, the cumulative growth rate of land transaction price rose from the low point of 29.2% in the year to 2.8%, and the land purchase area fell all the way from 33% to – 15.5%. The two formed a “scissors gap”, which was mainly due to the upward shift of the energy level of land acquisition cities by real estate enterprises. The land premium rate of Baicheng decreased by 21.1pct to 2.9% from the high point of the year, which is the historical low since 2010.
The weakness of both sales and land acquisition leads to the downturn of construction, and the completion repair has certainty and sustainability. In 2021, the new construction area decreased by 11.4% year-on-year, and the single month growth rate in December was – 31%. Under the expectation of “double weakness” in sales and land acquisition, the current construction situation is the worst in history; The completed area has increased by 11.2% year-on-year and 1.91% in a single month in December. The completion brought by the high sales growth since 2016 will continue to be realized, but the intensity may be weaker than that in 2021. We expect that in 2022, the growth rate of newly started area will be – 5%, the growth rate of construction area will be 1.7%, and the growth rate of completed area will be 10%.
In December, the growth rate of development investment hit a record low. In 2021, the completed investment in national real estate development increased by 4.4% year-on-year, and the investment growth rate in a single month in December was – 13.9%, which was the lowest growth rate in history (excluding singular values during the epidemic). There was no sign of recovery in the construction and land markets, which will continue to drive the investment downward. We expect the year-on-year growth rate of real estate development investment to be 0.5-1.0% in 2022.
The real estate funds in place declined comprehensively, and the insufficient demand led to the weak issuance of mortgage loans. In the single month of December, the growth rate of funds in place was – 19%, a decrease of 12 PCT compared with the previous month. Among them, the growth rates of Chinese loans, self raised funds, personal mortgage loans, deposits and advance receipts were – 32%, – 10%, – 8% and – 26% respectively, and – 11 PCT, – 12 PCT, – 19 PCT and – 10 PCT respectively compared with the previous month. After achieving positive growth in October and November, the medium and long-term loans for new residents turned negative again, with a monthly growth rate of – 19% in December. We believe that the positive growth of mortgage loans in October and November is the release of early backlog loans under the background of accelerated mortgage loan issuance, and the negative turn in December also confirms the lack of market demand.
Investment suggestion: in the short-term dimension, the warmer policy promotes the improvement of valuation. At present, it is in the combination of “bottom of fundamentals” + “bottom of policy”. The fundamentals are still on the way to accelerate the downward trend. The prosperity is the worst in history. There is still room for policy game. We think the first quarter of this year is the best window period for configuration. In the medium and long term, under the expectation of increased concentration and stable profits, the “three good real estate enterprises” with excellent management, smooth financing and diversified development will enjoy a higher valuation premium. We suggest paying attention to the leading stocks in the high-quality housing development industry: China Vanke Co.Ltd(000002) (00000 2), Poly Real Estate (600048), Gemdale Corporation(600383) (600383), China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) (001979), Seazen Holdings Co.Ltd(601155) (601155), Jinke Property Group Co.Ltd(000656) (000656); It is recommended to pay attention to high-quality property management companies: China Merchants Property Operation & Service Co.Ltd(001914) (001914), Country Garden Service (6098. HK), China Resources Vientiane life (1209. HK), Xuhui Yongsheng service (1995. HK), Jinke service (9666. HK), New Dazheng Property Group Co.Ltd(002968) (002968).
Risk warning: the risk that the fermentation of risk events exceeds expectations and the improvement of financing environment is not as expected.
