According to the Futu Securities research report, April is the low point for policies and emotions, and both the policy intensity and the fundamental situation of the real estate industry have improved significantly compared to April. In the long run, the recovery of the market depends on the first recovery of core cities. The sustained improvement of core city markets will be bullish for premium real estate developers and agencies in first- and second-tier cities, such as China Merchants Shekou Industrial Zone Holdings (001979.SZ), Greentown China (03900), and KE Holdings (02423).

The main viewpoints of Dongxing Securities are as follows:

In June, the year-on-year decrease in sales of new houses decreased, and the year-on-year sales price remained unchanged.

Core first- and second-tier cities have successively canceled or relaxed purchase restrictions, reduced down payments, canceled or lowered the lower limit of mortgage interest rates, and promoted stable market demand in June.

From January to June 2024, the cumulative year-on-year growth rate of sales area for commodity housing was -19.0%, a decrease from the previous value of -20.3%; the cumulative year-on-year growth rate of sales amount was -25.0%, a decrease from the previous value of -27.9%. Among them, the year-on-year growth rate of commodity housing sales area in June was -14.5%, a decrease from the previous value of -20.7%; the year-on-year growth rate of sales amount was -14.3%, a decrease from the previous value of -26.4%; the month-on-month growth rate of sales average price was 0.0%, a decrease from the previous value of -9.8%.

In June, the decrease in completed area and the weak situation of new construction area and development investment maintained.

Without sustained recovery of sales, it is difficult for development investment to make substantial improvements.

From January to June 2024, the cumulative year-on-year growth rate of new construction area for houses was -23.7%, a decrease from the previous value of -24.2%; the cumulative year-on-year growth rate of completed area for houses was -21.8%, an increase from the previous value of -20.1%; the cumulative year-on-year growth rate of development investment amount was -10.1%, the same as the previous value. Among them, the year-on-year growth rate of new construction area for houses in June was -21.7%, a decrease from the previous value of -22.7%; the year-on-year growth rate of completed area was -29.6%, an increase from the previous value of -18.4%; the year-on-year growth rate of development investment amount was -10.1%, a decrease from the previous value of -11.0%.

In June, the year-on-year decrease in earnest money and prepayments and individual mortgage loans narrowed, which led to a significant narrowing of the decline in funds in place for real estate developers.

From January to June 2024, the cumulative year-on-year growth rate of funds in place for real estate development enterprises was -22.6%, a decrease from the previous value of -24.3%. The year-on-year growth rate of funds in place in June was -15.2%, a decrease from the previous value of -21.8%. Among them, the year-on-year growth rate of domestic loans was -8.5%, an increase from the previous value of 16.9%; the year-on-year growth rate of self-financing funds was -6.4%, a decrease from the previous value of -8.6%; the year-on-year growth rate of earnest money and prepayments was -22.3%, a decrease from the previous value of -34.7%; the year-on-year growth rate of individual mortgage loans was -25.3%, a decrease from the previous value of -42.1%.

Risk warning:

Risks of continued decline in profitability, lower-than-expected sales, and significant asset impairment.