Smart Finance app learned that Sinolink Securities published a research report stating that the market fundamentals are continuing to recover in June sales data, and there are bullish signals that second-hand house prices in Beijing and Shanghai have stopped falling. The policy statement for the Third Plenary Session for 2021 has stated for the first time the need to prevent and resolve real estate risks, and pointed out the direction for the future development of the real estate industry. It is expected that the earlier policies, such as destocking, will be accelerated, and restrictive policies will continue to be relaxed. Recommended benefiting from the deep cultivation of high-energy cities, the national-owned real estate enterprises, which are major players in the improvement products segment, and the real estate intermediaries with core competitiveness that benefit from the continuous landing of favorable policies and increasing activity in both the first and second-hand housing market.

This week, A-share real estate, Hong Kong stock real estate, and property sectors all fell. This week (Jul. 13-19), the Shenzhen A-share real estate sector had a rise and fall rate of -0.7%, ranking 17th among all sectors. The WIND Hong Kong stock real estate sector fell by 4.7%, ranking 20th among all sectors. This week, the Hang Seng property service and management index fell by 5%, the Hang Seng China Enterprise index fell by 5.6%, and the CSI 300 index increased by 1.9%. The relative returns of the property index to the Hang Seng China Enterprise index and the CSI 300 were +0.7% and -6.9%, respectively.

This week, Shanghai launched four batches of land sales, with only one having a price limit. This week (Jul. 13-19), the sales area of residential land in 300 cities nationwide was 4.02 million square meters, a single-week increase of 102%, and a single-week decrease of 54% YoY. The average premium rate was 4%. From the beginning of 2024 to now, the cumulative sales area of residential land in 300 cities nationwide was 99.4 million square meters, a cumulative decrease of 48% YoY. From the beginning of this year to now, the total amount of land acquisitions by Poly Developments and Holdings Group, Hangzhou Binjiang Real Estate Group, Greentown China, China Res Land, and China Fortune Land Development, made them the top five players in the industry.

This week, new home sales both MoM and YoY decreased, and the MoM decline narrowed. This week (Jul. 13-19), the total area of commercial housing sold in 35 cities was 2.16 million square meters, down 5% from the previous week and down 17% YoY. Among them, the MoM decline in first-tier cities was 3%, and the YoY decline was 10%. The MoM decline in second-tier cities was 7%, and the YoY decline was 24%. The MoM decline in third and fourth-tier cities was 3%, and the YoY increase was 33%.

This week, second-hand housing transactions increased MoM, YoY continued to turn positive, and second-hand housing showed stronger resilience. This week (Jul. 13-19), the total area of second-hand housing sold in 15 cities was 1.86 million square meters, up 2% MoM and up 18% YoY. Among them, the MoM increase in first-tier cities was 3%, and the YoY increase was 61%. The MoM increase in second-tier cities was 0.4%, and the YoY increase was 4%. The MoM increase in third and fourth-tier cities was 20%, and the YoY increase was 103%.

In June, second-hand housing sales increased MoM, and the YoY decline narrowed. The prices of second-hand housing in Beijing and Shanghai rose MoM. According to the National Bureau of Statistics, the cumulative YoY growth of sales value and sales area of commercial housing in the first half of the year was -25.0% and -19.0%, respectively, which are 2.9% and 1.3% narrower than those from January to May. In June, the MoM growth of sales value and sales area of commercial housing was 50.9% and 52.6%, respectively, and the YoY changes were -14.3% and -14.5%, respectively. As for housing prices, the MoM changes of second-hand housing prices in the 70 major and medium-sized cities in June were -0.9%, -0.4%, -0.9%, and -0.9% for all, first-tier, second-tier, and third and fourth-tier cities, respectively. Their YoY changes were -7.9%, -9.0%, -7.9%, and -7.7%, respectively. Affected by the continuous release of the favorable policies of May 17th, the market heat has rebounded somewhat. The second-hand housing prices in Beijing and Shanghai, two core first-tier cities, started to rise MoM in June, ending a continuous decline since October 2023, which carries certain predictive significance for the real estate market. This is a bullish signal that could help guide market expectations and stabilize the market later.

The Third Plenary Session for 2021 put forward real estate policies for the first time, and policies are expected to accelerate. The Twentieth Third Plenary Session ended on July 18th. The plenary session approved the 'Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing the Modernization of the Chinese System in a Chinese Style'. For the first time, the plenum included 'preventing and resolving real estate risks' in the communique, demonstrating that the central government is highly concerned about the current real estate problems. During the subsequent press conference and in the 'Decision', the Central Government has indicated that the future direction for real estate development is a combination of renting and buying, or a new mode of 'indemnificatory apartment + commodity housing'. On the supply side: 1) the construction and supply of indemnificatory apartments, 2) the encouragement of the construction of high-quality houses as commodity housing and the reform of pre-sale system, and 3) paying attention to the reform process of land system, which may have a profound impact on the subsequent supply of real estate. On the demand side: 1) promoting the integrated development of urban and rural areas, speeding up the process of urbanization, and releasing potential demand, and 2) fully supporting diverse and improvement-oriented demands, and gradually relaxing restrictive policies.

Investment advice

There are continuing signs of recovery in the June sales data for the market fundamentals, with bullish signals of second-hand housing prices stabilizing in the north. The policy side has mentioned to prevent and resolve real estate risks and indicated the direction of future real estate development for the first time in the third plenary session of the 19th Central Committee of the Communist Party of China. It is expected that the previous policies such as destocking will be accelerated, restrictive policies will be further relaxed, and the new model of indemnificatory apartment and commodity housing will be accelerated in construction, which will speed up the process of market stabilization. Recommended national-owned real estate enterprises which are deeply cultivating in high-energy-level cities and focusing on improvement products, such as C&D Intl Group, China Overseas, Poly Developments and Holdings Group, and Hangzhou Binjiang Real Estate Group; recommend property intermediaries platform Ke Holdings, which has the core competitiveness and benefits from the continuous implementation of favorable policies and the continuous increase of activity in both primary and secondary housing markets.

Risk warning

Loose policies did not boost the market well; third- and fourth-tier cities had weak recovery momentum; real estate enterprises defaulted on debts.