The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the land value-added tax adjustment is the first time that the tax burden has been reduced from the housing enterprise side, which can effectively reduce the pressure on the cash flow of housing enterprises. Through the reduction of housing transaction deeds and value-added tax, transaction costs can be effectively reduced, demand for improved home purchases is stimulated, and the activity of the property market, especially in first-tier cities, increases the activity of the property market. Since the 926 Politburo meeting, it was proposed to stop the decline and stabilize the real estate market. A series of policies, including relaxation of purchase restrictions in first-tier cities, storage of commercial housing stock, special debt collection and storage of vacant land, introduction of monetization of shed reform, and tax policy adjustments, etc., have continued to help improve the property market sentiment and reaffirm optimism about the performance of the production sector.

Incident: On November 13, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing and Construction issued a notice to adjust the housing transaction tax and related land value-added tax and value-added tax policies after the relevant cities abolished standards for ordinary housing and non-ordinary housing.

The main views of CITIC Construction Investment are as follows:

Tax policies supporting real estate have adjusted deeds tax, value-added tax, and land tax increases, and no adjustments have been made to personal income tax.

Minister of Finance Lan Foan made it clear at a press conference on the 8th that relevant tax policies supporting the healthy development of the real estate market have been submitted for approval in accordance with procedures and will soon be introduced. This tax policy adjustment is a reflection of the implementation of this wording. According to the documents, adjustments have been made to contract tax, value-added tax, and land tax increases in the process of real estate sales transactions, and no adjustments have been made to other taxes such as personal income tax.

Deed tax cuts effectively reduce transaction costs and release improved demand.

Previously, the housing transaction tax in first-tier cities was levied at 1% for the first home less than 90 square meters, 1.5% for those larger than 90 square meters, 3% for the second home, 1% for the first and second suites of less than 90 square meters in non-first-tier cities, and 1.5% and 2% for the first and second suites larger than 90 square meters, respectively. After this policy adjustment, all cities across the country are uniformly levied at 1% for the first and second housing units less than 140 square meters, and the first and second housing units larger than 140 square meters are levied at 1.5% and 2% respectively. Deed tax cuts effectively reduce the burden on buyers and help release improved demand. In particular, first-tier cities benefit the most from purchasing 90-140 square meters of homes.

After first-tier cities abolish ordinary and non-ordinary standards, value-added tax will be integrated with the whole country, and the full 2 exemption policy will greatly increase the activity of the property market in first-tier cities.

Previously, first-tier cities increased value-added tax by 5% of the full amount for homes to be purchased and sold. For those purchased and sold for 2 years or more, ordinary residences were exempt from VAT, and non-ordinary residences were levied on the difference of 5%. After this policy adjustment, all properties sold and purchased for 2 years or more will be exempted from VAT if first-tier cities abolish the standard of ordinary and non-ordinary housing. This policy adjustment will help reduce the tax pressure on sellers of improved housing in first-tier cities, further open up the replacement chain, and increase the activity of the property market.

The adjustment of the land value-added tax policy reduced the tax burden on housing enterprises for the first time, effectively relieving the pressure on the cash flow of housing enterprises.

The policy stipulates that housing enterprises that build ordinary standard homes and sell them will continue to be exempt from land value-added tax if the value-added amount does not exceed 20% of the deducted project amount. Local governments set their own land value-added tax standards, but the lower limit of the land value-added tax rate for each region was uniformly reduced by 0.5 percentage points, that is, the eastern, central, northeastern, and western regions were reduced to 1.5%, 1%, and 0.5% respectively. This land value-added tax adjustment will help to effectively ease the pressure on housing companies' cash flow. Housing enterprises can concentrate funds to guarantee the payment of buildings or repay loans.

Policy combinations continue to be introduced to help the market stop falling and stabilize.

After the Politburo meeting on September 26, a series of policies were introduced, including easing purchase restrictions in first-tier cities, and activity in the property market increased markedly in October. According to our statistics, in October, new housing transactions in 40 key cities were 11.58 million square meters, up 40.5% from the previous month, up 5.0% from the previous year, and second-hand housing transactions in 13 key cities were 7.24 million square meters, up 26.2% month-on-month and 23.8% year-on-year. Among them, high-energy cities performed even more prominent. This tax policy adjustment will further release demand in the property market, especially the first-tier property market, and help the real estate market stop falling and stabilize.

I reiterated my optimism about the performance of the good production sector.

A shares: Binjiang Group (002244.SZ), Urban Construction Development (600266.SH), China Merchants Shekou (001979.SZ), Huafa Co., Ltd. (600325.SH), C&D (600153.SH), Investment Savings (001914.SZ), Wanye Enterprise (), Zhangjiang Hi-Tech (USD), 600641.SH 600895.SH

Hong Kong stocks: China Resources Land (01109), China Resources Vientiane Life (01209), China Overseas Development (00688), CNOOC Properties (02669), Longhu Group (00960), Yuexiu Real Estate (00123), C&D International Group (01908), Greentown China (03900), Greentown Services (02869), Wanwuyun (02602), Shell-W (02423).

At the same time, it is recommended to focus on some local real estate companies related to urban investment and chemical bonds, which are expected to benefit from this round of countercyclical fiscal adjustments, mainly including City Investment Holdings (600649.SH), Chongqing Development (000514.SZ), Cinda Real Estate (600657.SH), Yunnan City Investment (600239.SH), and Everbright Garbo (). 600622.SH

Risk warning: The risks in the real estate industry are mainly due to sales and carryover falling short of expectations and real estate companies' impairment exceeding expectations:

1. Sales fall short of expectations: Real estate market sales are still bottoming out, and there is a risk that they will continue to decline or fall short of expectations in the future;

2. Carry-over falls short of expectations: Weak sales lead to poor sales repayment by housing enterprises, tight funding sources, and project construction progress may be affected, or project carry-over falls short of expectations, affecting real estate companies' revenue and profit performance;

3. Housing companies' depreciation exceeds expectations: Market sales pressure has intensified, and there is a gap between current prices and current prices of earlier land acquisition projects, making housing companies' inventory value depreciation pressure high, leading to the risk that housing companies' performance will fall short of expectations.