The industry's sales growth rate clearly rebounded in October, and market sentiment stabilized. On the one hand, the effects of continued policy relaxation began to show. More importantly, the “stop decline and stabilize” proposed at the Politburo meeting, which restored market confidence.
The Zhitong Finance App learned that Zhongtai Securities released a research report saying that all sales data for the real estate industry from January to October 2024 are still at a low level. With the policy of “stopping the decline and stabilizing” and the optimization and adjustment of core housing policies, future industry data is expected to bottom out and stabilize as policies continue to be introduced, and they will continue to be optimistic about investment opportunities in the sector. Driven by the relaxation of core city policies and “inventory removal,” it is recommended to focus on housing enterprises with a stable performance and high level of safety in the layout of Tier 1 and 2 cities.
Incident: Data released by the National Bureau of Statistics shows that from January to October 2024, the sales area of commercial housing was 779.3 million square meters, -15.8% year-on-year, and commercial housing sales were 7685.5 billion yuan, -20.9% year-on-year. The country invested 8630.9 billion yuan in real estate development, -10.3% year-on-year.
The main views of Zhongtai Securities are as follows:
Sales have rebounded significantly, and strong policies have had an effect
The sales area from January to October 2024 was -15.8% year-on-year, up 1.3 pct from the growth rate in January-September 2024, and -20.9% year-on-year sales volume from January to September 2024. The industry sales growth rate rebounded markedly in October, and market sentiment stabilized. On the one hand, the effects of continued policy relaxation began to show. More importantly, the “stop decline and stabilize” proposed at the Politburo meeting, which restored market confidence.
The current policy continues the relaxation trend since May. Cities have further lowered housing loan interest rates, stock mortgage interest rates, and provident fund loan interest rates. At the same time, key cities have relaxed purchase restrictions, and “inventory removal” policies are frequent everywhere. It is expected that under the motto of “stopping the decline and stabilizing”, various relaxation policies in the industry are expected to continue to be introduced, and sales will gradually stabilize.
Investment is still declining, and new construction is falling back.
The completion data increased slightly month-on-month in 2024. Real estate investment in January-October was -10.3%, down 0.2 pct from the January-September growth rate; the year-on-year growth rate of new construction area in January-October was -22.6%, down 0.4 pct from the growth rate in January-September, and 23.9% year-on-year in the January-October completion area, up 0.5 pct from the January-September growth rate. In a situation where the desire to acquire land and start new construction is low, industry investment data is still declining. The monthly growth rate of new construction starts is still declining, but it has stabilized somewhat from month to month. Against the backdrop that the intensity of land acquisition by housing enterprises is still declining, it will still be difficult for the growth rate of new construction to strengthen in the future.
Taken together, in a situation where both supply and demand are weak, it is difficult to stabilize investment data in the short term, but it is expected that as the policy side continues to strengthen to drive a gradual recovery in sales, housing enterprises will also increase their efforts to acquire land, and industry investment data is expected to bottom out and stabilize.
Funding source data picked up month-on-month, and future improvements can be expected
Real estate development companies received -19.2% of capital from January to October 2024, up 0.8 pct from the growth rate in January-September. By segment, the growth rates of domestic loans, foreign capital, deposit and advance payments, and personal mortgage loans were -6.4%, -19.1%, -10.5%, -27.7%, and -32.8%, respectively. Domestic loans and self-financing continued to decline, while the rest of the data rebounded slightly.
Currently, the industry's financing channels are still shrinking, but as the Central Economic Work Conference stated that “real estate risks are actively and steadily mitigated and the reasonable financing needs of real estate companies with different forms of ownership are treated equally,” the CPC also stated that it will drastically increase the credit limit on the “project financing white list” and sales recovery brought about by demand-side policies, and the funding situation available to housing enterprises is expected to gradually improve in the future.
Investment advice
It is recommended to focus on real estate companies with stable performance and high security in Tier 1 and 2 cities, including Binjiang Group (002244.SZ), China Investment Holdings (600649.SH), China Merchants Shekou (001979.SZ), Huafa (600325.SH), and Poly Development (600048.SH); the Hong Kong stock side suggests focusing on shell-W (02423), Greentown China (03900), Yuexiu Real Estate (00123), and China Resources Land (01109).
Risk warning: Sales fall short of expectations, real estate policy relaxation falls short of expectations, research report usage information is not updated in a timely manner
