According to the Zhithong Finance APP, CITIC SEC released a Research Report stating that the Central Economic Work Conference reaffirmed previous Real Estate policies and measures, but expressed a stronger determination to achieve market stabilization through enhanced policy efforts. In the short term, the Real Estate market has already shown a lot of Bullish Signals, and stabilization is expected to be achieved; in the medium to long term, China's Real Estate market has a broad foundation of genuine demand, and the supply-side reform has nearly been completed, providing a promising future for high-quality Real Estate Development enterprises. The outlook for the Real Estate Industry’s new growth in the new cycle is Bullish, and recommendations are made for Real Estate blue chips.

The main points of the Citic Securities research report are as follows:

The Central Economic Work Conference was held in Peking.

The meeting emphasized the need to continuously work towards stabilizing the Real Estate market, intensifying the implementation of renovations in urban villages and dilapidated housing, and fully releasing the potential for rigid and improving housing demand. It called for reasonable control of new Real Estate land supply, revitalizing existing land and commercial properties, and promoting the disposal of existing Commodity housing. It aims to build a new model of Real Estate development and orderly establish related foundational systems. Work related to the Real Estate sector is a core component of risk prevention.

Continue the previous policy framework and promote market stabilization from multiple angles.

The meeting mentioned various policies to release housing demand potential (including continued easing of purchase restrictions, lowering transaction taxes, reducing down payment ratios and interest rates, etc.), renovations of urban villages and dilapidated housing (although it will increase supply in the long term, it can boost demand in the short term), controlling new land supply (limiting increments), revitalizing existing land and commercial properties (acquiring existing land, adjusting regulations, optimizing real estate company assets), and disposing of existing Commodity housing (acquiring existing homes as guaranteed rental housing). We believe that these policies have been implemented historically and played a positive role in stabilizing the Real Estate market, and it is also necessary to continue to implement them.

Expressions such as 'effort', 'intensification', and 'sufficient' reflect a firm determination to stop the decline and stabilize the market, indicating great potential for future policy initiatives.

Although the policy framework itself has not changed, there is significant room for strengthening real estate policies within this framework. Compared to history, this meeting used more decisive language regarding the implementation of real estate policies, continuously employing terms such as sustained efforts, enhanced implementation, and fully releasing, which have not been previously used. This reflects the party's proactive approach in the real estate sector, tackling difficulties head-on and striving for progress, which objectively helps stabilize the market quickly.

In the short term, the real estate market has shown a large number of Bullish Signals, and a stabilization is expected.

According to KE Holdings Research Institute, in November 2024, the second-hand housing Index for 50 cities increased by 0.3% month-on-month, achieving a consecutive month-on-month increase for two months, with first-tier cities rising by 0.7% in November. As of December 12, according to Wind data, the year-on-year growth of online signing data in December for 24 new housing sample cities we track is 15.7%, and the online signing data for 13 second-hand housing sample cities has a year-on-year growth of 83.7%. Based on data from leading agencies such as KE Holdings and 5i5j Holding Group, as of December 11, the seven-day moving average of second-hand housing transaction cases in 75 sample cities has dropped by about 16% from the market peak since October, but is still 12% higher than the peak after the "517 policy" and has increased nearly 50% year-on-year compared to the same period in 2023, while the viewing volume remains relatively high. We believe that with ongoing policy support, active trading in the market is expected to continue, and core city housing prices are likely to stabilize and stop falling.

In the medium to long term, there is a large amount of genuine housing needs in our country that have yet to be satisfied, presenting structural growth opportunities for market participants.

The issue of inadequate public resource per capita supply limiting the aggregation of residents to core urban areas is beginning to ease, and the advantages of stable public income in core urban areas are becoming increasingly pronounced. It is expected that the growth rate of the resident population in core urban areas will stabilize and rebound. The living value of older high-rise buildings has quickly diminished, and there has been long-term insufficient supply of larger residential units since 2006, leading to strong demand for residents to upgrade their homes. Home purchase remains the core means to improve living conditions. It is estimated that in just 35 cities, the stable residential and improvement demand in the next 10 years will exceed 4.3 billion square meters.

There is optimism for new growth in the real estate industry in the new cycle, recommending real estate blue chips.

The real estate industry has undergone a round of supply-side reform, and the number of large companies with a national layout has significantly decreased. The fierce competition in the raw materials (land) market has subsided, while the social demand for good housing is far from being satisfied. We recommend real estate development enterprises that have sufficient value, smooth financing channels, certain development capabilities, and focus on core cities.

Risk factors: the risk of excessive supply in third- and fourth-tier cities and limited policy potential; the risk that supportive policy measures may not meet expectations in terms of pace and intensity, resulting in home prices failing to stabilize in a timely manner; the risk that some Real Estate companies have excessively heavy balance sheets, making it difficult to replace assets.