The Zhitong Finance App learned that Cinda Securities released a research report saying that the current total demand for real estate is close to a historic low, and the sales area has fallen to the level of 2007. According to the Q4 sales situation, the annual sales area of commercial housing has exceeded 900 million square meters. According to data from major countries and regions around the world, the long-term center of new construction area per capita usually remains at 1-1.4 square meters/person. The bank believes that the demand center of China's commercial housing market is expected to remain around 9-1.4 billion square meters. According to estimates, the bank expects national commercial housing sales to increase by 3.4% and investment in real estate development to decrease by 9.5% in 2024.

High-quality housing enterprises focus on: 1) Housing development enterprises suggest focusing on Huafa shares (600325.SH), C&D shares (600153.SH), China Merchants Shekou (001979.SZ), Poly Development (600048.SH), etc.; 2) Second-hand housing brokers recommend focusing on Shell-W (02423) and I Love My Family (000560.SZ).

Cinda Securities's views are as follows:

Looking back at the past 2023, the market bottomed out in the midst of twists and turns.

In 2023, the popularity of real estate sales across the country was still low, and the cumulative increase in commercial housing transactions from January to November was still negative. Annual sales reached a high point in March-April, then the popularity began to decline, and the Q4 sales growth rate hit a new low during the year. The local auction market is lackluster, and the total land transaction price and land transaction plan construction are still in a downward phase. Real estate investment and development are still sluggish, and the completed area is increasing year-on-year in the context of the Baojiao Building. In terms of prices, the month-on-month decline in the 70 midtown second-hand housing price indices is close to historic lows. The market continues to be fragmented, and the western region is more resilient. The second-hand housing price index in typical western cities such as Chengdu, Kunming, Xi'an, and Yinchuan has remained upward, and the peak has been relatively small. Among them, the peak of the second-hand housing price index in Chengdu occurred in July 2023 and has only retreated 0.9% so far. The peak second-hand housing prices in Kunming, Xi'an, and Yinchuan have now retreated 2.6%, 3.1%, and 6.5%, respectively. Compared with the housing price performance in same-level cities, it is stronger. Some cities in the North China region have gone through full adjustments, and sales volume has begun to gradually recover.

Revival of the 2015-2021 property market upward period.

In the context of “no housemaking” and the strictest regulation policy in history, 2015-21 still achieved a sales scale accounting for 57% of the cumulative sales of commercial housing since 1998. The bank believes that there were three driving factors in the last round of the upward phase of the property market: First, residents increased leverage. The growth rate of personal housing loan balances reached a record high in 2021, while the income leverage ratio of the residential sector reached more than 61%, an increase of 22.50 pcts over 2015. Second, shed reform has been carried out on a large scale, which has partly had the effect of increasing the housing exchange rate. From 2016 to 2021, the national average annual volume of second-hand housing transactions exceeded 6 trillion dollars, and second-hand housing transactions became an important source supporting the purchasing power of new homes. Third, land prices are rising rapidly. Expectations that land prices and housing prices will rise, and positive feedback from land prices and housing prices will drive the government and residents to increase leverage and the continuous expansion of the replacement chain for residents.

Differences in the characteristics of this cycle:

First, population inflows to key cities are slowing down. The relationship between supply and demand in China's real estate market has changed structurally, and the total volume is gradually shifting from short supply to a balance between supply and demand. There was a slight population outflow in some key cities. The average annual population inflow of first-tier cities in 2017-22 was significantly slower than in 2010-15. Chengdu, Xi'an, Hangzhou and other places became major cities with population inflows. Second, the return on assets for home purchases is declining, and the rate of decline in return on assets exceeds the cost of debt. Despite loose interest rates and credit policies, the cost of increasing leverage has been reduced. However, currently second-hand housing is being sold in large quantities, the removal cycle is long, the return on assets is declining, and it is more difficult to monetize. As a result, the mainstream demand in the past may have been leveraged for house swaps, while current demand may change to reduced leverage for house swaps. Third, policies are driving the release of replacement demand, and second-hand housing listings and prices are under pressure. Although the current cycle shows different characteristics from the past, the position of the domestic property market cycle is still very similar to the end of 2014 to 2015. After the 930 policy was introduced in 2014, the popularity of new and second-hand housing picked up at the same time, but the increase in second-hand housing was higher than that of new housing. In October 2014, the growth rate of new home sales in first-tier and second-tier cities picked up rapidly. In September 2014, the monthly sales area of commercial housing nationwide was 121 million square meters, a year-on-year decrease of 10.32%. After the introduction of the New Deal in October 2014, the monthly sales area fell slightly to 114 million square meters, and the year-on-year growth rate declined to 1.61%.

Construct a new model for real estate development and increase the supply of affordable housing:

“Document No. 14” proposes increasing the construction and supply of affordable housing, returning commercial housing to commercial attributes, and meeting the demand for improved housing. Reviewing Singapore's affordable housing construction model, the Housing Authority was established after Singapore's autonomy in 1960, with the goal of building public housing and increasing the home ownership rate. Singapore's homeownership rate rose from 29% in the 1970s to 92% in 2000, and has remained high ever since. On the institutional side, land nationalization in Singapore reached 87% in 2006, reducing land and housing construction costs. At the same time, financial subsidies were provided to the Housing and Construction Authority through investment of reserve funds, etc., to continue to provide low-cost housing units. Houses are built as needed, based on about 4-5 times household income. In line with the support of the central provident fund system, the monthly burden on residents to buy a house is low. Private homes in Singapore are more expensive and are more geared towards improvement needs. Housing groups are only for Singaporean citizens and permanent residents; non-residents can only buy private homes; at the same time, the sales limit for group housing is usually 10 years or more, so there is little room for arbitrage. The increase in the resale price growth rate of housing units also fluctuates less than that of private homes.

Risk factors: 1) Policy risk: The tightening or relaxation of real estate regulation policies falls short of expectations. 2) Market risk: The recovery of sales in the real estate market fell short of expectations, and the relief of financial pressure on the industry fell short of expectations.