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中信建投证券:中国地产已迈向“消费品时代”

CITIC Construction Investment Securities: China Real Estate Has Entered the “Consumer Goods Era”

Zhitong Finance ·  May 22 14:38

To understand the current reality of real estate in China and the direction of China's real estate policy, we need to pay full attention to the fact that real estate in China has moved from one big era (era of investment goods) to another (era of consumer goods).

The Zhitong Finance App learned that CITIC Construction Investment Securities released a research report saying that China is currently in the process of switching from the era of investment goods to the consumer goods era. Real estate will usher in four major trends during this period: repricing of real estate and land; declining investment in real estate sales; rapid differentiation in real estate; and rebalancing of assets and liabilities driven by real estate and land. After understanding the reality of real estate in China, we need to pay attention to the three issues of real estate collection and storage policies: First, pay attention to the significance of the signals given by this central meeting. Particular attention is paid to whether the scale of real estate collection and storage will increase in the future, and whether the implementation methods will be more diverse; second, the original purpose of the real estate collection and storage policy is to stabilize real estate, so it is expected that there will not be a large number of new supply increases in the short term; third, what we really need to pay attention to is how the policy will resolve the construction guarantee and supply reshaping of the industry during this real estate collection and storage process.

The main views of CITIC Construction Investment Securities are as follows:

The Past of Real Estate in China: The Era of Investment Products in a Framework of Shortage of Supply

In Asian economies such as Japan, South Korea, and China, the housing price to income ratio is rising extremely fast at the same time as the economy is growing rapidly. These Asian countries have always had 1-2 generations (10 years for a generation), enjoying high growth while bearing housing price pressures far higher than conventional experience. Examples include Japan in the 1950-1980s, South Korea in the 1980s and 1990s, and China in 2001-2020.

CITIC Construction Investment Securities believes that the underlying logic of the “Asian Phenomenon” is that after the war, Asian economies took over the industrial systems of European and American countries in turn and quickly achieved industrialization over a period of 20-40 years. Industrialization drives urbanization, and the population rapidly migrates to towns, leading to a 20-40 year time gap in real estate supply and demand.

The gap between supply and demand will push up expectations for housing prices to rise. Expectations of future price increases are quickly realized in current real estate pricing, which ultimately shows rapid progress in urbanization, rapid rise in housing prices, and significant deviation from inflation. Residents enjoying the dividends of rapid urbanization will also inevitably have to bear the pressure of high housing prices.

Expectations of future price increases are realized in current pricing, which is the pricing logic for investment products. China began housing commercialization reform in 1998 and joined the WTO in 2001. Since then, China's industrialization and urbanization process has amazed the world. However, the other side of the boom is that real estate is in short supply, and real estate price increases are unavoidable under the investment pricing logic. This is the essential logic of real estate in China over the past 20 years.

The future of real estate in China: the era of consumer goods under the framework of balance between supply and demand

When the market discusses the future of real estate in China, intuitively amplifies the negative impact of population on real estate. In fact, after observing the Japanese experience, it was discovered that population is not the single explanatory variable for real estate.

Japan's total population continued to grow negatively after 2009, and the housing vacancy rate was above 10% and continued to rise, indicating that the total number of houses is excessive. What is interesting, however, is that sales of new homes in Japan have stabilized at an equilibrium level every year since 2009, and Japanese real estate ended a continuous decline in prices for more than 20 years, and finally saw a rebound in the price index in 2012.

On the one hand, Japan's population is growing negatively, while housing prices are rising; on the other hand, houses are being vacant, and new homes are being purchased. These contradictions show that after 2009, Japanese real estate was already in the consumer goods era.

Only by treating houses as ordinary consumer goods can we understand the Japanese real estate phenomenon. Negative population growth coexists with rising housing prices, and idle houses go hand in hand with the purchase of new homes.

Once the housing supply and manufacturing capacity can successfully meet current demand, real estate is no longer in short supply. At this point, after the elderly population died, the houses were vacant; however, young people with newly established families can easily (and prefer) buy properties from the new housing market. Housing price increases at this stage will not deviate too much from commodity prices, because real estate is no longer in short supply, so the real estate investment attributes have subsided, and the consumer goods attribute has become the mainstream pricing logic.

When measuring the pattern of real estate supply and demand in China using the apartment ratio (the total number of houses owned by urban residents divided by the total number of urban households), CITIC Construction Investment Securities found that before 2021, the ratio of urban residents to households in China was less than 1, and the ratio of households in 2021 was greater than 1. This also means that the real estate supply and demand pattern in China changed in 2021. Real estate supply and demand were in short supply before 2021, and there was a basic balance between real estate supply and demand after 2021.

Since then, China's real estate can no longer be viewed from the perspective of investment products. The future trend of Chinese real estate is that it will eventually enter an era of consumer goods.

China's Real Estate Today: The Transition from Investment Products to the Consumer Goods Era

CITIC Construction Investment Securities said that to understand the current reality of real estate in China and the direction of China's real estate policy, we all need to pay full attention to the fact that China's real estate has moved from one big era (era of investment goods) to another (era of consumer goods).

In the era of investment products, the undertone of the real estate industry pattern is that supply is in short supply. At this stage, there are four obvious trends in real estate: real estate supply and demand are strong, housing prices are significantly higher than commodity prices, the real estate market has not shown obvious structural differentiation, real estate companies and the residential sector are rapidly increasing leverage, and interest rates are rising.

Under the consumer goods model, the pattern of real estate supply and demand is becoming more balanced. At this stage, the real estate trend is: real estate supply and demand are falling, housing price increases are close to price increases, the scale of enterprises in the real estate chain is limited, residents' leverage is slowing down, interest rates are stabilizing, and real estate is highly differentiated (a few real estate properties that are actually scarce still retain certain investment attributes).

From the era of investment products to the era of consumer goods, the macro level will usher in four inevitable trends, and this is also the starting point for understanding the current real estate and contingent policies in China.

Trend 1. The reshaping of real estate prices and land pricing. In the era of investment products, the “speculative” pricing component will be squeezed out of moisture, housing prices and land prices will descend, and price volatility will converge. Trend 2. Real estate sales investment volume has declined to the next level. Trend 3. Real estate experiences rapid differentiation. Trend 4. Rebalancing assets and liabilities driven by real estate and land.

Understanding real estate collection and storage policies from major real estate trends in China

CITIC Construction Investment Securities believes that by clarifying the past, present, and future of China's current real estate collection and storage system, it is possible to understand the policy or progress and effects from three perspectives: First, pay attention to the significance of the signals given by this central conference, and pay particular attention to whether the scale involved in real estate collection and storage will expand in the future and whether the implementation methods will be more diverse. Second, the original purpose of the real estate collection and storage policy is to stabilize real estate, so it is presumed that there will be no significant increase in supply in the short term. Third, what we really need to pay attention to is how the policy will resolve the transfer of buildings and the reshaping of industry supply during this real estate collection and storage process.

If it is possible to promote clear supply and balance of the industry's balance sheet in terms of collection and storage policies, this will undoubtedly be an important trend bias for the capital market.

Risk warning: Consumption recovery momentum is insufficient, real estate cycle improvements are limited, the impact of European and American austerity monetary policies may exceed expectations, and geopolitical disturbances.

The translation is provided by third-party software.


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