Source: Cai Lian She Author: Liu Rui
On the occasion of the one-month anniversary of the "5.17" new policy, several institutions on Wall Street expressed optimism. The various measures recently introduced and implemented by the Chinese government in the real estate sector have not only strengthened their confidence, but also injected a shot in the arm for the domestic real estate industry. According to analysts at Societe Generale, policies such as the re-loan policy for affordable housing will take time to have an impact on the real estate market.
After a month since the real estate destocking policy 'Combo Fist' (referred to as '5.17' new policy) was issued by the central bank and other departments on May 17th, a series of policies have shown a stimulating effect on local real estate markets.
On the occasion of the one-month anniversary of the '5.17' new policy, analysts from many institutions on Wall Street expressed optimism, saying that the various measures recently introduced and implemented by the Chinese government in the field of real estate have not only strengthened their confidence but also given a boost to the domestic real estate industry.
Many investment banks are bullish on the prospects of Chinese property stocks.
"This ('5.17' new policy) is a fairly positive signal. This is also the reason why we hold a more constructive stance." Karl Choi, head of real estate research in Greater China at Bank of America, expects real estate sales of the top 100 developers in China to stabilize next year.
Karl Choi also said that as the real estate market gradually recovers, the rise in individual real estate stocks in recent times is faster than he expected, so he will be 'more picky' in selecting real estate stocks. However, from a long-term perspective, he remains optimistic about the entire real estate industry.
Citigroup analyst Griffin Chan has raised the target prices of several domestic real estate companies this month, with the most notable being that he has raised the target prices of CIFI Hold GP (00884.HK) and Longfor Group (00960.HK) by more than 30% each.
Griffin Chan expects to raise the rating of the entire domestic real estate industry in the future. He believes that the latest policies introduced by the government will promote a soft landing for the industry.
Credit Suisse recently raised the rating of real estate companies such as China Vanke from 'outperform the market' to 'buy'. They said that recent measures taken by some local governments to acquire vacant property will improve the cash flow of companies such as Vanke.
John Lam, head of real estate research in China and Hong Kong at UBS Group, has been positive about the domestic real estate industry since January this year. He said that the government's latest measures confirm its 'inventory reduction intention.' He expects domestic house prices to bottom out in mid-2025.
The boosting effects still need time to show up.
Although many investment banks on Wall Street are optimistic, according to the data, although the '5.17' new policy has effectively boosted real estate transaction volume, the effect on real estate prices has not yet been seen.
National Bureau of Statistics data shows that in May, in 70 large and medium-sized cities across the country, the sales prices of commodity housing in various urban areas fell on a month-on-month basis and the year-on-year decline narrowed slightly. In May, the sales prices of new commodity housing in first-tier cities fell by 0.7% on a month-on-month basis, a 0.1 percentage point increase from the previous month; the sales prices of new commodity housing in second- and third-tier cities fell by 0.7% and 0.8% on a month-on-month basis, respectively, with declines both expanding by 0.2 percentage points over the previous month.
The analyst team at French bank Societe Generale commented, 'To be fair, one month is too short a time, and the real estate policy has not yet taken effect.'
SocGen analysts believe that policies such as the policy of refinancing for affordable housing will 'take time' to have an impact on the real estate market.
On June 12th, the People's Bank of China held a symposium on the promotion of refinancing for affordable housing and deployed the promotion and implementation of refinancing for affordable housing. The core logic of refinancing for affordable housing is that the People's Bank of China provides low-cost refinancing funds, motivating 21 national commercial banks to issue loans to local state-owned enterprises designated by the government based on market-oriented principles for the construction of affordable housing for both homebuyers and renters, which is expected to drive bank loans of 500 billion yuan.
Editor/Lambor