Source: Securities China Author: Geng Yin
The real estate industry, which has been in a slump for a long time, has recently shown some bullish signals.
Since July, the stock price of real estate industry chain has achieved a good start in the second half of the year. Wind Real Estate Industry Index has risen by 5.11% in July, significantly outperforming the broader market.
In terms of the market, since the implementation of the 'New Policy on May 17', the transaction volume of second-hand houses in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen has reached a new stage high, with Shenzhen's monthly transaction volume hitting a new high in 38 months. In terms of enterprises, although the sales of the top 100 real estate companies decreased by 19.55% year-on-year in June, it increased by 26.05% month-on-month. Many leading enterprises achieved year-on-year growth of more than 10%, and the basic corporate fundamentals have improved.
Market analysis believes that with the comprehensive implementation and gradual effectiveness of the 'New Policy on May 17', coupled with the mid-year business performance of enterprises, various sales data show that the market sentiment in core cities is picking up. It is expected that with the simultaneous optimization of supply and demand, the real estate market will accelerate its stabilisation and recovery, and real estate sales will improve.
Multiple indicators in the real estate industry are improving.
Under the continuous policy stimulation this year, many indicators in the real estate industry have shown signs of improvement. For example, in terms of market transactions, after the 'New Policy on May 17', the transaction data of second-hand houses in first-tier cities showed a significant increase.
Data provided by HTSC shows that the second-hand house transaction volume in first-tier cities in June has approached or exceeded the level of March last year. In June, the total number of second-hand house transactions in first-tier cities reached 55,991, a year-on-year increase of 52%, showing a monthly restoration trend.
Specifically, the number of second-hand residential transactions in Beijing increased by 29% year-on-year, the highest level since March 2023. The number of second-hand housing transactions in Shanghai was 26,376, a year-on-year increase of 83%, a month-on-month increase of 41%, and the monthly transaction volume reached the third highest level in 36 months, second only to 26,581 in July 2021 and 26,699 in March 2023. In June, the second-hand residential sales volume in Shenzhen was 4,172 units, a year-on-year increase of 73%, and the monthly transaction volume hit a new high in 38 months. The second-hand residential transactions in Guangzhou were 10,456 units, a year-on-year increase of 26% and a month-on-month increase of 33%, also reaching a new high since March 2023.
'With the comprehensive cancellation or relaxation of purchase restrictions, the reduction of down payment ratio, the cancellation or reduction of the lower limit of mortgage interest rates, the demand in core cities, especially first-tier cities, has been boosted, driving the decline in June transactions to narrow. Due to the low base in July last year, it is expected that the sales decline in July will continue to narrow.' Dongxing Securities pointed out in a recent research report.
58 Anjuke researchers also pointed out that with the continuous adjustment of housing prices, the space for further downward adjustment will also be limited. After the transaction volume stabilises, the confidence of home buyers will gradually recover, and it is expected that the second-hand housing market will stabilise before the new housing market.
In the new housing market, transaction volume is also significantly on the rise. In June, the total number of transactions for commercial residences in first-tier cities was 24,986 units, a month-on-month increase of 35% and a year-on-year decrease of 13%. However, the rate of decline has gradually narrowed in the past few months, showing a monthly restoration trend.
At the enterprise level, data from China Index Academy shows that in the first half of the year, the sales of the top 100 real estate companies totalled 2.083 trillion yuan, a year-on-year decrease of 41.6%, a decline that narrowed by 3.8 percentage points from the previous month; The year-on-year decline in June's monthly sales decreased to 19.55%, and there was a month-on-month increase of 26.05%.
It is worth noting that in June, nearly 60% of the top 100 real estate companies achieved a month-on-month increase in revenue, and nearly 30% of real estate companies achieved a year-on-year increase in monthly performance. Among them, China Overseas Land & Investment Co. Ltd. achieved a monthly total sales amount of 46.6 billion yuan in June, ranking first among the top 100 companies and hitting a new high in nearly a year. China Overseas Land & Investment Co. Ltd. had a year-on-year increase of 44.8% in total sales amount and a month-on-month increase of 39.5% in equity sales amount.
In addition, Poly Developments and Holdings Group, Greentown China, China Resources Land, Hangzhou Binjiang Real Estate Group, China Jinmao, Yuexiu Property, China Railway Construction Corporation, and Poly Property, among other real estate companies achieved a month-on-month improvement in performance.
The real estate sector is trending positively.
Against the backdrop of improving fundamentals, the capital market has also responded relatively positively to the real estate industry recently. On July 1st, the real estate chain rose across the board, with leading companies such as Poly Real Estate rising by more than 8%, and related industry stocks such as SDG Services achieving an increase of 20%. Although some individual stocks have adjusted over the next two trading days, the Wind Real Estate Industry Index has risen by 5.11% in July, significantly outperforming the broader market.
'At this point in time, the real estate sector has fallen back to the low point in April. Recently, sales in key cities have gradually improved, and with the convening of important meetings in July, July may be a new round of game window, and the performance of the sector can be moderately optimistic.' Analyst Yang Fan of Ping An Securities said.
Dongguan Securities pointed out that after experiencing a more than 20% year-on-year decline in sales amount in 2022, the industry's overall sales amount has stepped down, and the controllable decline in sales on a low base in 2024 is not very high. Under the continuous accumulation of policy advantages, it is expected that the current round of real estate adjustment cycle has come to an end, and it is currently in the bottoming-out phase, and the subsequent bottom exploration and rebound is worth looking forward to.
From a fundamental perspective, the analysis is relatively optimistic about the trend of real estate in first-tier cities, and also focuses on the trend of the market in first-tier cities.
Bocom International pointed out that the transaction volume in first-tier cities has remained relatively stable in the past few months, performing better than second- and third-tier cities. In the first four months of 2024, the first-hand market transaction area in first-tier cities has basically returned to the level of 70%-80% of 2019, while second- and third-tier cities only reached about 60%/40%. With the higher demand and good economic activity support, the momentum of the high-tier city transaction volume recovery is relatively strong.
HTSC believes that the clear attitude conveyed by the policy is to stabilize the real estate market, and in this process, first-tier cities have the most repair foundation and elasticity. With the gradual lifting of policies, it is expected that they will gradually emerge as the most powerful repair follow the logic of repairing or promoting the stabilization of second-hand house prices through the increase of second-hand house volume, and further transmit to new houses.
However, some analysts are still concerned about the real estate industry. CICC pointed out that this round of cycle has gradually formed a four-dimensional real estate policy framework facing “stabilizing demand”, “maintaining transaction and construction”, “stabilizing credit” and “new models”. The policy end may further strengthen and improve under the changing market environment, such as stimulating demand by reducing interest rates and renovating old urban villages, and reducing inventory by increasing acquisition.
“Under the neutral policy assumption, we expect that the total sales volume of first-hand and second-hand houses in the second half of 2024 may turn positive with a year-on-year growth of 2%. However, considering the marginal decline in the proportion of new house sales, the relatively cold land market since the beginning of the year, and the normal construction progress, it is expected that indicators such as new construction area, completion area, construction area, and development investment may still show a weak performance throughout the year.” CICC pointed out in the outlook for the second half of the year.
Editor/Lambor