As if in a cycle. In 2014, the "930" new policy comprehensively triggered a real estate investment boom, kicking off a magnificent eight years in the real estate market, and national wealth grew rapidly as a result.

Ten years later, at a time of low expectations for the real estate market, an unprecedented "929" new policy was introduced.

After 14 years, Guangzhou lifted its purchase restrictions, while first-tier cities such as Shanghai and Shenzhen continued to relax, and existing home loan rates were lowered... Following the high-level officials speaking out on September 26, proposing to "stop the decline and stabilize" the real estate market, a combination of policies was swiftly implemented on September 29, just before the Golden Week starting on October 1st.

While real estate policies are being implemented, consecutive support policies for the stock market have also been introduced, with A-shares and Hong Kong stocks reacting ahead of time. From the SSE Composite Index launching a defense battle at 2700 points to breaking through 3300 points, in just a few days, it feels like a world away.

The rapid restoration of asset prices has led to a major reversal in market expectations. If the beneficial effects continue, consumers' purchasing power will gradually recover. Only by stabilizing expectations can confidence be stabilized, which will be crucial in breaking the downward spiral of the past three years.

Real estate can also emerge from the muddy and enter a new phase with this round of asset revaluation cycle in China. The market should be more optimistic about the next market.

Of course, in this brand new cycle, the major participants in the real estate market, as well as the rules of the game, have undergone earth-shaking changes. The market is coming back, but everything is different now, and the property market is unlikely to see extravagant prosperity.

Grabbing funding

Just 3 days after the high-level proposed the statement of "stabilizing the real estate market", the Ministry of Housing and Urban-Rural Development unusually issued a policy relaxation guidance for first-tier cities.

At the party group meeting of the Ministry of Housing and Urban-Rural Development on September 29, it was proposed to support first-tier cities in utilizing their control autonomy effectively. Subsequently, the policies of first-tier cities were quickly adjusted. Guangzhou took the lead among first-tier cities in lifting property purchase restrictions, and the requirements for property purchases in Shanghai and Shenzhen are the most relaxed in almost twenty years.

Compared to the "5.17 New Policy", this round of policies have been implemented faster and with greater intensity. From the stock market to the property market, the real estate industry has also welcomed a long-lost warmth.

Investors are using real money to grab funding. In the past three trading days, the stock prices of listed real estate companies have quickly moved away from the bottom area.

Hong Kong-listed distressed real estate developers often see their stock prices double. $SUNAC (01918.HK)$ The ten-day increase is approaching a two-fold rise. $SHIMAO GROUP (00813.HK)$Please use your Futubull account to access the feature.$R&F PROPERTIES (02777.HK)$Please use your Futubull account to access the feature.$CIFI HOLD GP (00884.HK)$Please use your Futubull account to access the feature.$AGILE GROUP (03383.HK)$ Both achieved a doubling of stock prices.

有多位房产中介表示，新政出台后，业主显然更有底气了，开始出现反价。像深圳网红楼盘华润城润府，多套房源挂牌价普遍上调0.3-1 million元不等；在上海、广州等地，也出现业主本在和客户协商价格，新政后业主涨价，客户立马接受的现象。

一手房市场也喜报连连。某华南房企深圳营销负责人对华尔街见闻表示，9月29日当晚新政出炉前，该公司在深圳项目3小时就销控6套，随后在9月30日上午，又售出了13套。

Longfor Group personnel said that after the new policy was introduced, many customers who had been waiting to observe the market or were restricted by down payment immediately made a decision to purchase, with the customers' confidence and payment ability significantly improved under the support of the new policy. For example, the Longfor Gathering Essence project in Shanghai was sold out on the opening day of September 27th, achieving sales of 1.5 billion; while the Longfor Gathering Essence project in Beijing, after selling 1 billion in a single phase in September, will also push for more sales during the National Day holiday period, expecting prices to rise across the board after the holiday period.

Investors, property developers, and agents all hope to seize this rare policy window and accelerate acquisitions.

In the respondents' view, from the perspective of capital markets, property developers may have gradually emerged from a trough period, but the real estate market still needs further policy support to improve market expectations.

A clear indicator is the restoration of the price-to-book ratio (PB). Before this round of stock price increases, investors generally gave low valuations to property developers, believing that they needed to sell assets at a significant discount. This also means that leading property developers such as China Vanke Co., Ltd., Longfor Group, and China Overseas Land & Investment had price-to-book ratios of around 0.3, while distressed property developers had even lower ratios, around 0.1-0.2. With this round of stock price increases, the leading property developers' price-to-book ratios have risen to above 0.5, still with some room for further recovery.

Crystal Huang, Global Financial Markets Director at UBS, believes that with the recent strong policy signals driving market expectations, there has been a clear change. Investor confidence has also significantly recovered. The key going forward is to follow through with the fundamentals.

Stock markets usually lead industry reversals and stabilize 3-6 months ahead, and as fundamentals stabilize, stock prices follow suit. The bottoming and rebound of the property market also require time to stabilize expectations and form sustainable positive feedback.

Lu Wenxi, a market analyst at CRIC, determines that from the perspective of volume, property transaction volume in cities like Shanghai is expected to stabilize after a decline, and the fourth quarter volume will show an upward trend.

Chen Cong, an analyst at CITIC Securities, points out that property prices in first-tier cities are expected to stabilize first within the year, thereby leading to a stabilization of property prices in other parts of the country. If the policies fail to achieve the goal of stabilization, there is expected to be ample room for further policy measures across various regions.

In this process, if the asset side can recover, property developers' value will increase further, and performance will also become more resilient. Particularly, property developers like China Overseas Land & Investment, and China Vanke Co., Ltd., which have intensive layouts in core cities and substantial assets, will benefit first.

Along with the stock price recovery, the fundamentals are stable, the path of asset value recovery, and the property valuation can also be reassessed.

Cycle

Success is also expected, decline is also expected. Under the influence of expectations, human joy and sorrow are magnified, becoming annotations in the cycle of rotation.

From giants shouting trillion-dollar slogans, billion-dollar dark horses soaring, to former giants falling continuously, even state-owned enterprises are in danger. In just ten years, the world has changed.

In each cycle, a subtle triangular relationship is formed among real estate companies, institutions, and homebuyers. The expectation of continuous rise in house prices stimulates homebuyers to leverage up to enter the market continuously; real estate companies have also taken the path of 'high turnover, high debt, high leverage' in the past, competing for land king; behind this, backers emerge, and financial institutions continuously provide ammunition for homebuyers and real estate companies.

This has also led to a broad upward cycle in the real estate market from the loose cycle that persisted from the New Deal on September 30, 2014, until the end of 2016. China's new house sales area increased from 1.2 billion square meters in 2014 to 1.7-1.8 billion square meters in 2019-2021.

During this period, with financial support and the magnifying effect of expectations, the market experienced a mismatch between supply and demand. A large number of commercial properties were sold to leveraged buyers, as well as high-income groups from industries such as the internet and finance; now, 'deleveraging' has become the main theme, coupled with economic growth slowdown, the prosperity of high-salary industries is no longer there, and the real estate industry's boom is unsustainable.

This also means that the current real estate market easing will not achieve the glory it had ten years ago.

UBS Asia Chief Economist Wang Tao believes that after the senior officials proposed stabilizing the real estate market and listed some key issues in the industry, the specific execution will be crucial. At least for now, there is no policy indicating a significant adjustment in destocking projects or financing, or a substantial increase in credit support for developers.

Some analysts suggest that the current policies mainly focus on further relaxing restrictions on home purchases and credit, allowing more willing and capable individuals to leverage, mainly to stimulate improvement in demand. If the fiscal policy can further follow up next, the overall expectation of the property market recovery is expected to accelerate.

CITIC Securities' analysis points out that it is expected that the upcoming policies will accelerate the reform of real estate financing and presale models, speed up the establishment of a new real estate development model, bidding farewell to the 'three highs' model of high leverage, high debt, and high turnover. On the demand side, the focus is on releasing improvement-driven demand, controlling the increment strictly, and optimizing the existing stock.

Whether it is the change in real estate financing models of real estate developers from total-for-total to project mortgage loans, or the normalization of public offering REITs in commercial properties, rental housing, and other areas, it signifies a shift in the future direction of the real estate market.

The stabilization and rebound of the real estate market does not mean returning to the old path of broad opening and large closures as before. Instead, it is about finding a new path for sustainable and healthy development in a brand new economic environment and industry cycle. A new era of real estate is unfolding.

Editor/Rocky