According to the Securities Times app, Citic Securities released research reports stating that on October 17th, the State Council Information Office held a press conference to introduce the relevant situations regarding promoting the stable and healthy development of the real estate market, focusing on future repurchase of existing land, new urban village transformations, and strengthening the white list mechanism. Citic Securities believes that the current policies reflect a firm determination to control increments, optimize stock, and improve quality, with the repurchase land policy potentially playing a crucial role in optimizing the real estate enterprises' balance sheets and solidifying their net assets. Monetizing the transformation of urban villages is also beneficial for increasing short-term market demand. Overall, Citic Securities believes that the real estate market is heading towards stabilizing after the decline, and blue-chip real estate development companies have significant investment value.

Repurchasing existing land may have far-reaching effects on optimizing real estate companies' capital and profitability, and reducing the impact on market supply.

From a macro perspective, the real estate market faces issues of oversupply, mismatched supply and demand in terms of quantity and structure, with the task of digesting and revitalizing the existing stock. From a micro perspective, property development companies generally lack development conditions and profitability for a large amount of land, leading to problems of inadequate development capability and unwillingness to develop. The former is a key concern for the capital markets regarding future housing price trends, while the latter is a crucial reason for the significant discount in property development company valuations. Citic Securities believes that after connecting special bonds, special loans, and the People's Bank of China's refinancing support, local land repurchases are expected to become more common. Based on previous cases such as Yuexiu Property, Citic Securities believes land repurchases in the real estate market may have the following characteristics: 1) historical price repurchases or slight discounts on repurchases; 2) repurchased companies often add new land reserves in the same city, but the new land reserve areas and planning conditions are generally better than those of the repurchased land reserves; 3) repurchased land reserves are often not used for commodity housing construction again; 4) both local governments and property development companies show a high level of enthusiasm for land repurchases.

From a practical perspective, launching a 1 million-unit urban village transformation monetization plan has increased demand in core cities.

This press conference explicitly stated that the future addition of 1 million units for urban village and rundown house transformations will focus on supporting prefecture-level and above cities, matching policy supports such as special loans, special bonds, tax benefits, commercial loans, and mainly through monetization. Although the overall scale of monetizing the transformation cannot be compared to the shackles reform around 2015, the monetization focuses more on high-tier cities, and prioritizes mature projects. Citic Securities expects progress to be relatively fast. Since the previous shackles reform monetization project ended with a small scale of monetization, this reform has also resulted in a net increase in demand for the real estate market.

Affirming the positive significance of population concentration and emphasizing the market's bottom-building trend.

The press conference responded to the relaxation of housing purchase restrictions in first-tier cities, stating that 'full autonomy has been given to each city in real estate regulation,' and believing that 'from a pattern perspective, the 'siphon effect' is a common phenomenon in the development process of world cities. In terms of impact, the 'siphon effect' has both advantages and disadvantages. In different cities and different stages of city development, the 'siphon effect' will have different effects.' Looking at historical cycles, first-tier cities generally stabilize ahead of the national real estate market. This round of policies actively easing policies in first-tier cities, Citic Securities believes, will help push first-tier cities to stabilize prices starting from the core areas. In addition, the policy highly focuses on changes in the market fundamentals, so Citic Securities believes that if the real estate market shows a downward trend again, policies will still use a wealth of tools to quickly respond and solve issues.

The 'white list' mechanism reduces delivery and credit risks for development companies, forming a positive development cycle.

In recent times, concerns among various participating parties about developer delivery and credit have further strengthened the self-reinforcing mechanism of falling house prices. This press conference proposed, 'By the end of the year, increase the credit scale of white list projects to 4 trillion yuan, lend as much as possible, meet reasonable financing needs of projects.' Citic Securities believes that this reform will help ensure the completion and delivery of projects, safeguard the legitimate rights and interests of homebuyers, alleviate concerns about delivery for homebuyers and credit risks for development companies in the capital markets, and stabilize industry chain confidence, thereby making multi-directional efforts to prevent the vicious cycle of falling house prices.

Investment strategy:

The pace and intensity of real estate policies being introduced are below expectations, with the risk of continued declining house prices; repurchasing land itself involves a relatively complex negotiation process, and the digestion of non-performing assets by development companies still requires a considerable amount of time; some companies have insufficient available-for-sale values, making sales and performance recovery difficult, with continuous cash flow tightness risk.

Investment strategies.

Citic Securities believes that the current policies reflect a strong determination to control increments, optimize stock, and improve quality, with the land repurchase policy possibly playing a crucial role in optimizing the real estate company's balance sheet and solidifying net assets. Monetizing the renovation of urban villages also helps increase short-term market demand. Overall, Citic Securities believes the real estate market is heading towards stabilization after falling, and blue-chip real estate development companies have significant investment value. Citic Securities recommends and trades directly-related service providers, bullish on developers with large available-for-sale values, sound credit, rich experience in digesting existing land reserves.