Since this year, the real estate industry has been actively moving in a positive direction, with the tail risks being alleviated, but there is still inertia in operation.

Data shows that since the fourth quarter of last year, the seasonally adjusted transaction volume and price of land in 300 cities have shown a simultaneous decline. As of September 2024, the transaction area and monthly average price of land in 300 cities have fallen from their peaks by 81.7% and 29.4% respectively, with the cumulative transaction amount of land in 300 cities from January to September this year falling by 53% compared to the same period last year.

Regarding the issuance of real estate bonds, according to the statistics of the Fangzheng Securities team, the total amount issued last week was 5.25 billion yuan, with a maturity amount of 8.6 billion yuan and a net financing amount of -3.35 billion yuan. As of November 8, 2024, the total cumulative issuance amount of real estate credit bonds is 343.883 billion yuan, down by 21.03% year-on-year, with a maturity amount of 376.597 billion yuan, down by 7.58% year-on-year, and a net financing scale of -32.714 billion yuan, compared to 27.949 billion yuan in the same period last year.

However, with the disclosure on November 8 by the Standing Committee of the National People's Congress regarding the optimization of real estate tax collection and storage-related policy progress, more positive signals have become apparent.

Market analysts point out that the optimization of real estate tax collection may involve the cancellation of taxes and fees related to standard residential housing, and at the same time, optimization policies related to real estate, such as deed tax and personal income tax, may be successively introduced, further reducing residential housing costs for residents and easing the tax burden on real estate companies.

At the same time, E-House Research Institute stated that special bonds actually represent the destocking capabilities of local governments. After the restart of land reserve special bonds, there will be further optimization space in the housing transaction market supply-demand relationship. With fiscal tools involved, the batch-efficient operational advantages will play a role in stabilizing market expectations.

From the secondary market perspective, in the overall weak fluctuations of the bond market, with credit following interest rate adjustments and some internal differentiation, the sentiment of credit bond market buyers is still not high, with a cautious approach in terms of duration. The highlights of trading still focus on real estate bonds, with signs of recovery in the trends of bonds of some real estate companies. For example, last Friday, the closing price of "16 Longfor 04" was 91.5 yuan, up 1.52%, and several overseas bonds under its banner also saw increases, such as "LNGFOR 3.95 09/16/29", which has risen from around 74 dollars in early October to near 80 dollars recently.

Market participants pointed out that as the policy focus shifts to destocking and clear goals of stabilizing prices, the increase in default amount of real estate enterprises has decreased, showing signs of a temporary pause in default risks. However, this risk is mostly concentrated in state-owned enterprises with more projects listed in the 'white list', and the financing environment of private real estate enterprises themselves is still not optimistic.

Meanwhile, htsc macro analyst Yiyi believes that the land auction market has shown signs of warming up, but continues to trend towards concentration in first-tier cities. Yiyi stated that since 2023, the transaction prices of land in first-tier cities after seasonal adjustments have increased rapidly. Looking at different provinces and cities, the cumulative land transaction area in Xiamen has nearly doubled year-on-year since the beginning of the year, and the cumulative land transaction areas in Urumqi, Lanzhou, and Wuhan have also significantly increased year-on-year.

However, Yiyi also mentioned that real estate sales have not yet broken out of the downward trend, with some regions experiencing simultaneous decreases in land market volume and prices, and the overall enthusiasm for land auctions being generally low, with only sporadic high-premium transactions.

According to Liang Weichao, Chief of Fixed Income at China Post, for institutional trading desks, the cost-effectiveness of credit strategies in the fourth quarter may not be high. It is advisable to reduce visibility at this stage, more observing and less moving would be better; on the other hand, while configuration trading desks can seize opportunities, under the volatile market conditions, some real estate bonds may experience undeserved credit downgrades and forced selling, which could be a good opportunity for selective bond selection.