According to the Zhituo Finance APP, Kaiyuan Securities released a research report stating that since the end of September, real estate policies have continued to be relaxed, while monetary and fiscal policies have further lowered home buying costs. As a result, the sales data for October improved as expected, marking the smallest monthly decline since the small spring of 2023. The recovered funds from sales to real estate companies have significantly improved. According to Wind data, in the first two weeks of November, the transaction heat for new and second-hand homes in first-tier cities remained high, the cumulative sales drop for the year continued to narrow, and the performance of November sales data is worth looking forward to after the full release of policy effects.

The major viewpoints of Open source Securities are as follows:

The sales data for October improved as expected, with the cumulative sales decline narrowing for five consecutive months.

The National Bureau of Statistics released data on commodity housing investment and sales for January to October 2024. From January to October, the national sales area of commercial housing was 0.779 billion square meters, representing a year-on-year decline of 15.8% (1-9 months: -17.1%), among which the sales area of commercial residences fell by 17.7% year-on-year; the sales amount of commercial housing was 7.69 trillion yuan, a year-on-year decline of 20.9% (1-9 months: -22.7%), among which the sales amount of commercial residences declined by 22.0% year-on-year.

In October, the sales area and sales amount of commercial housing declined by 1.6% and 1.0% year-on-year, respectively, with the monthly decline narrowing for three consecutive months, both being the smallest decline since May 2023. The sales in October are expected to improve as anticipated. Regionally, from January to October, the year-on-year growth rates of the commercial housing sales area in the Eastern, Central, Western, and Northeast regions were -14.4%, -17.2%, -17.5%, and -12.4%, respectively, with the decline narrowing in all regions.

The decline in new construction area has expanded, while the decline in completed area has narrowed.

From January to October 2024, the nationwide new construction area of housing reached 0.612 billion square meters, a year-on-year decrease of 22.6% (compared to -22.2% from January to September), with the decline expanding again after narrowing for seven consecutive months, among which the new construction of residences decreased by 22.7% year-on-year; in October, the new construction area was 0.052 billion square meters, a year-on-year decrease of 26.7%, with the reduction in land acquisition continuously affecting the scale of new construction. From January to October, the completed housing area was 0.42 billion square meters, a year-on-year decrease of 23.9% (compared to -24.4% from January to September), among which the completed area of residences decreased by 23.4% year-on-year; in October, the completed area was 0.052 billion square meters, a year-on-year decrease of 19.6%.

Sales collection of funds has significantly improved, although the financing environment for real estate companies remains severe.

From January to October 2024, the investment in real estate development amounted to 8.63 trillion yuan, a year-on-year decrease of 10.3% (compared to -10.1% from January to September), among which the investment in residential development decreased by 10.4% year-on-year; in October, the monthly development investment was 0.76 trillion yuan, a year-on-year decrease of 12.3%, and sales collections continue to suppress the investment motivation of real estate companies. From January to October 2024, the funds in place for real estate development enterprises reached 8.72 trillion yuan, a cumulative year-on-year decrease of 19.2% (compared to -20.0% from January to September), with the decline narrowing for seven consecutive months, among which domestic loans, self-raised funds, deposits and prepayments, and personal mortgage loans decreased year-on-year by -6.4%, -10.5%, -27.7%, -32.8% (compared to -6.2%, -9.1%, -29.8%, -34.9% from January to September).

Looking at the monthly data, influenced by the increase in sales activity in October, the funds collected from sales improved, with the month-on-month growth rates of deposits and prepayments, as well as personal mortgage loans increasing by 22.4 percentage points and 17.2 percentage points respectively; at the same time, the cumulative declines in domestic loans and self-raised funds expanded, keeping the financing environment for real estate companies still severe.

Recommended symbols:

(1) High investment intensity, optimal layout areas, and market-oriented mechanisms with strong creditworthiness: Poly Developments and Holdings Group (600048.SH), Greentown China (03900), China Merchants Shekou Industrial Zone Holdings (001979.SZ), China Overseas (00688), Xiamen C&D Inc. (600153.SH), Yuexiu Property (00123), Hangzhou Binjiang Real Estate Group (002244.SZ), and C&D Intl Group (01908);

(2) A dual-drive of residential and commercial property, simultaneously benefiting from the real estate recovery and consumer promotion policies: Seazen Holdings (601155.SH), Longfor Group (00960);

(3) Continued growth in the scale and penetration rate of second-hand housing transactions, indicating a promising future for the after-service market in real estate: Ke Holdings-W (02423), 5i5j holding group (000560.SZ).

Risk warning: (1) Industry sales recovery is not as expected, financing improvement is not as expected, and the funding risks of real estate companies are further increasing. (2) Policy relaxation is not as expected.