In October, the industry's sales growth significantly rebounded, and market sentiment stabilized. This is partly due to the ongoing effects of policy relaxation, and more importantly, the Politburo meeting's proposal to "stop the decline and stabilize," which has helped restore market confidence.
According to Zhizhong Finance APP, Zhongtai released research reports stating that from January to October 2024, various sales data in the real estate industry are still hovering at low levels. With the policy direction of "stop the decline and stabilize" and the optimization and adjustment of core housing policies, industry data is expected to gradually stabilize along with the continuous implementation of policies. The investment opportunities in this sector remain bullish. Under the easing of policies in core cities and the push for "destocking," it is recommended to focus on real estate companies with stable performance and high safety levels in first and second-tier cities.
Event: The National Bureau of Statistics announced that from January to October 2024, the sales area of commercial housing is 779.3 million square meters, down 15.8% year-on-year, and the sales amount of commercial housing is 7,685.5 billion yuan, down 20.9% year-on-year. The national investment in real estate development is 8,630.9 billion yuan, down 10.3% year-on-year.
Zhongtai Securities' main points are as follows:
Sales have significantly rebounded, and policy efforts have taken effect.
From January to October 2024, the sales area decreased by 15.8% year-on-year, an increase of 1.3 percentage points compared to the growth rate from January to September 2024. The sales amount from January to October decreased by 20.9% year-on-year, an increase of 1.8 percentage points compared to the growth rate from January to September 2024. The sales growth rate in October showed a significant rebound, and market sentiment stabilized. This is partly due to the ongoing effects of policy relaxation, and more importantly, the Politburo meeting's proposal to "stop the decline and stabilize," which has helped restore market confidence.
The current policy continues the relaxation trend seen since May, with various cities further lowering housing loan interest rates, existing mortgage rates, and provident fund loan rates. At the same time, key cities are relaxing purchase restrictions, and various "destocking" policies are emerging across the country. It is expected that under the tone of "stop the decline and stabilize," various types of relaxation policies in the industry will continue to be introduced and will help sales gradually stabilize.
Investment continues to decline, and new construction is falling.
Completion data slightly rose month-on-month in 2024; from January to October, real estate investment decreased by 10.3% year-on-year, a decline of 0.2 percentage points compared to the growth rate from January to September; from January to October, the growth rate of new construction area fell by 22.6% year-on-year, a decrease of 0.4 percentage points compared to the growth in January to September. The area completed from January to October decreased by 23.9% year-on-year, an increase of 0.5 percentage points compared to the growth in January to September. Under the circumstance of low willingness to acquire land and initiate new projects, investment data in the industry continues to decline. The monthly growth of new constructions is still falling; however, it has stabilized month-on-month. With the ongoing decline in the intensity of land acquisition by real estate companies, it will still be difficult for new construction growth to strengthen in the future.
In summary, with both supply and demand being weak, it is difficult for investment data to stabilize in the short term. However, it is expected that with the continuous efforts in policies driving a gradual recovery in sales, real estate companies will also increase their land acquisition efforts, and investment data in the industry is expected to hit the bottom and stabilize.
Data on funding sources has rebounded month-on-month, and improvements can be expected in the future.
From January to October 2024, the funds available to real estate development companies decreased by 19.2% year-on-year, an increase of 0.8 percentage points in growth compared to January to September. In detail, the growth rates of domestic loans, foreign investment, self-raised funds, deposits and advance payments, and personal mortgage loans were -6.4%, -19.1%, -10.5%, -27.7%, and -32.8% respectively. Domestic loans and self-raised funds continue to decline, while other data has slightly rebounded.
Currently, financing channels in the industry are still in a contraction state, but with the central economic work meeting stating "actively and steadily resolving real estate risks, treating all real estate companies with different ownership equally, meeting their reasonable financing needs," and the State Council also indicating a substantial increase in the credit limits for the "project financing whitelist," combined with the sales recovery brought about by demand-side policies, the funding situation for real estate companies is expected to gradually improve in the future.
Investment advice
It is recommended to pay attention to real estate companies that layout in first and second-tier cities and have stable performances and high safety, including hangzhou binjiang real estate group (002244.SZ), shanghai chengtou holding (600649.SH), china merchants shekou industrial zone holdings (001979.SZ), zhuhai huafa properties (600325.SH), and poly developments and holdings group (600048.SH); on the Hong Kong stock side, focus on ke holdings-W (02423), greentown china (03900), yuexiu property (00123), and china res land (01109).
Risk warning: sales falling short of expectations, real estate policy relaxation not as expected, research reports using information updates not timely.
