With the continuous implementation of real estate and consumer promotion policies, there has been marginal improvement in real estate sales volume and prices, and there is a significant boost in consumption related to trade-ins, indicating there is still room for recovery in the future.
According to the Smart Finance APP, Central China Securities released a Research Report stating that the home Sector has been constrained by the dual impact of Real Estate and Consumer dynamics, maintaining valuations at historically low levels. It is expected that by the end of the third quarter of 2025, the market will start to rise from the bottom, and valuations will begin to recover, although currently, they still remain in a low-middle historical position. With the ongoing implementation of Real Estate and Consumer promotion policies, there has been a marginal improvement in Real Estate sales volume and pricing, significantly boosting consumption in categories related to upgrading old products, which still has room for recovery, thus raising the industry investment rating to 'outperform the market.'
The main viewpoints of central China Securities are as follows:
The implementation of Real Estate and Consumer promotion policies continues.
Since 2024, the Real Estate industry has been undergoing continuous adjustments. The government has been taking action from both supply and demand sides, consistently releasing multiple optimization policies for Real Estate. Since September 2024, significant Real Estate policies have been introduced to restore market confidence, explicitly stating the need to stabilize the decline in the Real Estate market. In December 2024, the Central Economic Work Conference reiterated the need to 'stabilize the real estate market' and to 'make continuous efforts to stabilize the decline in the Real Estate market,' expressing the central government's strong determination for Real Estate stability.
In 2024, the government introduced a policy for upgrading old consumer goods, allocating approximately 150 billion yuan in special national bonds to support this initiative. Local governments have followed up with implementation details for the upgrade program and constantly optimized the execution plan. The Central Economic Work Conference in December 2024 proposed to vigorously boost Consumer spending and to expand the implementation of the 'Two New' policies.
The marginal improvement in Real Estate has significantly boosted consumption related to upgrading old products.
With the gradual optimization and adjustment of real estate policies, there has been a marginal improvement in real estate sales volume and price. In October, positive changes appeared in the real estate market, and market trading became more active in November, with improved market expectations moving towards stabilizing after a decline.
As the trade-in policy gradually takes effect, there has been a significant boost in consumption related to trade-in categories. According to data from the Ministry of Commerce in mid-December, the sales of related products driven by the consumption goods trade-in policy exceeded 1 trillion yuan; more than 53 million units of home decoration and kitchen and bathroom 'renewal' subsidy products were provided. With the national government's support, several provinces and cities have begun implementing the 2025 trade-in for consumption goods, and it is expected that the variety and scale of trade-ins will expand by 2025.
Henan Province is sending out bullish signals in real estate, with consumer growth outpacing the national average.
From January to November, the area of newly built commercial housing sold in Henan Province decreased by 12.7% year-on-year, and sales revenue fell by 16.0% year-on-year, with a reduction rate narrowing by 2.2 and 2.4 percentage points compared to January to October, and this has been narrowing for 5 and 6 consecutive months, respectively; from January to November, real estate development investment in Henan Province decreased by 7.9% year-on-year, with the decline rate narrowing by 0.7 percentage points compared to January to October, marking four consecutive months of reduced decline; in the period from January to November 2024, the total retail sales of social consumer goods in Henan Province reached 2499.022 billion yuan, a year-on-year growth of 6.1%, which is 2.6 percentage points higher than the national average. The trade-in policy has strongly driven the consumption of major commodities like autos, home appliances, and home furnishings in Henan Province, stimulating market potential.
Investment suggestions: It is recommended to pay attention to the home sector enterprises Oppein Home Group Inc. (603833.SH), Suofeiya Home Collection (002572.SZ), Zhiou Technology (301376.SZ), Loctek Ergonomic Technology Corp. (300729.SZ), as well as Gongniu Group (603195.SH), a leading company highly relevant to the home sector.
Risk reminders: Risk of policies falling short of expectations; risk of real estate prosperity not meeting expectations; risk of demand being less than expected; risk of intensified industry competition; risk of sharp rises in raw material prices.
