The Zhitong Finance App learned that Open Source Securities released a research report saying that after the Politburo meeting on April 30, the central government introduced a number of relaxed home purchase loan policies. Various regions lifted purchase restrictions in core cities such as Hangzhou and Xi'an due to the promotion of city policies. The policy side was more active than before. Meanwhile, investment and sales data for April continued the trend of low operation in the first quarter, and the market is still in the process of adjustment. In a situation where sales data falls short of expectations, inventory removal policies such as “trade-in” and the acquisition of existing commercial housing for use as guaranteed housing are expected to help stabilize the housing market. Continue to be optimistic about strong credit real estate enterprises with high investment intensity, excellent layout area, and market-based mechanisms.
Recommended targets: (1) high-quality central state-owned enterprises such as Poly Development (600048.SH), China Merchants Shekou (001979.SZ), China Overseas Development (00688), C&D (600153.SH), and Yuexiu Real Estate (00123); (2) Financially sound private enterprises and mixed ownership enterprises such as Vanke A (000002.SZ), Greentown China (03900), Xincheng Holdings (601155.SH), and Midea Real Estate (03990).
The main views of Open Source Securities are as follows:
The decline in sales in a single month widened, and the low sales level in the second quarter may continue
Commercial housing investment and sales data released by the National Bureau of Statistics for January-April 2024 shows that in January-April, the country's commercial housing sales area was 292 million square meters, down 20.2% year on year (January-March -19.4%), of which commercial residential sales area fell 23.8% year on year; in January-April commercial housing sales were 2.81 trillion yuan, down 28.3% year on year (January-March -27.6%), of which commercial residential sales fell 31.1% year on year. The monthly sales area in April was 66 million square meters (average value of 113 million square meters in April 2017-2023), down 22.8% year on year; sales volume was 0.67 trillion yuan (average value of 1.09 trillion yuan in April 2017-2023), down 30.4% year on year, all the lowest in a single month since 2017.
Looking at the subregions, the year-on-year growth rates of commercial housing sales in the eastern, central, western, and northeastern regions were -18.2%, -24.2%, -20.3%, and -14.2%, respectively, in January-April. The central region saw the biggest decline. According to data from 64 cities tracked by Open Source Securities, the sales area of new homes fell by more than 20% year on year in the first three weeks of May, and the market may continue to operate at a low level in the second quarter under a high base.
The new construction area continues to decline, and the completion data is still declining year-on-year
From January to April 2024, the country's new housing construction area was 235 million square meters, down 24.6% year on year (January-March -27.8%), continuing the downward trend since the second half of 2021, with new residential construction falling 25.6% year on year; new construction area in April was 62 million square meters (average value of 154 million square meters in April 2017-2023), down 14.0% year on year. Weak sales data and reduced land transaction area continued to affect the new construction process. In January-April, the completed housing area was 189 million square meters, down 20.4% year on year (January-March -20.7%), of which the completed residential area decreased 21.0% year on year; the area completed in April was 36 million square meters (average value of 41 million square meters in March 2017-2023), down 19.1% year on year.
The decline in development investment has increased, and the decline in sales repayments is still large
From January to April 2024, real estate development investment was 3.09 trillion yuan, down 9.8% year on year (January-March -9.5%), and the decline continued to expand. Among them, residential development investment fell 10.5% year on year; in April, the monthly development investment amount was 0.88 trillion yuan, down 10.5% year on year. The pressure on sales and repayment continued to influence housing companies' motivation to invest in land acquisition and start construction.
From January to April 2024, real estate development companies received 3.40 trillion yuan in capital, a cumulative year-on-year decrease of 24.9% (January-March -26.0%). Their cumulative total of loans, self-financing, deposit and advance payments, and personal mortgage loans in China was -10.1%, -10.1%, -37.2%, and -39.7% (January-March -9.1%, -14.6%, -37.5%, -41.0%). Sales and repayment funds were still under pressure, and the decline in corporate self-financing support for financing policies narrowed.
Risk warning: The recovery in industry sales fell short of expectations, the improvement in financing fell short of expectations, the capital risk of housing enterprises further increased; policy relaxation fell short of expectations.