According to the Zhitong Finance and Economics app, Haitong International released research reports stating that in 2024 from January to October, the year-on-year decline in real estate development investment widened, while the year-on-year decline in commodity housing sales narrowed. From January to October, the completed area of houses was 0.42 billion square meters, with a cumulative year-on-year decrease of 23.9%, a decrease smaller by 0.5 percentage points than that of January to September 2024. From a base perspective, the industry in 2024 showed a trend of peaking and then declining. Recently, the central government and various ministries have frequently expressed opinions on real estate, with multiple financing support policies from the supply side and destocking policies. Demand-side restrictive policies are continuously opening up, and the stabilizing role of real estate in the economy will be re-included in policy considerations. The current market cap of the real estate sector does not completely match its economic value, indicating potential for value reassessment.

Haitong International's main points are as follows:

Key points of the single-month data in October 2024:

Without adopting comparable data metrics, in October 2024, the completed development investment in the industry was 762.9 billion yuan, a year-on-year decrease of 11.83%, a decrease of 18.81% from September 2024. The data for commodity housing sales amounted to 797.5 billion yuan, a year-on-year decrease of 1.43%, 12.91% lower than September 2024. The data for the area of commodity housing sold was 76.46 million square meters, down by 1.63% year-on-year, a decrease of 21.03% from September 2024. Development funding amounted to 833.7 billion yuan, a decrease of 10.14% year-on-year, 7.02% lower than September 2024. The newly started construction area was 51.76 million square meters, down by 26.62% year-on-year, 21.41% lower than September 2024. The completed area was 51.79 million square meters, down by 19.66% year-on-year, a rise of 51.34% from September 2024.

The year-on-year decrease in newly started construction area widened, while the year-on-year decrease in completed area narrowed.

From January to October 2024, the construction area of houses was 7.207 billion square meters, with a cumulative year-on-year decrease of 12.4%, a larger decline by 0.2 percentage points than that of January to September 2024. The newly started construction area of houses in January to October 2024 was 0.612 billion square meters, with a cumulative year-on-year decrease of 22.6%, a larger decline by 0.4 percentage points than that of January to September 2024. The completed area of houses in January to October 2024 was 0.42 billion square meters, with a cumulative year-on-year decrease of 23.9%, a decrease smaller by 0.5 percentage points than that of January to September 2024.

The year-on-year decrease in funds in place for real estate companies has narrowed.

From January to October 2024, the total amount of funds from national real estate sources reached 8.72 trillion yuan, with a cumulative year-on-year decrease of 19.2%, a decrease narrower by 0.8 percentage points compared to January to September 2024. Looking at the composition of total funding sources from January to October 2024, domestic loans accounted for 14.21% of real estate funding sources, foreign capital utilization accounted for 0.03%, self-raised funds accounted for 36.09%, and other funds accounted for 49.66%.

The year-on-year decrease in sales area and sales amount for real estate has narrowed.

From January to October 2024, the sales area of commercial residential buildings was 0.779 billion square meters, with a cumulative year-on-year decrease of 15.8% compared to 2023, a decrease narrower by 1.3 percentage points compared to January to September 2024. The sales amount of commercial residential buildings from January to October 2024 was 7.69 trillion yuan, with a cumulative year-on-year decrease of 20.9% compared to 2023, a decrease narrower by 1.8 percentage points compared to January to September 2024. Looking at the sales data by segment for residential properties: in January to October 2024, the sales area and sales amount in first-tier, second-tier, and third-tier cities all decreased year-on-year, with the decrease narrowing.

Investment advice: maintain an 'outperform' rating

Haitong International believes that the overall market environment for stable growth remains unchanged. The advantages and values of high-quality companies relative to other real estate companies will become more prominent. Recommendations include focusing on: Development Sector: Listed in A Share Market - China Vanke Co., Ltd. (000002.SZ), Poly Developments and Holdings Group (600048.SH), China Merchants Shekou Industrial Zone Holdings (001979.SZ), Gemdale Corporation (600383.SH); Listed in Hong Kong - China Overseas (00688); Commercial and Residential Sector: China Resources Land (01109), Longfor Group (00960), Seazen Holdings (601155.SH); Property Sector: Wanwu Yun (02602), China Res Mixc (01209), China Ovs Ppt (02669), Poly Ppt Ser (06049), China Merchants Property Operation & Service (001914.SZ), New Dazheng Property Group (002968.SZ); Cultural Tourism Sector: Shenzhen Overseas Chinese Town (000069.SZ).

Risk Warning: The industry faces risks of policy changes below expectations and downward risks in fundamentals.