Huafu Securities: Shanghai land auction resumes "highest bidder wins" rule.

Huafu Securities released a research report stating that the first land auction in Shanghai after the restoration of the "highest bidder wins" rule was held on July 9, with a total of four plots of land sold. The targets of this land auction were the first batch of residential land sold in Shanghai after the introduction of the "Shanghai Nine Regulations", and there were two major changes in the land auction rules. Firstly, Shanghai abolished the 10% premium cap rule that had been in place since the centralized land supply in 2021, restoring the market-oriented rule of "highest bidder wins". Secondly, the proportion requirement of medium and small-sized units for the four plots of land was further reduced, with Yangpu Changbai, Yangpu Pingliang, and Baoshan Gucun plots requiring 50% medium and small-sized units, and Fengxian Xincheng plot requiring 40%. This marks a further return of the real estate market towards marketization. It is expected that the linkage mechanism between real estate and land prices may be further relaxed in the future. At the same time, the market-oriented adjustment of land prices and the reduction in the proportion requirement of medium and small-sized units will provide new challenges and opportunities for real estate development enterprises with outstanding capabilities in product development and sales. Huafu Securities believes that the restoration of the "highest bidder wins" rule in this land auction signifies a further return of the real estate market towards marketization. It is expected that the linkage mechanism between real estate and land prices may be further relaxed in the future. Additionally, Huafu Securities believes that the market-oriented adjustment of land prices and the reduction in the proportion requirement of medium and small-sized units will provide new challenges and opportunities for real estate development enterprises with outstanding capabilities in product development and sales. Investment Suggestions: Huafu Securities believes that during the process of land auctions and the return of the real estate market to marketization, leading real estate companies with excellent product development and sales capabilities will demonstrate stronger pricing power and are expected to restore profitability first. It is recommended to focus on leading real estate companies: Poly Developments and Holdings Group, China Merchants Shekou Industrial Zone Holdings, Hangzhou Binjiang Real Estate Group, as well as regional local state-owned enterprises: Shanghai Jinqiao Export Processing Zone Development. Industry Tracking: Sales Review (7.6-7.12) The total number of transactions in 34 key cities was 13,000 units, a decrease of 42.6% from the previous week; the total number of transactions in 2024 was 465,000 units, a cumulative year-on-year decrease of 35.8%. Among them, sales in first-tier cities were 4,311 units, a 36% decrease from the previous week, with a cumulative total of 119,000 units in 2024, a cumulative year-on-year decrease of 32.3%; sales in second-tier cities were 7,529 units, a 47% decrease from the previous week, with a cumulative total of 295,000 units in 2024, a cumulative year-on-year decrease of 38.1%; sales in third-tier cities were 1,058 units, a 31.7% decrease from the previous week, with a cumulative total of 51,000 units in 2024, a cumulative year-on-year decrease of 29.3%. Land Supply (7.1-7.7) The planned construction area of residential land supply in 100 cities was 5.94 million square meters, with a cumulative planned construction area supply of 13.045 million square meters in 2024, a cumulative year-on-year decrease of 39.2%, with a supply-demand ratio of 1.4. In terms of land listing prices, the average listing price per square meter of land in 100 cities was 4,497 yuan/sqm, with an average listing price of 4,752 yuan/sqm in the past four weeks, a decrease of 8.8% from the previous week and a year-on-year decrease of 11.9%. Land Transactions (7.1-7.7) The planned construction area of residential land transactions in 100 cities was 2.07 million square meters, with a cumulative transaction area of 93.45 million square meters in 2024, a cumulative year-on-year decrease of 34.3%. In terms of land transaction prices and premium rates, the average transaction price per square meter of residential land in 100 cities was 4,098 yuan/sqm, a 39.2% decrease from the previous week, and a year-on-year decrease of 11.4%. The overall premium rate was 0.8%, with an average transaction price of 5,964 yuan/sqm in 2024, a year-on-year decrease of 12.1%, a premium rate of 4.2%, a decrease of 2.3 percentage points compared to the same period last year. Risk Warning: Real estate sales may decline more than expected, and financing conditions may tighten more than expected.