Zhongtai: policies stimulate the bottoming out and stabilization of the real estate industry, with sales significantly rebounding.

Zhongtai issued a research report stating that the sales data of the real estate industry from January to October 2024 are still hovering at a low level. With the policy direction of "stabilizing the market" and the optimization adjustment of core housing policies, the industry data is expected to bottom out and stabilize with the continuous introduction of policies in the future, and investment opportunities in the sector are still promising. Under the relaxation of core city policies and the promotion of "destocking", it is recommended to focus on real estate companies that are strategically located in first and second-tier cities and have stable and high-performance portfolios. Event: The data released by the National Bureau of Statistics shows that from January to October 2024, the sales area of commercial housing was 779.30 million square meters, a year-on-year decrease of 15.8%, and the sales amount of commercial housing was 768.55 billion yuan, a year-on-year decrease of 20.9%. The national real estate development investment was 86.309 billion yuan, a year-on-year decrease of 10.3%. Key points from Zhongtai's analysis: Sales have significantly rebounded, policy efforts are effective From January to October 2024, the sales area decreased by 15.8% year-on-year, which increased by 1.3 percentage points compared to the growth rate from January to September 2024. The sales amount for January to October decreased by 20.9% year-on-year, which increased by 1.8 percentage points compared to the growth rate from January to September 2024. The sales growth in October has significantly rebounded, stabilizing the market sentiment. On one hand, the effects of continuing policy relaxation are beginning to show, and more importantly, the political conference proposed the goal of "stabilizing the market", which has helped to restore market confidence. Current policies have maintained a trend of relaxation since May, with cities further reducing housing loan rates, existing housing loan rates, and provident fund loan rates. At the same time, key cities have relaxed the restrictions on property purchases, and "destocking" policies are being implemented in various regions. It is expected that under the tone of "stabilizing the market", various relaxation policies in the industry will continue to be introduced, promoting gradual stabilization of sales. Investment is still declining, new construction is slowing down The completion data has shown a slight increase year-on-year in 2024, with real estate investment decreasing by 10.3% year-on-year from January to October. The growth rate of new construction area in January to October was down by 22.6% year-on-year, and the completion area decreased by 23.9% year-on-year. As the willingness for land acquisition and new construction is low, industry investment data continues to decline, and the growth rate of new construction remains low. Given the downward trend in land acquisition intensity among real estate companies, it will be difficult for new construction to pick up in the future. In summary, with weak supply and demand in the market, it will be difficult for investment data to stabilize in the short term. However, it is expected that with the continued policy support driving sales gradually warm up, real estate companies will increase land acquisition efforts, and industry investment data is expected to bottom out and stabilize. Funding sources are showing signs of improvement, with prospects for future improvement From January to October 2024, the funds in place for real estate development enterprises decreased by 19.2% year-on-year, which increased by 0.8 percentage points compared to September. Specifically, domestic loans, utilization of foreign funds, self-raised funds, deposits and prepayments, and individual mortgage loans increased by -6.4%, -19.1%, -10.5%, -27.7%, and -32.8% respectively. Domestic loans and self-raised funds continue to decline, while other data show slight improvement. Currently, financing channels in the industry are still shrinking, but with the Central Economic Work Conference stating to "actively and prudently resolve real estate risks, and meet the reasonable financing needs of different ownership real estate companies equally", and the China Banking and Insurance Regulatory Commission indicating a significant increase in the credit quota for "project financing whitelist", as well as the sales uptick brought by demand-side policies, the situation of funds in place for real estate companies is expected to gradually improve in the future. Investment recommendations It is recommended to focus on real estate companies that are strategically located in first and second-tier cities with stable and high-performance portfolios, 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); for Hong Kong-listed stocks, it is recommended to pay attention to BEKE-W (02423), GREENTOWN CHINA (03900), YUEXIU PROPERTY (00123), and CHINA RES LAND (01109), among others. Risk warning: Sales fall below expectations, real estate policy relaxation is less than expected, research report information updates are not timely.