Guosen: Real estate sales volume and prices have shown marginal improvement from January to October 2024. However, development investment has not yet improved.

Guosen released a research report stating that with the manifestation of demand-side policy effects at the end of September, both sales volume and price indicators have shown marginal improvements, but real estate development investment has not yet turned around. The future trend of the real estate sector will depend on the progress of policies such as land recovery and urban village expansion, as well as the sustainability of the real estate market volume and price recovery. In particular, the year-on-year decline in sales in October narrowed significantly, with the effects of demand-side policies becoming evident at the end of September; the decline in average sales price of commercial housing narrowed, and the repair situation of second-hand house prices was better than that of new houses. However, the decline in real estate development investment widened again, with the amount of funds in place for real estate enterprises continuing to shrink, the decline in new construction widening, the completion decline narrowing, and significant monthly fluctuations. Event: The National Bureau of Statistics released data on real estate investment and sales from January to October 2024. From January to October 2024, real estate development investment was 863.09 billion yuan, a year-on-year decrease of 10.3%; the newly started area of houses was 612.27 million square meters, a year-on-year decrease of 22.6%; the completed area of houses was 419.95 million square meters, a year-on-year decrease of 23.9%; the sales area of newly built commercial houses was 779.3 million square meters, a year-on-year decrease of 15.8%; the sales amount of newly built commercial houses was 768.55 billion yuan, a year-on-year decrease of 20.9%; and the funds in place for real estate development enterprises were 87.235 billion yuan, a year-on-year decrease of 19.2%. Guosen's key points are as follows: The year-on-year decline in sales in October narrowed significantly, with the effects of demand-side policies becoming evident at the end of September. From January to October 2024, the sales amount of commercial houses was 768.55 billion yuan, a year-on-year decrease of 20.9%, narrowing by 1.8 percentage points compared to January-September; in October, the year-on-year decrease in the sales amount of commercial houses was 1.0%, significantly narrower by 15.3 percentage points compared to September. From January to October 2024, the sales area of commercial houses was 779.3 million square meters, a year-on-year decrease of 15.8%, narrowing by 1.3 percentage points compared to January-September; in October, the year-on-year decrease in the sales area of commercial houses was 1.6%, significantly narrower by 9.4 percentage points compared to August. Observing the sales scale relative to the same period in history, the sales amount and area of commercial houses in October were equivalent to 62% and 54% of the same period in 2019, respectively, which is still at a low level but has improved from previous lows. The series of demand-side favorable policies announced at the end of September have shown significant effects. The year-on-year decline in average sales price of commercial houses narrowed, and the repair situation of second-hand house prices was better than that of new houses. From January to October 2024, the average sales price of commercial houses nationwide was 9862 yuan per square meter, a year-on-year decrease of 6.1%, narrowing by 0.7 percentage points compared to January-September; in October, the average sales price of commercial houses was 10430 yuan per square meter, a month-on-month increase of 10.3%, a year-on-year increase of 0.6%, an increase of 6.6 percentage points compared to September. In terms of cities, in October 2024, the year-on-year decrease in sales prices of newly built commercial residential buildings in 70 large and medium-sized cities was 6.2%, an increase of 0.1 percentage points compared to September, and a month-on-month decrease of 0.5%, a narrowing of 0.2 percentage points compared to September; the year-on-year decrease in sales prices of second-hand residential buildings in 70 large and medium-sized cities was 8.9%, a decrease of 0.1 percentage points compared to September, and a month-on-month decrease of 0.5%, a narrowing of 0.4 percentage points compared to September, especially the month-on-month increase of 0.4% in first-tier cities, marking the first positive change in 13 months. The repair situation of second-hand residential sales prices was better than that of new houses. The year-on-year decline in real estate development investment widened again, while the decline in funds in place for real estate enterprises continued to narrow. From January to October 2024, the real estate development investment amount was 863.09 billion yuan, a year-on-year decrease of 10.3%, widening by 0.2 percentage points compared to January-September. In October, the real estate development investment amount decreased by 12.3% year-on-year, a widening of 3.0 percentage points compared to September. From January to October 2024, funds in place for real estate enterprises were 87.235 billion yuan, a year-on-year decrease of 19.2%, narrowing by 0.8 percentage points compared to January-September; in October, funds in place for real estate enterprises decreased by 10.8% year-on-year, a narrowing of 7.7 percentage points compared to September. Breaking down the sources of funds for real estate enterprises, from January to October 2024, domestic loans were 124 billion yuan, a year-on-year decrease of 6.4%; deposits and advance payments were 264.44 billion yuan, a year-on-year decrease of 27.7%; and individual mortgage loans were 124.36 billion yuan, a year-on-year decrease of 32.8%. The continuous improvement in sales returns has gradually alleviated the drag on the funds of real estate enterprises. The widening of the decline in new construction, while the narrowing of the decline in completions. From January to October 2024, the newly started area of houses was 612.27 million square meters, a year-on-year decrease of 22.6%, widening by 0.4 percentage points compared to January-September; in October, the year-on-year decrease in the newly started area of houses was 26.7%, a widening of 6.8 percentage points compared to September. From January to October 2024, the completed area of houses was 419.95 million square meters, a year-on-year decrease of 23.9%, narrowing by 0.5 percentage points compared to January-September; in October, the year-on-year decrease in the completed area of houses was 20.1%, a narrowing of 11.3 percentage points compared to September. Investment recommendation: With the manifestation of demand-side policy effects at the end of September, both sales volume and price indicators have shown marginal improvements, but real estate development investment has not yet turned around. The future trend of the real estate sector will depend on the progress of policies such as land recovery and urban village expansion, as well as the sustainability of the real estate market volume and price recovery. In terms of individual stocks, it is recommended to continue to recommend Poly Developments and Holdings Group (600048.SH), CHINA OVERSEAS (00688), CHINA RES LAND (01109), YUEXIU PROPERTY (00123), and BEKE-W (02423). Risk warning: The effects and intensity of the implementation of favorable policies are lower than expected, external environmental changes may lead to fundamentals of the industry deteriorating more than expected, and credit risk events of real estate enterprises may have a greater impact than expected.