Galaxy Securities Local Two Sessions Real Estate Review: Actively Exploring New Models to Help the Industry Stabilize and Recover

Galaxy Securities released a research report stating that local two sessions mainly focus on the development model of the real estate industry, discussing aspects such as demand, inventory, and supply in the property market. With joint efforts in various aspects, the effects may gradually become apparent, leading to a potential increase in industry valuation. Top real estate companies demonstrate excellent operational management capabilities and have financial advantages, with the possibility of further increasing market share. Recommended investments include Poly Developments and Holdings Group (600048.SH) and other quality developers, property management companies, commercial companies, and real estate agencies. Event: Currently, local two sessions at the provincial level have concluded, and according to the reports released in various local government work reports regarding the real estate industry, relevant work is being deployed in terms of developing new models and stabilizing the market. Key points from Galaxy Securities: New real estate models are widely mentioned: The Third Plenary Session held in July 2024 mentioned accelerating the construction of a new real estate development model. This was also mentioned in several provincial-level local session reports. The new real estate model may mainly be achieved through a "guarantee + market" housing supply system, including affordable housing (including affordable rental housing) and commercial housing models. Some provincial reports specifically mention steadily promoting the supply of affordable housing, such as Beijing's plan to build 50,000 units of affordable rental housing, Shanghai's plan to build 70,000 units of affordable rental housing, and Henan Province's plan to add 57,000 units of affordable housing. In terms of property management, the supervision of the entire real estate process may be optimized, and supervision of presale funds for commercial housing may be strengthened. Demand: Urban revitalization may be a focus area. A previous national conference in December 2024 mentioned supporting rigid and improvement housing demands, emphasizing implementing renovations for urban villages and old deteriorating buildings. Efforts will continue to expand the scale of urban village renovations, with the potential to release housing demands and boost the property market. The transformation of old neighborhoods in urban renewal areas was mentioned by several provinces, including plans to renovate old neighborhoods in urban areas. Inventory: Clearing existing real estate stock. Since 2024, the disposition of existing housing and land stocks has been continuously mentioned. As of December 2024, there were 390 million square meters of unsold commercial housing in China, with the scale of unsold properties expanding for two consecutive months. Some provinces mentioned "acquiring existing commercial housing" in their session reports, with initiatives such as using local government special bonds to support the acquisition of unsold commercial properties. Property market: Importance of guaranteeing delivery highlighted. In October 2024, the Ministry of Housing and Urban-Rural Development proposed increasing credit support for "white list" projects to meet their financing needs. By the end of 2024, the total loan amount for "white list" projects reached 5.03 trillion yuan, surpassing the goal of 4 trillion yuan. This was increased further to 5.6 trillion yuan by January 22, 2025. Many provinces specifically mentioned ensuring the completion and delivery of real estate projects in their session reports, indicating potential success in this aspect with strong support from local governments. Risk warning: Risks of policy initiatives falling short of expectations, risks of discrepancies in policy implementation across different cities, risks of macroeconomic performance falling short of expectations, risks of funding not meeting expectations, and risks of significant fluctuations in property prices.