News Alert: A prolonged sales recovery triggers more policy loosening

  • Preliminary presales data of the key developers we track in Apr posted m-o-m deterioration with a drop of c.20% from Mar due to city lockdowns and weak market sentiment
  • Although local governments are stepping up easing policies, a slower construction progress may lead to a shortfall in new launches and on-and-off city lockdowns may disrupt market recovery. We believe that there is low possibility for developers to achieve its presales targets in 2022
  • Going ahead, the key issue to watch for is how the government will fine-tune its Zero-Covid policy to mitigate the damage caused to business activities 
  • We suggest investors to stick with defensive plays. COLI (688 HK), COGO (81 HK), CR Land (1109 HK), Longfor (960 HK), and Yuexiu (123 HK) remain our top picks

What’s new?

Preliminary presales data of developers compiled by the CRIC in April shows a further deterioration in the physical market. 

Our view

Sales worsened further amid prolonged lockdownsPreliminary presales data of the key developers we track in Apr posted m-o-m deterioration with a drop of c.20% from Mar (vs +c.35% from Feb) due to city lockdowns and weak market sentiment. 

Lower possibility to achieve its presales targets in 2022For the 29 developers we track, the gap to achieve their 2021 presales scale, on monthly basis, further widened to c.24% (vs c.16% in Mar) for the upcoming eight months.

Delay in construction and presales may trigger more policy loosening before market recovery. More than 40 cities have introduced easing measures in Apr to support local market, per CRIC’s record. The recent Politburo meeting on Apr 29th, calling for 1) local governments to optimize its policies based on its market conditions; 2) supporting housing rigid and upgrade demand; 3) optimizing the pre-sale funds regulations. However, a slower construction progress may lead to a shortfall in new launches and on-and-off city lockdowns may disrupt market recovery. Going ahead, the key issue to watch for is how the government will fine-tune its Zero-Covid policy to mitigate the damage caused to business activities.

Suggest continuing to stay with defensive plays. We anticipate the sector would remain volatile amid a weak physical market and with a slower-than-expected reopening of refinancing channels. As such, we suggest investors to stick with defensive plays. COLI (688 HK), COGO (81 HK), CR Land (1109 HK), Longfor (960 HK), and Yuexiu (123 HK) remain our top picks.

Source: CRIC, DBS Bank (HK)