DBS: China Property Monthly Chart Book: Land market still quiet
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China Property Monthly Chart Book: Land market still quiet
Land transactions in the 18 cities in the 1st batch of land auction saw a 41% decline in GFA terms from the 3rd batch last year. The bought-in rate stayed largely flat at 17%, with a slightly higher 19% of land transacted had hit their respective price caps as land quality was higher (average land cost rose 31%). SOE developers continued to dominate the scene while POEs stayed on the sidelines aside from CIFI, Longfor and Binjiang. With a challenging presales outlook and an upcoming repayment peak in Jul/Aug, we believe developers, particularly POEs, will remain conservative on land investments, and SOEs will likely retain their dominance for the rest of the year. Therefore, new launches will likely follow the same trend and SOEs will continue to outperform POEs in terms of presales in 2023.
Share price of the property sector rose 1.2% in Apr (or down 1.4% if share price performance of Powerlong, Yuzhou and LVGEM are excluded), outperforming the HSI’s 4.1% drop. Small-caps took the lead with a 3.2% rebound (or down 0.8% excluding outliers), while mid-caps and large-caps retreated 2.2%/1.3%, respectively.
While more supportive policies are likely on the way, existing uncertainties on presales and currency movements should not be ignored. We recommend investors to stay defensive with quality names that are less prone to these risks to ride on potential policy supports ahead – COGO (81 HK), COLI (688 HK), Longfor (960 HK), CR Land (1109 HK) and Yuexiu (123 HK).
