Property – China
Home Delivery Remains A Major Risk; Residential REITs Make A Breakthrough In 7M22, contracted sales of the top 100 developers dropped 49% yoy, while SOE developers saw notable improvements in yoy growth in Jun 22 and Jul 22. Recent policy signals are mixed, with the good news being the Politburo’s softened tones on demand-side policy and the approval of China’s first residential REITs. However, there is still a lack of clear guidance on the home delivery issue. Maintain MARKET WEIGHT. We lower our earnings forecast and target price for CR Land to factor in rent relief.
WHAT’S NEW
• China Real Estate Index System (CREIS) released new-home sales data for the week of 25-31 July and released preliminary Jul 22 sales of top 100 developers.
• During the Politburo meeting on 29 July, top party officials urged local governments to stabilise the property market.
• China’s first two residential REITs have received approval for issuance.
• CR Land announced a rent relief scheme for qualified tenants.
ESSENTIALS
• Major cities’ sales volume increased by 4.3% wow in the last week of Jul 22. According to CREIS, in the fourth week of Jul 22 (25-31 July), new-home sales volume of 28 major cities that have data available increased 4.3% wow and decreased 29.2% yoy. Sales volume of Tier 1/Tier 2/Tier 3 cities decreased by 7.9%/increased 1.8%/increased by 40.7% wow respectively. Outperformers include Guangzhou (+23% wow/+1.4% yoy), Nanjing (+34% wow/+4.6%yoy), and Chengdu (+4%wow/+121%yoy).
• Sales weakened in Jul 22 from Jun 22 with further divergence between cities. For Jul 22, average weekly new-home sales volume of Tier 1/Tier 2/Tier 3 cities that have data available were 0.4% higher/24% lower/34% lower than the average weekly sales of Jun 22. Major outperformers include Shanghai (+56% mom/+41% yoy), Shenzhen (+6.6% mom/+34% yoy) and Chengdu (+38% mom/+23% yoy). For inventory, total GFA of saleable homes of Beijing/Shenzhen/Guangzhou/Nanjing/Wenzhou/Xiamen came in at +1%/-2%/-1%/-1%/+2%/+9%/+0% wow and +5%/+71%/+31%/+30% /+19%/+19% yoy respectively.
• Contracted sales of top 100 developers dropped 29% mom and 39.7% yoy in Jul 22. In 7M22, contracted sales of the top 100 developers dropped 49% yoy. State-owned developers continued to significantly outperform privately-owned developers – CR Land/Greentown China/Yuexiu Property achieved 22% yoy/38%yoy/34% yoy growths respectively in contracted sales in Jul 22. In 7M22, contracted sales of state-owned developers and privately-owned developers we monitored saw average declines of 25% and 52% yoy respectively.
