News Alert: Stepping up a notch in policy relaxations
- Suzhou and Guangzhou has respectively been reported in the news to have relaxed their home purchase and home price restrictions
- We believe the development would mark a step-up in policy support if these relaxations are not retrieved
- More policy should be on the way, but will likely be introduced at a gradual and controlled manner
- Top picks: COLI (688 HK), CR Land (1109 HK) and Yuexiu (123 HK) for potential market recovery; KE Holdings (BEKE US/2423 HK) to ride on the demand shift to the secondary market
What’s new
It is reported that Suzhou has started to relax home purchase restrictions. Guangzhou has also relaxed the upper and lower bound difference of the filing ASP of new project launches from the original +/-6% to +10%/-20% vs nearby projects.
Our view
Marks a step-up in policy support if not retrieved. Guangzhou and Suzhou are key Tier 1 and 2 cities, and new policy moves in these cities are often interpreted as new policy tones/directions from the central government. As such, if these measures are not withdrawn by the respective city governments, these landing of more impactful supportive measures would mark another step up in regulators’ stance to relax policies and support the physical market.
A largely anticipated, but nevertheless welcomed move. We believe gradual policy relaxations in higher tier cities would not serve as a big surprise to the market, as there has been rumours of large scale policy relaxations over the weekend and that Sept sales so far (higher tier cities included) has been muted. Nevertheless, this development should still be welcomed by the market as it confirms governments’ intention to support and stabilize the falling property market.
More policy support on the way, but likely introduced at a gradual and controlled manner. On one hand, we believe more measures will be introduced on the demand side to stabilise currently dampened homebuyer sentiments. On another, more liquidity support will likely come along to contain project delivery risks. However, we believe the magnitude and pace of these measures will remain gradual and controlled, as regulators intends to avoid the possibility of the physical market overheating like it did in previous cycles. We believe the physical market recovery will be maintained at a moderate pace over in 4Q22.
Stay with quality names. Investor confidence on the sector remains fragile and more concrete progress and follow through on policy support would be required to kickstart the recovery. High beta names will likely continue to exhibit strong price volatility along the way. We recommend investors to stay with quality names to ride on the potential release of effective solutions to come – COLI (688 HK), CR Land (1109 HK) and Yuexiu (123 HK). We also like KE Holdings (BEKE US/2423 HK) as it is a direct beneficiary of homebuyer sentiment recovery and the ongoing shift towards the secondary property market
