20131119-DBS_Group-China_Property_Weekly_Digest_Local_tightening_to_continue_despite_market-oriented_reform_hopes_43页_965kb

China Property Weekly Digest Summary (Issue No. 55)

Core Content

This report provides an overview of the Chinese property market, focusing on sales performance, policy updates, and developer activities. It highlights the ongoing tightening of local property markets despite the government's push for market-oriented reforms. The analysis covers major Tier I, Tier II, and Tier III cities, as well as key developers and their projects.

Main Points

1. Project of the Week: CIFI - Jiangwan Mansion, Shanghai

• Project Overview: A low-rise development comprising garden apartments and townhouses.
• Launch Details:
  • First batch of 51 garden apartments (240 sqm/unit) launched at an ASP of Rmb34,000/sqm.
  • 24 units sold, fetching Rmb200 million in presales.
• Performance:
  • Achieved 100% of 2013 sales target.
  • Expected gross margin of 57% and net margin of 25%.
• Future Outlook:
  • Townhouse products are expected to launch in June 2014 at higher prices, which may lead to a significant increase in sales.

2. Policy Update

• Guangzhou: Announced six measures to tighten the market, including raising down payment requirements for second home purchases and increasing land supply.
• Shanghai: Introduced seven measures, including raising down payment requirements and increasing land supply.
• Shenzhen: Raised down payment requirement for second home purchases.
• Huizhou, Guangdong: Lowered mortgage cap for second home purchases.
• National Policy:
  • The government released a new reform roadmap, including relaxing the "One-child policy" and accelerating housing registry reform.
  • Plans to speed up real estate tax legislation and allow farmland circulation.

3. Weekly Sales Performance

• Tier I Cities:

  • Total units launched: 1,716 units.
  • Average sales-through rate: 75%.
  • Sales volumes declined by 16% in Tier I, 10% in Tier II, and -8% in Tier III cities compared to the previous week.
  • ASPs rose by -2% in Tier I, 3% in Tier II, and 3% in Tier III cities.
  • YTD sales volumes increased by 16%, 26%, and 42% in Tier I, Tier II, and Tier III cities respectively.

• Tier II Cities:

  • Total units launched: 3,059 units.
  • Average sales-through rate: 64%.
  • Sales volumes declined by 16% in Tier II cities.
  • ASPs increased by 3% in Tier II cities.

• Tier III Cities:

  • Total units launched: 67,000 sqm.
  • Average sales-through rate: 8%.
  • Sales volumes declined by -3% in Tier III cities.
  • ASPs increased by 7% in Tier III cities.

4. Inventory Level

• Inventory (in 000 sqm):

  • Beijing: 7,383
  • Shanghai: 9,917
  • Shenzhen: 3,420
  • Guangzhou: 6,942
  • Hangzhou: 6,647
  • Suzhou: 6,163
  • Ningbo: 10,214
  • Qingdao: 13,800
  • Nanjing: 4,340
  • Fuzhou: 2,047
  • Nanning: 5,509
  • Huizhou: 2,598
  • Jiujiang: 1,460
  • Nanchong: 3,893
  • Zhoushan: 1,740
  • Dongying: 3,394

• Average Inventory (weeks to digest): 47 weeks.

5. Company Update

• Major Land Acquisitions:
  • Greenland HK (337.HK):
    • Acquired land in Changsha, Hunan (372,000 sqm) at Rmb750 million.
    • Acquired land in Shanghai (48,100 sqm) at Rmb645 million.
    • Acquired land in Suzhou, Jiangsu (33,000 sqm) at Rmb335 million.
    • Acquired land in Shanghai (113,200 sqm) at Rmb530 million.
    • Acquired land in Shanghai (56,900 sqm) at Rmb407 million.
    • Acquired land in Beijing (60,000 sqm) at Rmb782 million.
  • CMPD (000024.CH):
    • Acquired land in Chongqing (306,800 sqm) at Rmb1,228 million.
    • Acquired land in Chongqing (794,600 sqm) at Rmb2,783 million.
  • Huayuan (600743.CH):
    • Acquired land in Beijing (148,500 sqm) at Rmb1,210 million.
  • GZ R&F (2777.HK):
    • Acquired land in Beijing (186,200 sqm) at Rmb2,328 million.
    • Acquired land in Beijing (142,800 sqm) at Rmb1,828 million.

6. Investor Recommendation

• The property sector is currently trading at 6.3x FY14 PE, 0.9x P/BV, and 49% discount to NAV (vs. historical average of 10x1.2x37%).
• The tightening policy is expected to continue, and local measures will remain in place until optimal supply and demand dynamics are achieved.
• Recommendation to focus on developers with strong fundamentals and sustainability.
• Top picks include COLI, CR Land, Country Garden, COGO, and Franshion.

7. Market Outlook

• Despite the government's market-oriented reform goals, local tightening policies are likely to continue.
• The sector is expected to see a slowdown in growth in 2014, with a focus on fundamentals and sustainability.
• Developers with high exposure to the Yangtze River Delta (YRD) are expected to benefit from FTZ-related developments.

Key Information

• HSI: 23,658

• Analysts:

  • Ken HE CFA: +86 21 6888 3375, ken_he@hk.dbsvickers.com
  • Carol WU: +852 2863 8841, carol_wu@hk.dbsvickers.com
  • Danielle Wang CFA: +852 2820 4915, danielle_wang@hk.dbsvickers.com
  • Andy YEE: +852 2971 1773, andy_yee@hk.dbsvickers.com

• Recent Reports:

  • China Property Sector - Implications from the new reform roadmap: 18 Nov
  • COLI (688.HK) - Look beyond 2014: 11 Nov
  • China Property Sector - FTZ trip takeaways: 08 Nov
  • Country Garden (2007.HK) - 3Q landbanking in the right direction: 05 Nov
  • Greenland HK (337.HK) - Back to expansion mode: 01 Nov
  • Shui On Land (272.HK) - Innovative asset monetisation: 01 Nov
  • CR Land (1109.HK) - CEO unveils mid-term growth focus: 29 Oct

Conclusion

The report outlines the current state of the Chinese property market, emphasizing the ongoing local tightening measures and the expected slowdown in growth for 2014. It highlights the performance of specific projects, the impact of policy changes, and the sales trends across different tiers of cities. Investors are advised to focus on reputable developers with strong fundamentals, as the sector continues to face regulatory pressures and market adjustments.