20180225-川财证券-Chuancai_Research_2018_Strategy_Report__2018_China_Equity_Market_Real_Estate_Outlook_27页_1mb

2017 Real Estate Industry Review and 2018 Outlook Summary

Core Content Overview

The 2017 real estate market in China showed a lackluster performance overall, but industrial leaders emerged as strong performers. Policy restrictions were introduced to curb speculative activities, leading to a slower growth in the sector. Despite this, companies with strong brand value, large scale, and efficient fundraising capabilities were able to outperform, demonstrating resilience in a challenging market environment. The report also highlights the long-term trend of increasing industrial concentration, the development of the rental housing market, and the potential investment opportunities for 2018.

Main Points and Key Information

1. 2017 Market Performance

• The real estate sector underperformed compared to the broader A-share market, with a decline of 0.64% as of December 25, 2017.
• The sector ranked 11th out of 28 in terms of growth rate.
• VANKE-A (000002.SZ) and PRE (600048.SH) were among the top performers, with gains exceeding 50%.
• FUTURE LAND (601155.SH) and EBJB (600622.SH) also showed strong performance, with returns of 149.43% and 77.85%, respectively.

2. Housing Demand Support Through Multiple Channels

• The 19th CPC National Congress emphasized that "housing is for living in, not for speculation."
• A long-term mechanism was established to promote both rental and purchase housing.
• Over 10 cities initiated land transactions for the purpose of leasing, with Shanghai leading the way by offering nearly 1 million square meters of rent-only land, accounting for 20% of total real estate transactions in 2017.
• The rental housing market is expected to grow, with a potential total annual rent exceeding CNY1 trillion.
• The report identifies EBJB and SLH as leading players in the long-term rental apartment sector.

3. Industrial Concentration Trend

• Since 2012, the concentration of the real estate industry has been increasing.
• In 1-10M2017, the Top 10 real estate enterprises accounted for over 25% of the market share.
• It is estimated that this ratio will surpass 30% in 2018, indicating a stronger consolidation of market power.
• The Top 100 real estate enterprises accounted for 53.2% of the market share in 2017, showing a significant trend toward industry concentration.

4. Unfavorable Market Conditions in 2018

• The real estate market is expected to enter a contraction phase in 2018.
• Sales revenue might slightly cool down, with an expected 4-6% decrease in commercial housing sales.
• However, real estate investment is expected to remain resilient due to low inventory and strong willingness for new construction projects.

5. Investment Opportunities and Related Stocks

• The real estate industry is rated "Increase" for 2018.
• Key investment opportunities include:
  • Valuation repair for industrial leaders: VANKE-A (000002.SZ), PRE (600048.SH), GEMDALE (600383.SH).
  • Regional Thematic Opportunities:
    • Xiongan New Area: CFLD (600340.SH), RISESUN (002146.SH).
    • Guangdong-Hong Kong-Macau Greater Bay Area: OCT HOLDING (000069.SZ), CMSK (001979.SH).
  • Long-term rental apartment theme: SLH (002285.SZ), EBJB (600622.SH).

6. Risk Reminder

• The report highlights potential risks such as weaker-than-expected domestic macroeconomy and tightened housing loan policies.

Conclusion

Despite the overall unexciting performance of the real estate market in 2017, industrial leaders showed resilience due to their scale, brand premium, and low fundraising costs. The development of the rental housing market and the trend toward industrial concentration are expected to provide long-term opportunities for the sector in 2018. Investors are advised to focus on valuation repair, regional themes, and long-term rental apartment opportunities, while being mindful of macroeconomic and regulatory risks.