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Summary of the Document

Core Content

The document provides an overview of the current state of the Chinese property market, focusing on land prices, sales performance, policy updates, and company activities. It highlights the trends in different tiers of cities, with a particular emphasis on the differences in local government policies and their impact on the market.

Main Points

Land Price Trends

• The premium over asking prices at residential land auctions in 300 cities increased to 25% in August.
• Beijing and Shanghai saw premiums of 37% and 62%, respectively, despite significant increases in land supply (up 581% and 124% y-o-y in 8M13).
• Low-tiered cities are also expected to see rising land prices, as lower prices could lead to a decline in the revaluation of land-related collaterals.
• Many cities are planning to raise benchmark land prices due to increasing costs of primary land development.

Sales Performance

• Tier I cities reported 19% w-o-w growth in sales volume, with an average sales-through rate of 79%.
• Tier II cities had 20% w-o-w growth in sales volume, with an average sales-through rate of 68%.
• Tier III cities saw 27% w-o-w growth in sales volume, with an average sales-through rate of 68%.
• Tier I cities showed a notable ASP (Average Selling Price) growth of 20%, while Tier II and Tier III cities had 1% and 1% growth respectively.
• Guangzhou was a major driver of ASP growth in Tier I cities, with some developers cutting prices to boost sales.

Policy Updates

• Wuhu, Anhui introduced home purchase subsidies for graduates, including exemption of property deed tax and a Rmb20k relocation allowance.
• Zhengzhou, Henan tightened property controls, raising home purchase requirements and presales permit requirements, and increasing supply to stabilize prices.
• Wenzhou, Zhejiang eased restrictions on home purchases and allowed trading of rural land property rights starting from October 1, 2013, though the scope remains limited.
• Several cities adjusted provident fund mortgage policies, allowing conversions to commercial mortgages and relaxing mortgage caps.

Sector Valuation

• The property sector is currently trading at 6.4x FY14 PE, 1.0x P/BV, and 49% discount to NAV, compared to its historical average of 10x 1.2x 37%.
• The sector is expected to range trade, with a preference for companies having strong presales outlook in the second half of 2013, such as COLI, Country Garden, Shimao, and COGO.

Key Information

HSI

• HSI (Hang Seng Index): 22,395

Company Activity

• Major land acquisitions by key developers are listed, including:

  • COGO (81.HK): Acquired land in Changzhou, Jiangsu, with a premium over asking price of 10%.
  • SOHO (410.HK): Acquired land in Shanghai, with a premium of 0%.
  • BBMG (2009.HK): Acquired land in Beijing, with a premium of 47%.
  • Minmetals (230.HK): Acquired land in Beijing, with a premium of 49%.
  • CRCC (1186.HK): Acquired land in Hefei, Anhui, with a premium of 65%.
  • Greenland: Acquired land in Shanghai, with a premium of 82%.
  • Sunac (1918.HK): Acquired land in Chongqing with various premiums, some at 0%.
  • Chixia (600533.CH): Acquired land in Wuxi, Jiangsu, with a premium of 0%.

• Recent news includes:

  • GZ R&F (2777.HK): Proposed to issue Rmb6m in domestic corporate bonds.
  • Franshion (817.HK): Announced that Warburg Pincus invested US$79m in cash for a 20% equity interest in its Suzhou operations.

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

Charts and Data

• Chart of the week: Land prices are expected to continue rising, especially in top-tiered cities.
• Growth of land supply and transaction in 300 cities and 10 key cities for 8M13.
• Growth of transacted ASP in 300 cities.
• Weekly GFA sales and ASP for Tier I, II, and III cities.
• Inventory levels and the number of weeks to digest inventory.
• YTD GFA sales and avg ASP for Tier I, II, and III cities.
• Share price performance and peers valuation.

Conclusion

The document outlines the continued growth in land prices, especially in top-tiered cities, and highlights the differentiation of local controls across the country. It emphasizes the impact of policy changes on the property market and provides sales and valuation data for different tiers of cities. Companies with strong presales outlook are preferred, and key developers are active in land acquisitions.