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China Property Weekly Digest Summary (Issue No. 79)

Core Content

This report provides a comprehensive overview of the current state of the Chinese property market, focusing on policy updates, sales performance, and project developments in different tiers of cities. It highlights the trend of local governments relaxing policies to stimulate demand, as well as the performance metrics of key property projects and cities.

Main Points

Policy Updates

• More Anhui cities loosen restrictions on HPF (Home Purchase Fund): Xuancheng has become the second city in Anhui after Tongling to relax HPF mortgage requirements. Key changes include:

  • Raising the mortgage cap from Rmb200k to Rmb300k per person.
  • Reducing the required contribution period from 12 to 6 consecutive months.
  • Offering subsidies on deed tax for first home buyers.

• Other cities also relaxed policies:

  • Shenyang: Raised mortgage cap to Rmb350k per family and Rmb600k for households with three members.
  • Changzhou: Facilitated conversion of HPF mortgages to commercial mortgages and increased the cap.
  • Shangqiu (Henan): Raised mortgage cap to Rmb400k per household and increased loan terms.
  • Nanning: Allowed residents from five adjacent cities to purchase property.
  • Hangzhou Xiaoshan: Offered a 2% subsidy for relocation home buyers.
  • Hangzhou Xiaoshan: Set a deposit cap for land acquisitions.
  • Wuxi: Lowered residency requirements for non-local home buyers.
  • Chengdu: Tightened residency requirements for non-local buyers.

Sales Performance

• Sales volumes and ASPs (Average Selling Price) increased week-over-week (w-o-w):

  • Tier I cities: 18 projects launched, 3,224 units, with a sell-through rate of 61%. Sales volumes increased by 3% w-o-w, and ASPs increased by 5% w-o-w.
  • Tier II cities: 24 projects launched, 6,699 units, with a sell-through rate of 48%. Sales volumes increased by 7% w-o-w, and ASPs increased by 3% w-o-w.
  • Tier III cities: 21 projects launched, with a sell-through rate of 15%. Sales volumes increased by 0% w-o-w, and ASPs increased by 0% w-o-w.

• Year-over-year (y-o-y) sales volume trends:

  • Tier I cities: Declined by 18% y-o-y.
  • Tier II cities: Declined by 18% y-o-y.
  • Tier III cities: Declined by 26% y-o-y.

• Sales volume and ASP trends in major cities:

  • Beijing: Sales volumes declined by 15% w-o-w, ASP increased by 18% w-o-w.
  • Shanghai: Sales volumes increased by 17% w-o-w, ASP increased by 2% w-o-w.
  • Shenzhen: Sales volumes increased by 15% w-o-w, ASP increased by -4% w-o-w.
  • Guangzhou: Sales volumes declined by 4% w-o-w, ASP increased by -4% w-o-w.

• Overall sector performance:

  • The sector is trading at 5.5x FY14 PE and 0.7x P/BV, compared to 2011 troughs of 4x and 0.5x respectively.
  • Analysts suggest that investors should selectively add positions to the sector due to expected support from local policy loosening.

Key Projects

• Country Garden - Seashore City, Tianjin:
  • Project Type: High-rise, bare.
  • ASP (Rmb/sm): 7,800.
  • GFA (Gross Floor Area): 118,000 sm.
  • Plot Ratio: 1.2.
  • Planned Sales for 2014: Rmb400m.
  • YTD Sales: Rmb200m, with a 50% lock-in.
  • Expected Gross Margin: 29%, Net Margin: 14%.

Key Information

• Project Launches:

  • Tier I cities: 18 projects launched, 3,224 units.
  • Tier II cities: 24 projects launched, 6,699 units.
  • Tier III cities: 21 projects launched.

• Inventory Level:

  • The average number of weeks to digest inventory is 77.
  • Beijing: 9,250,000 sm, 65 weeks.
  • Shanghai: 10,500,000 sm, 47 weeks.
  • Nanning: 5,572,000 sm, 48 weeks.
  • Nanjing: 4,905,000 sm, 38 weeks.

• Recommended Companies:

  • COLI (688 HK), COGO (81 HK), Country Garden (2007 HK), Shimao (813 HK).

Conclusion

The report indicates a mixed performance in the property market, with local policy relaxations playing a significant role in supporting demand. While sales volumes and ASPs show improvement in some cities, the sector remains under pressure with a decline in sales volume compared to previous years. Analysts suggest a selective investment approach in light of these trends.