UBS_Equities-China_Property_Revisiting_Rental_Market_Lam-112933123_18页_1mb

Summary:

UBS Global Research's report highlights the growing importance of the rental market in China as a more reliable indicator of underlying demand compared to volatile primary and secondary transaction data. Key factors driving this shift include subdued property price expectations, lower rental yields compared to mortgage rates (narrowing spread), higher rental population in Tier 1 cities (~45%), and reduced purchase intent due to economic conditions like rising unemployment and salary cuts.

Data shows an 18% increase in rental listings across 50 cities since September 2024, alongside a 3% decline in rental prices in Tier 1 cities since the same period. This points to weak demand stemming from difficult property sales, cannibalization from social housing, and an underperforming job market. The report downgrades its price target for Tier 1 city second-hand housing prices to a 10% decline for 2025E.

The impact of recent policy measures has faded, with secondary market daily sales growing 30% year-on-year in 2025 YTD. Secondary listings are easing pressure from primary ones. Interest rates remain the most effective stabilization tool. The MSCI China Real Estate index trades at 8.3x/0.57x forward PE/P/BV.

Key risks for the property market include restrictive government policies, tight financing conditions, and weaker economic growth. Upside potential includes policy loosening and asset disposals. The valuation methodology is primarily based on PE or P/BV multiples.