20140409-DBS_Group-China_Property_Weekly_Digest_Launching_the_Joint_Ownership_Housing_pilot_scheme_42页_924kb

China Property Weekly Digest Summary (Issue No. 72)

Core Content

This report provides an overview of the Chinese property market, focusing on recent developments in property sales, policy updates, and company activities, particularly highlighting the launch of a new project by COLI and the introduction of the Joint Ownership Housing pilot scheme.

Main Points

1. Project of the Week

• COLI - International Community, Ningbo:
  • Launched the second phase over the 30-March weekend.
  • Sales reached over Rmb300m (>60% sell-through).
  • Unit sizes range from 89sm to 139sm, targeting end-users.
  • ASP for phase 2 is Rmb13,500/sm, same as the initial launch and comparable to nearby projects.
  • Project acquired in Dec-2012, first phase launched 28/9/2013.
  • Expected gross margin of 38% and net margin of 18%.

2. Policy Update: Joint Ownership Housing

• MOHURD (Ministry of Housing and Urban-Rural Development) will pilot the Joint Ownership Housing scheme in six cities: Beijing, Shanghai, Shenzhen, Chengdu, Huangshi, and Huai'an.
• Aimed at middle-class households and newly married couples who cannot afford commodity housing but are above the public rental threshold.
• The government will share ownership, allowing buyers to pay only a portion of the property price.
• The policy is intended to increase property supply and meet housing demand without stimulating investment.
• It is expected to have limited impact on the commodity housing market.

3. Property Sales Performance

• Weak sales in the second week of April:
  • Tier I cities: Sales volumes dropped by 27% / 13% / 12% w-o-w in Tier I/II/III cities respectively.
  • Tier I cities (y-o-y): Sales volume declined by 18% in 14W14.
  • ASP trends:
    • Tier I cities: ASP increased by 1% / 1% / 6% in Tier I/II/III cities respectively.
    • Tier II cities: Mixed performance with some cities showing increases and others declines.
    • Tier III cities: Generally weak performance, with a 13% increase in ASP for some cities.

4. Share Price Performance

• The sector is trading at 5.9x FY14F PE, slightly higher than the 2008 and 2011 troughs (4.6x and 3.9x).
• No near-term catalyst expected, but some stocks are considered attractive at current valuations:
  • COLI (688.HK)
  • Franshion (817.HK)
  • Shimao (813.HK)

5. Regional Policy Updates

• Tianjin: Lowered the transaction tax threshold, making more housing eligible for ordinary housing status.
• Nanjing: Implemented seven control measures, including:
  • Maintaining land supply above 500ha for 5 years.
  • Setting price caps on land auctions.
  • Tightening presales approvals for developers with a history of delays.
  • Quarterly monitoring of property prices.
  • Regulation of fitting costs.
• Hangzhou Xiaoshan: Tightened HPF mortgage requirements.
• Suzhou: Restricting commercial property sales for three years.
• Chongqing: Adjusted downpayment requirements and HPF mortgage caps.
• Qingdao: Extended HPF payment period and required both spouses to meet criteria.
• Kunming: Raised downpayment for second homes and set a two-year window period for new HPF mortgages.
• Wenzhou: Increased HPF mortgage and rental subsidy caps and relaxed requirements for professional talents.
• Guangxi: Tightened transaction tax on second-hand properties.
• HPF Management Centre: Adjusted policy for employees of central state bodies.

Key Information

• Market Sentiment: Weak, with no near-term catalysts.
• Inventory Levels:
  • The number of weeks to digest inventory is 75 on average.
  • Beijing, Shanghai, Shenzhen, and Guangzhou have high inventory levels.
• Company Activities:
  • Major land acquisitions by key developers:
    • Poly CN acquired land in Dongguan.
    • KWG acquired land in Beijing.
    • Sino-Ocean Land made multiple land acquisitions in Zhongshan.
  • Yuexiu raised a US$80m 2-year term loan facility.

Summary of Sales Trends

• Tier I cities:
  • Weekly GFA sales decreased by 27%.
  • Weekly ASP increased by 1%.
• Tier II cities:
  • Weekly GFA sales decreased by 13%.
  • Weekly ASP increased by 1%.
• Tier III cities:
  • Weekly GFA sales decreased by 12%.
  • Weekly ASP increased by 6%.

Conclusion

The report highlights a mixed market performance with weak sales and a focus on policy changes aimed at stabilizing the housing market. While the Joint Ownership Housing scheme is introduced to support middle-class demand, the sector remains under pressure due to weak sentiment and high inventory levels. Some developers, such as COLI, Franshion, and Shimao, are seen as having attractive valuations despite the overall market conditions.