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China Property Weekly Digest Summary (Issue No. 82)

Core Content Overview

This report provides a detailed analysis of the Chinese property market, focusing on the performance of new projects, policy updates, sales trends, and inventory levels across Tier I, II, and III cities in June 2014. It also highlights key developments for major developers and market valuations.

Main Points

Project of the Week

• CR Land's Oak Bay in Tianjin:
  • Location: Near Tianjin airport.
  • Unit Sizes: 60-140 square meters.
  • ASP: Rmb9,000-9,500 per square meter, slightly higher than 2013's Rmb8,500.
  • Sales Performance:
    • 2013: 120-130 units/month.
    • 2014: 80 units/month due to reduced demand and higher mortgage rates.
  • Future Plans: Phase 4 (around 1,400 units) will be launched by end of September with more flexible pricing.
  • Sales Target for 2014: Rmb950 million, up from Rmb830 million in 2013.
  • YTD Sales: Rmb290 million, with 31% of sales locked in.
  • Profit Margins:
    • Gross Margin: 24%.
    • Net Margin: 13%.

Policy Update

• Tier 3 Cities Loosen HPF Mortgage Policies:
  • Cities Involved: Huaibei, Zhuji, Taizhou, Zhangye.
  • Key Adjustments:
    • Increased mortgage caps.
    • Reduced minimum contribution periods.
    • Extended maximum mortgage terms.
  • Notable Cities:
    • Anhui Huaibei and Jiangsu Taizhou are the fourth cities in their provinces to loosen HPF policies.
    • Hangzhou and Dongguan issued policies to limit price cuts.
    • Haikou allows local ID for property buyers over 120 square meters.
    • Wuhu offers interest subsidies for second home buyers.
    • Shangqiu reversed HPF tightening, increasing the cap to Rmb400k per household.

Sales Performance

• Tier I Cities:
  • New Launches: 15 projects (2,119 units), +24% week-over-week.
  • Sell-through Rate: 65%.
  • Sales Increase: 56% in major Tier I cities, 32% in Tier II, and 3% in Tier III.
  • ASP Trends:
    • Tier I: +5% w-o-w.
    • Tier II: +11% w-o-w.
    • Tier III: -1% w-o-w.
  • YTD Sales:
    • Tier I: 14% higher than May's average.
    • Tier II: 14% higher.
    • Tier III: 13% higher.
  • Year-over-Year Sales:
    • Overall decline of 18% for 51 tracked cities.

Valuation Analysis

• Sector Valuation:
  • PE Ratio: 5.4x FY14F.
  • P/BV: 0.7x.
  • Discount to NAV: 61% (vs. historical average of 38%).
• Attractively Valued Stocks:
  • Country Garden (2007.HK), COLI (688 HK), COGO (81 HK), and Shimao (813 HK).

Market Trends

• HSI: 23,204.
• Inventory Levels:
  • Tier I Cities:
    • Beijing: 9,497,000 square meters, 80 weeks to digest.
    • Shanghai: 11,055,000, 41 weeks.
    • Tier I Average: 81 weeks.
  • Tier II Cities:
    • Tianjin: 127,000, 27% w-o-w increase.
    • Hangzhou: 89,000, 247% w-o-w increase.
    • Tier II Average: 127,000 square meters, 32% w-o-w increase.
  • Tier III Cities:
    • Dongguan: 70,000, 6% w-o-w increase.
    • Tier III Average: 39,000 square meters, 3% w-o-w increase.

Key Developers' Updates

Major Land Acquisitions

• R&F Properties (2777.HK):
  • Location: Tianjin.
  • Planned GFA: 170,800 square meters.
  • Land Cost: Rmb212 million.
  • Average Land Cost: Rmb1,244 per square meter.
• Aoyuan (3883.HK):
  • Location: Guangzhou.
  • Planned GFA: 33,600 square meters.
  • Land Cost: Rmb315 million.
  • Average Land Cost: Rmb9,375 per square meter.

Recent News

• Vanke (000002.CH): Raised a US$400 million 5-year guarantee loan.
• Sunac (1918.HK): Raised a US$260 million 3-year bank loan.
• Shimao (813.HK): Raised US$665 million and HK$550 million bank loan with a 4-year term.
• Yuexiu (123.HK): No specific news mentioned.

Conclusion

The Chinese property market experienced mixed performance in June 2014, with increased sales in Tier I cities and a decline in Tier III. Tier 3 cities showed a trend towards loosening HPF mortgage policies to stimulate demand. Despite the sector's current valuation discounts, some stocks are considered attractively priced. Inventory levels remain high in many cities, suggesting potential for further policy adjustments. Major developers are actively acquiring land and securing financing, indicating ongoing investment activity.