National real estate sales volume normalize to 2.3% YoY in 2M18. Low inventory level to mitigate the risk of sharp property price correction

Transcription

1 Industry Report China Property 1 APRIL 2018 Contacts Dagong Global Credit Rating (HK) Co. Ltd Tel: (852) contact@dagonghk.com National real estate sales volume normalize to 2.3% YoY in 2M18 National Bureau of Statistics (NBS) released real estate data for the first 2 months of Sales volume saw an increase of 2.3% YoY, further softening from 5.3% YoY in and 2 YoY in. That said, we believe major developers will continue to record strong sales given the market share gain and increase in sellable resources. We believe the strong sales come mainly on the back of a pickup in tier 3 city sales, as rising mortgage rates and tougher homepurchase restrictions have channeled property demand away from tier1 cities, supporting realestate sales growth in tier2 and tier3 cities. Low inventory level to mitigate the risk of sharp property price correction Despite the strong land sales growth in, the base is low. We believe this should help maintain inventory at a low level, thus mitigating the risk of sharp property price correction. National residential inventory has been improving 13 months in a row, with completed unsold inventory dropping to 301 million sqm, down 2 YoY (versus 403 million sqm at end, down 11% YoY). Average selling price (ASP) slightly weakened to RMB8,290 per sqm, mainly due to policy tightening in tier 12 cities, and greater sales contribution from tier 34 cities. Construction activities momentum soften due to the Chinese New Year effect For construction activities, new starts growth increase by 5. YoY in 2M18, soften from 10.5% YoY in. GFA completion also declined by 17.1% YoY (versus 7. YoY in ), partly due to the Chinese New Year effect. Property under construction stayed largely stable at 1. YoY for 2M18, a similar level compared with 2.9% YoY growth in. However, we believe the momentum to pick up during 1H18 given the improvement in land sales since 3Q and a shrinking inventory level. Industry consolidation to continue on high land costs We believe small property developers will lose their competitiveness due to the consistently high land costs while larger developers to gain market shares, on the back of their 1) strong balance sheets and lower funding costs, 2) diverse land acquisition channels through primary land replenishment, redevelopment and M&As, 3) abundant land bank and project pipelines. We believe as onshore liquidity will likely remain tight throughout 2018, smaller developers would likely face bigger refinancing risks when their debt matures. We expect market consolidation to accelerate, with the top 10 players market share to reach +3 in 2018, versus 25%/2 in /16 The Center, 99 Queen s Road Central, Hong Kong

2 Feb13 Jul13 Dec13 May14 Oct14 Mar15 Aug15 Jan16 Jun16 Nov16 Apr17 Sep17 Feb18 Average Selling Price, RMB/sqm Jan13 May13 Sep13 Jan14 May14 Sep14 Jan15 May15 Sep15 Jan16 May16 Sep16 Jan17 May17 Sep17 FY= Industry Report China Property 1 APRIL 2018 Potential property tax introduction should have limited near term impact During the opening meeting of the 13th National People s Congress, Premier Li Keqiang stated that in the past 5 years, the tier3/4 cities have seen obvious results in destocking and ASP growth has been reined in. He also mentioned that China will prudently advance legislation on property tax. We see the property tax a measure to encourage owners to rent the property out to offset the cost of holding, and thus increasing the supply especially in lower tier cities, but not a way to curb the property market. As land sales have become a critical income source (304 combined on our estimates) for local governments, we believe neither the central nor local governments can afford an abrupt collapse in property markets. We do not believe property tax will be rolled out soon either, thus limited impact to property market in short term. China Property: Average selling price China Property: Average selling price Home Index for Major Cities 9,000 7,000 6, ,000 4, ,000 1 Total Sales ASP (LHS) Beijing Shanghai Guangzhou Shenzhen 2

3 Industry Report China Property 1 APRIL 2018 China s major residential sales and construction trend Supply China residential property Newly Started (Mln sqm, YTD) 1,307 1,458 1,249 1,067 1,159 1, YoY % 1 15% 9% 11% 5% Under Construction (Mln sqm, YTD) 4,290 4,863 5,151 5,116 5,213 5,364 4,307 YoY % 1 13% 1% 3% Completed (Mln sqm, YTD) YoY % 15% 3% 9% 5% 7% 17% Home Inventory (Mln sqm) YoY % 4 37% 2 11% Demand China residential property Total Sales Value (Bln, YTD) 5,347 6,770 6,240 7,275 9,906 11,024 1,055 YoY % 1 27% 17% 3 11% 1 Total Sales Volume (Mln sqm, YTD) 985 1,157 1,052 1,124 1,375 1, YoY % 17% 9% 7% 2 5% Total Sales ASP (RMB sqm, YTD) 5,428 5,851 5,932 6,472 7,204 7,614 8,290 YoY % 1% 9% 11% 15% Supply China residential property Mar17 Apr17 May17 Jun17 Jul17 Aug17 Sep17 Oct17 Nov17 Dec17 Feb18 Newly Started (Mln sqm, YTD) YoY % 2 17% 1 3% 1 3% 2 5% Under Construction (Mln sqm, YTD) 4,332 4,457 4,581 4,727 4,832 4,933 5,053 5,154 5,270 5,364 4,307 YoY % 3% 3% 3% 3% 3% 3% 3% 3% 3% Completed (Mln sqm, YTD) YoY % 1 3% 3% 1% 1% 3% 7% 17% Home Inventory (Mln sqm) YoY % 15% % 21% % 2 25% 2 Demand China residential property Total Sales Value (Bln, YTD) 1, , , ,023 1,448 1,055 YoY % % % % 1 Total Sales Volume (Mln sqm, YTD) YoY % 17% 13% 1 1 5% 5% Total Sales ASP (RMB sqm, YTD) 7,882 7,739 7,616 7,512 7,720 7,633 7,688 7,506 7,414 7,720 8,290 YoY % 7% 7% 1% 3% 1 13% 3

4 Total Sales Value, RMB Bn Total Sales Value, RMB Bn Total Sales ASP, RMB/sqm, % Total Sales ASP, RMB/sqm, % Home Inventory, Mn sqm, % Home Inventory, Mn sqm, % Industry Report China Property 1 APRIL 2018 China Property: Inventory trend % 1 15% 2 25% 3 Home Inventory (LHS) Home Inventory (LHS) China Property: Average selling price trend 9,000 7,000 6,000 5,000 4,000 3,000 2, , 8, 7,800 7,600 7, 7, 7,000 6, Total Sales ASP (LHS) Total Sales ASP (LHS) China Property: national total sales value 12,000 10,000 6,000 4,000 2, ,600 1, 1, % 2 15% 1 5% Total Sales Value (LHS) Total Sales Value (LHS) 4

5 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 New Personal Mortgages, RMB Bn Money Supply M2, RMB Bn Apr11 Sep11 Feb12 Jul12 Dec12 May13 Oct13 Mar14 Aug14 Jan15 Jun15 Nov15 Apr16 Sep16 Feb17 Jul17 Dec17 Money Supply M2, RMB Bn Money Supply M2, RMB Bn Total Sales Volume, Mn sqm Total Sales Volume, Mn sqm Industry Report China Property 1 APRIL 2018 China Property: National total sales volume 1,600 1, 1, Total Sales Volume, (LHS) Total Sales Volume (LHS) China: Money supply, , , , ,000,000 80,000 60,000 40,000 20, , , , , ,000,000 80,000 60,000 40,000 20, Money Supply M2 (LHS) YoY% (RHS) Money Supply M2 (LHS) China: Personal mortgage 3, , ,000 1, New Personal Mortgages (LHS) YoY% (RHS) New Personal Mortgages (LHS) 5

6 Industry Report China Property 1 APRIL 2018 Major property developers New contracts sales and YoY growth Source: Companies, HKEx, Dagong Research 6

7 Industry Report China Property 1 APRIL 2018 Disclaimer THE CREDIT RATINGS OR RESEARCH ISSUED BY DAGONG GLOBAL CREDIT RATING (HONG KONG) CO., LIMITED ( DAGONG HK, US, WE, OR OUR ) REFLECT OUR OPINION ON THE CREDIT CONDITION OF THE SUBJECT AND/OR INDUSTRY, WHICH INCLUDES THE ENTITY AND/OR ITS RELATED DEBT INSTRUMENTS (IF APPLICABLE), AS OF THE DATE THE CREDIT RATINGS OR RESEARCH IS ISSUED. NONE OF THE INFORMATION CONTAINED IN THE CREDIT RATINGS OR RESEARCH ISSUED BY DAGONG HK, NOR THE PUBLICATION ITSELF, SHALL BE CONSIDERED A RECOMMENDATION TO BUY, SELL, OR HOLD ANY SECURITY. THE CREDIT RATINGS OR RESEARCH IS NOT INTENDED TO ADDRESS AND/OR REFLECT THE MARKET VALUE OF THE RATED ENTITY AND/OR ITS RELATED DEBT INSTRUMENTS (IF APPLICABLE). DAGONG HK ASSUMES NO RESPONSIBILITY FOR ANY LOSS OR DAMAGE ARISING FROM USE OF THE CREDIT RATINGS OR RESEARCH WE PRODUCE. IN RELATION TO PROVIDING CREDIT RATING SERVICES AND PRODUCING RESEARCH, DAGONG HK RELIES ON FACTUAL INFORMATION PROVIDED BY THE RATED ENTITY AND/OR ACQUIRED FACTUAL PUBLIC INFORMATION. DAGONG HK ENDEAVORS TO ENSURE THAT THE INFORMATION USED IN THE CREDIT RATINGS OR RESEARCH IS OF SUFFICIENT QUALITY; HOWEVER, NO AUDIT IS CONDUCTED BY DAGONG HK, AND NO IMPLICIT OR EXPLICIT GUARANTEE IS MADE OR SHALL BE ASSUMED FOR THE ACCURACY, CORRECTNESS, TIMELINESS, AND/OR COMPLETENESS OF THE FACTUAL INFORMATION AVAILABLE. The credit ratings included in the rating report were solicited and disclosed to the rated entity prior publishing. Neither the rated entity nor its related party did not participate in the credit rating process aside from providing the information requested by Dagong HK s rating team. The credit ratings or research issued by DAGONG HK is not intended for distribution to, or use by, any person in any jurisdiction where such usage would infringe the law. Any user accessing information available through the research is responsible for consulting the relevant agencies or professionals accordingly and for complying with applicable laws and regulations. The contact information for the Complaint Officer is available at DAGONG HK expects and understands that users of the credit ratings or research provided by DAGONG HK are professionally trained and capable of exercising independent assessments when making investment and business decisions. None of the content related to the credit ratings or research produced by DAGONG HK may be modified, reproduced, distributed, or reverse engineered without prior written consent from DAGONG HK. For any further information on key elements underlying the rating and rating procedures, please refer to the following link: DAGONG HK is a subsidiary of Dagong Global Credit Rating Co., Ltd. The Credit Rating Committee of DAGONG HK is responsible for and reserves the ultimate power of interpretation for the methodology used in its independent credit ratings or research. Copyright Dagong Global Credit Rating (Hong Kong) Co., Limited. 7