The Zhitong Finance App learned that CITIC Securities released a research report saying that since 2023, the trend of second-hand housing sales being superior to new housing continued in 2024. Among them, active second-hand housing transactions in second-tier cities were the main reason. The reason behind this is cyclical factors such as the phased low supply quality of new housing in the existing industry, as well as trending factors such as an increase in the number and quality of effective second-hand housing listings and strong marginal policy relaxation. It is expected that the share of second-hand housing sales in China will continue to rise from a medium- to long-term perspective. They are optimistic about service platforms that have an advantage in the field of stock housing transactions and home decoration, and are also optimistic that they are more suited to boutique development and focus on development enterprises in core cities.

▍ The main views of CITIC Securities are as follows:

Second-hand housing sales have continued to be better than new homes since 2023, mainly due to active transactions in second-tier cities.

Whether it's data from the Bureau of Statistics or the Shell Research Institute, second-hand sales have always been better than new homes since 2023. During the Spring Festival, the average daily second-hand housing transaction volume tracked by Shell increased by more than 70% year on year, while the average daily transaction area of new homes in 25 representative cities of the China Index Research Institute decreased by about 27% year on year.

Second-tier cities are the main driving force for second-hand performance. There are 14 cities with online signing data. Second-tier cities increased 33% year-on-year in 2023, far better than 16% of first-tier cities and 7% of third- and fourth-tier cities. During the Spring Festival holiday, the average second-tier daily outlook and transactions of seashell statistics increased by 140% and 98% year-on-year, respectively, leading the first and third tier.

Active second-hand trading does not mean that the real estate market is prosperous; leading second-hand second-hand transactions does not mean that second-tier housing prices are performing better.

Shell Research Institute's January 2024 second-hand housing price index. The first, second, and third-tier cities were 100.8, 87.6, and 92.3, respectively (100 in November 2018). Housing price statistics for 70 cities by the Bureau of Statistics also showed that the decline in housing prices in second-tier cities was greater than that of first-tier cities. Second-hand transactions are booming in second-tier cities. It is more because demand in second-tier cities is shifting from the first-hand housing market to the second-hand housing market rather than the overall market boom.

Second-hand housing tends to be active. There are cyclical factors and trend factors.

Second-hand housing transactions are active. There are factors such as the phased low supply quality of new housing, the limited supply of high-quality land in most cities, and the psychological scars caused by delivery problems. However, the more important reason is that the effective listing of second-hand housing has increased, the number of new units has increased, and the listing price for owners is also relatively rational. Moreover, the early policies for second-hand housing are more restrictive, so policies such as granting a home without credit, tax rebates on home purchases, and secured transfers all have a marginal drive over second-hand housing.

Second-hand activity is a long-term trend, but there may also be fluctuations in the short term.

In the long run, China's second-hand housing market is less active than in other countries and regions, and second-hand sales account for a low share. It is expected that more and more cities will follow Beijing, Shanghai and other places and enter a period dominated by second-hand use. For example, Nanjing and Chengdu have completed this change one after another, and Hangzhou is about to achieve this change in the next few years. Of course, second-hand activity will also be affected by short-term factors, such as development companies' willingness to sell and specific policies.

Distinguish between the real estate cycle and the increase in second-hand share, and adhere to a comprehensive research perspective.

The increase in the share of second-hand housing transactions will cause a divergence between mortgage loan investment and new home sales. That is, as in January 2024, mortgage loans have been invested heavily, but sales of new homes have recovered little. Similarly, since there are far fewer industries related to second-hand housing than first-hand housing, the effects of credit and policy easing on the industrial chain may weaken, but individual segments, such as stock housing intermediaries and stock housing decoration, may excel in the entire real estate industry chain.

Furthermore, the performance of housing prices is likely to be more fragmented, and housing prices reflect the value of regional housing. I am optimistic about service platforms that have an advantage in the field of stock housing transactions and home improvement, and I am also optimistic about development companies that are more suited to boutique development and focus on core cities.

Risk Factors:

The risk that housing prices will continue to decline; the risk that the pace and effects of the introduction of supportive policies in the real estate industry fall short of expectations; the risk that the profitability of some companies will continue to decline and their performance will fall far short of expectations; the risk that some companies' financial constraints exceed expectations.