The Zhitong Finance App learned that Guotai Junan released a research report saying that compared to financial risk, the bank believes that the real pressure on real estate lies in greater inventory pressure and corresponding depreciation. However, this is an explicit risk, and at the same time, as long as time is given or unconventional policies (such as government repurchases), this pressure can be relieved. Therefore, the probability of this pressure turning into risk is small; in the end, it will only be reflected in pressure, not risk. The industry is still under pressure, but there is no risk. Seize the phased opportunities brought by the development sector due to risk exposure, and continue to find a restructuring direction to release the pressure.

Beneficiaries: Xuhui Holding Group (00884), Sunac China (01918), etc., continue to recommend park companies, including Sino-Singapore Group (601512.SH), China Merchants Shekou (001979.SZ), and leading real estate companies recommending Poly Development (600048.SH).

Incident: Recently, Vanke's debt insurance incident began, and ended with Vanke's full repayment of US dollar bonds. The end of a risk exposure brought about a restoration of market confidence, and as the seasonal peak season began, the month-on-month improvement in sales also led to a restoration of confidence.

Guotai Junan's views are as follows:

Recently, after the industry experienced a sharp decline in new home sales from January to February, the market's concerns about the survival of housing enterprises have increased again. With the smooth implementation of the Vanke incident, it is expected to be greatly repaired. According to Kerui data, housing companies' sales declined sharply in the first 2 months. The year-on-year decline was generally 30-50%, leading to market concerns that housing companies' cash returns were reduced, which in turn triggered debt repayment risks. After the Vanke Insurance Project attracted market attention, market concerns escalated once again. Recently, however, with Vanke's full repayment of US dollar bonds and financial institutions' support for housing enterprises once again strengthened, market expectations have been greatly restored.

The traditional peak season at the beginning of every year becomes a catalyst for an improvement in expectations, especially during the downturn in the property market. Referring to the performance in early 2023, this is even more obvious. Since the real estate market is cyclical, if a new cycle is formed, it will be difficult to make a U-turn again in the short term. This also causes the market to pay particular attention to the arrival of an inflection point in the real estate industry. It has been almost 3 years since the property market declined in the second half of 2021. Judging from the traditional cycle, it has already exceeded the period of the downward cycle, so every peak market season is likely to become an inflection point. As trends are difficult to change in the short term, it is expected that this round will also usher in a period of improvement in market expectations due to month-on-month improvements. A recent example of reference appeared in early 2023. Xiaoyangchun's month-on-month improvement brought about a significant increase in market expectations.

There is no systemic financial risk in the real estate market, and this will be the biggest expected recovery in the short term.

Although the bank has repeatedly emphasized that there are no systemic financial risks in the real estate market, there are still concerns. For example, some investors are still worried that falling housing prices will cause residents' down payments to be broken down, leading to supply cuts. The bank has previously estimated that residents' down payment ratio is far higher than the legally stipulated lower limit of 20% for the first home, such as 20% for the first home, and the actual down payment ratio is expected to exceed 60%. Another example is that housing companies' debts cannot be repaid, causing financial institutions to lose money. The bank mentioned in the annual strategy report “Reorganization, Year 1” released on December 17, 2023, that domestic debts have extensive financial policy support, and can basically be rolled over, making it difficult to form real bad debts. Therefore, the bank believes that there should currently be no concern that systemic financial risks will occur in the real estate market.

Of course, pressure on real estate development also exists. The main reason is that there is still a large inventory, and depreciation pressure corresponding to inventory, but this is an explicit risk. With time and unconventional policies, it can be properly addressed. Compared to financial risk, the bank believes that the real pressure on real estate lies in greater inventory pressure and corresponding depreciation. However, this is an explicit risk, and at the same time, as long as time is given or unconventional policies (such as government repurchases), this pressure can be relieved. Therefore, the probability of this pressure turning into risk is small; in the end, it will only be reflected in pressure, not risk. The industry is still under pressure, but there is no risk. Seize the phased opportunities brought by the development sector due to risk exposure, continue to seek restructuring directions to release pressure. The beneficiaries include Xuhui Holding Group, Sunac China, etc., and continue to recommend park companies, including China News Group, China Merchants Shekou, and leading real estate companies recommending Poly Development.

Risk warning: Market demand is declining at an accelerated pace.