The Zhitong Finance App learned that Tianfeng Securities released a research report saying that the February fundamental downgrade and March fundamentals upgrade may be mainly due to the impact of suppressed demand and volume in high-energy cities. Therefore, marginal changes in high-frequency transactions of new homes in first-tier and second-tier cities are still a key basis for determining whether fundamentals are likely to weaken a second time. The demand-side LPR was lowered beyond expectations. As the “four limit” adjustments in various regions under the city's policy framework have entered a new round of strength, it is expected to drive the centralized release of improved demand, and supply-side financing support such as white lists will continue to increase. It is expected that supply-side clean-up will basically come to an end in '24. Before the fundamentals of the industry stopped falling and stabilized, the bank believed that demand was unstable and that policies continued, and was optimistic that the two-way supply and demand policy would continue to drive the sector market.

Target aspects: 1) Recommended high-quality real estate leaders: China Merchants Shekou (001979.SZ), China Overseas Development (00688); 2) Recommended high-quality property management companies: China Investment Savings (001914.SZ), Poly Industry (06049), etc.; 3) Suggest focusing on guaranteed housing and urban village renovation themes: Greentown Management Holdings (09979), Urban Construction Development (600266.SH), Tianjian Group (000090.SZ), Chinese enterprises (600675.SH). 600048.SH

Tianfeng Securities's views are as follows:

Sales side: High energy levels determine fundamentals

In March 24 years ago, the sales area of newly built commercial housing was 227 million square meters, -19.4% year-on-year, with sales of 2.14 trillion yuan, or -27.6% year-on-year. The cumulative growth rate recovered slightly from February. The bank believes that the decline in fundamentals in February and the improvement in fundamentals in March may mainly stem from the impact of suppressed demand and volume in high-energy cities. Therefore, marginal changes in high-frequency new housing transactions in first-tier and second-tier cities are still a key basis for judging whether fundamentals are likely to weaken twice. Judging from the performance in the first three weeks of April, the year-on-year growth rate of new home sales in typical first-tier and second-tier cities was -29% and -37%. Compared with March, they were repaired at 11 pct and 7 pct, respectively, but declined by 16 pct and 1 pct respectively from the first two weeks of April. Weakening high-frequency sales in first-tier cities further intensified fundamental uncertainty. From a seasonal perspective: sales area transactions in the first three months of 21-23 accounted for 20.1%, 22.9%, and 26.8% of the annual ratio, respectively. If the first 3 months of this year account for 26.8% of the record, the sales area is expected to be 850 million square meters, -24.3% year-on-year; if the previous 3 months account for close to 22.9% in '22, the sales area for the whole year of 24 is 992 million square meters, -11.2%. Investment side: divergence between investment and sales growth

24 years ago, in March, the country invested 2.21 trillion yuan in real estate development, -9.5% year-on-year. The cumulative growth rate decreased by 0.5 pct from February. The bank believes that in the context of sales recovery, the continued divergence in the growth rate on the investment side indicates a lack of corporate confidence, a reflection of this year's fundamentals, or a similar trend as in 22/23. There have been no essential changes in factors such as revenue and industry expectations. Over the past 24 years, the transaction growth rate has been highly consistent with the growth rate of the supply of new listings, reflecting the fact that under pressure to eliminate stocks, high-quality supply is the key to affecting sales volume. The lukewarm performance of the high-energy local auction market in the first quarter and the continued decline in development investment volume may have caused “poor quantity and quality” of supply in the second half of the year, which also caused concerns about whether the gold, nine, and silver transactions could be released twice during the year.

24 years ago, in March, the area of new housing construction was 172.83 million square meters, -27.8%. The cumulative decline was 1.9 pcts narrower than in February. Referring to the 20-23 trend, the growth rate is still likely to weaken in the second and third quarters of this year. The completed housing area was 152.59 million square meters, -20.7% year-on-year. The cumulative decline was 0.5 pct higher than in February. The year after the “Baojiao Building” was proposed in August '22, the year-on-year growth rate of completion continued to pick up, but it showed a downward trend again after August '23, indicating that the trend of a decline in the scale of construction commencement after 21 years was already showing on the completion side, and the growth rate of completion may continue to weaken during this year.

Financing side: structural changes in funding sources

In March 24 years ago, real estate development companies received 2568.9 billion yuan in capital, -26.0% year-on-year. The cumulative decline was 1.9 pcts higher than in February. Among them, the narrowing in the cumulative decline in domestic loans reflects the beginning of external financing, mainly due to credit-side benefits such as financing coordination mechanisms; the weakening growth rate of deposit and pre-sale payments and personal mortgage portals is mainly due to sales still under pressure. Looking at the share of funds available in each category, in the first 24 years of March, domestic loans, self-financing, deposit and advance payments, and personal mortgage loans accounted for 19%, 36%, 31%, and 15%, respectively, compared with +4pct, +5pct, -5pct, and -4pct in the same period last year. The bank believes that the continued decline in the amount of funding available and structural changes that rely more on external financing can also explain the weakness of development investment to a certain extent. Compared to the risk of loss borne by debt expansion, housing enterprises are more likely to reserve bullets, focus on stock removal, and continue to wait for a more clear market bottom.

The year-on-year decline in new and second-hand housing narrowed in April

The new housing market traded 2.46 million square meters this week, or -35.76% month over month, an improvement of 7.58pct compared with the previous month; the cumulative inventory was 111.56 million square meters, and the elimination of the first tier, second tier, third tier and below accelerated. The second-hand housing market traded 1.72 million square meters this week, -19.73% month over month, an improvement of 9.33 pct compared to the previous month. From April 8 to April 16, the land market transaction area was 14.03 million square meters, -11.23% year over year; total transaction volume was 10.9 billion yuan, -13.58% year over 12 weeks; national average premium rate was 4.58%, rolling 12 weeks -0.62 pct year on year.

Risk warning: industry credit risk spreads; industry sales decline exceeds expectations; because city policies fall short of expectations