Weexpectmorepolicyflexibilityforthepropertymarketin2014。
AfterthefirstdayofthenationalPoliticalConsultativeConference(PCC)meeting,theheadoftheMinistryofHousingandUrban-RuralDevelopment,Mr.JianWeixin,toldthemediathatgovernmentpoliciesonthepropertymarketwillfollowa‘two-way’approach.Thisdiffersfromthe‘one-way’tighteningapproachseensince2010,andsuggestsaflexiblepolicystancebycentralgovernmentonthepropertymarketin2014.Inourview,a‘two-way’approachmeansthegovernmentcontinuestotightenthepropertymarketwhenoverheatinghappens,butatthesametime,wouldprovidesupporttothepropertymarket(especiallyonend-users)whenevernecessary.
Propertymarkettighteningnolongerfollowsa‘one-way’approach。
Overall,for2014,webelievethatcentralgovernmentwillcontinuetopromotethedevelopmentofsocialhousingtoprovidehousingforlow-incomegroupsinsociety.Fortheprivateresidentialmarket(thattargetsthehigh-incomegroup),thegovernmentwillusemoremarket-orientedmeasures(likeincreasingsupply)andfeweradministrativemeasurestoadjustthepropertymarket.Thisshouldfacilitatethereleaseofend-userhousingdemandanddrivefurthersalesgrowthforend-user-focuseddevelopers.Also,ifthepropertymarketisweak,webelievethattherewouldbesupportivemeasures.
Paceofhomepriceincreasescontinuestoslownationwide。
AccordingtoNBS,themomentumofhomepricegrowthhascontinuedtoslowdownsinceApril2013.Asareference,inMarch2013,averageMoMASPgrowthforthe70citieshitahighof1.09%,butthenthisMoMgrowthslowedtoonly0.4%inJan2014(sametrendforTier-1,2,and3/4cities).TheslowingMoMASPgrowthshowedthatexistingtighteningmeasuresarealreadyworking,andwithrisingsupplyin2014,weexpectafurtherslowdowninMoMASPgrowthnationwide–whichshouldreducethelikelihoodandnecessityformorepropertytighteningmeasuresbythegovernment.
SalesvolumehascontinuedtoimprovepostCNY。
EarlierthereweremarketconcernsaboutslowingpropertysalesinChina.Webelievetheseconcernswereoverdone,asweeklysaleshavecontinuedtorecoverpostCNY.Asareference,sincetheendoftheCNYperiod,weeklysaleshavereboundedforthreeconsecutiveweeksalready.Forthelatestweek(Feb24-Mar2)salesvolumesinthe40majorcitieswereupanother44%WoWto7.592msqm.SalesmomentumcontinuedtopickupandsawafurtheraccelerationfromtheWoWincreaseof35%inthepreviousweek.Latestweeklysalesvolumerepresentedc.120%oftheaverageweeklyvolumesregisteredinthethreemonthsbeforeCNY.WeexpectsalestocontinuetoriseinMarchasdeveloperskick-startnewprojectlaunchesfor2014.
Inexpensivevaluations+expectedpositivecatalysts=buyingopportunities。
Selectdevelopers(suchasR&F,KWG,CCRE)nowofferattractivedividendyieldsevenbasedonactualdividendsin2012,whichshouldprovidedownsidesupporttoshareprices.Asdevelopers’salesstarttopickupafterCNY,weseemorepositivecatalystsahead.Overall,wepreferCOLI,CRLand,Shimao,CountryGarden,ChinaVanke,COGO,andR&Ffortheirend-userfocus.WealsolikeFranshion,KaisaandCCREoncontinuedrestructuringand/oracceleratingsalesin2014.Keyrisks:unexpectedeconomic/policychanges.