Propertysalesvolumeflatyoy,ASPdown4%yoyinJan-Feb2014NationalcommoditypropertytransactionvolumesinJan-FebcameinatGFA105mnsqm(-0.1%yoy).ASPwasRmb6,774/sqm(-4%yoy),resultinginJan-FebpropertysalesofRmb709bn(-4%yoy).Amongregions,Jan-FebvolumesinEastern,Central,andWesternChinawere-6%,+15%and-2%yoy,respectively.
PropertyinvestmentandnewstartsgrowthweakinJan-Feb2014NationalpropertyinvestmenttotaledRmb796bninJan-Feb,+19%yoy(vs.+22%inDec).Newstartswere-27%yoytoGFA167mnsqm(vs.+35%inDec),mainlyduetohighbaseinJan-Feblastyear.Jan-FebGFAcompletedandGFAunderdevelopmentwere-8%and+16%yoy,respectively.
Jan-FeblandsalesgrowthslowedwithlandpricepremiumstableOurmonitoringof302cities’totallandmarketactivitiesindicatesthatJan-FeblandGFA/revenuetransactedwere373mnsqm/Rmb557bn(-6%/+27%yoy).Revenuewas-50%momand+0%yoyinFeb14(vs.-19%/+47%mom/yoyinJan),withanaveragepriceofRmb1,391/sqm.Thepremiumratewas14%inJan-Febvs.13%inDec13.Intermsofpropertyrelatedlandmarketactivities,Jan-Feblandsalesrevenuewas+31%yoy.
WeakJan-Febsalesperformancereportedbydevelopers15developersunderourcoveragewithavailableJan-Febsalesdata:totalvolumes(-6%yoy),contractedsales(-2%yoy),ASP(+4%yoy).
Ourinvestmentview
Weseearisingsupplytrendin2014potentiallyworseninginto2015.Demandshouldstaysolidintheneartermbutgrowthislikelytoslowsubstantiallyonthebackoflittleimprovementinaffordabilityandlikelylessfavorableliquidityconditionsgoingforward.Wepreferreal-estateagentsoverdevelopersasagentsarelikelytooutperformdevelopersduringtheslowdownphase,asseeninpastcycles.Buyideas:E-House(CL),Greentown(CL),CountryGarden,Longfor,CML,CRL,Shimao,Vanke(B),Vanke(A),CMP(A),Poly(A)andWorldUnion.Sellideas:Yanlord,PCRTandSOL.Keydownsiderisks:developers’balancesheetsdeterioratesubstantially.Keyupsiderisks:better-than-expectedeconomicconditions/policyloosening.