What’s new
The National Bureau of Statistics (NBS) released property data for the first eight months of the year : Development investment rose 15.6% YoY to Rmb4.4trn; new-start GFA fell 6.8% YoY to 1.23bn sqm; GFA sold declined 4.1% YoY to 574mn sqm; sales increased 2.2% YoY to Rmb3.40trn; GFA under construction rose 15.6% YoY to 5.12bn sqm; and, completed GFA surged 20.2% YoY to 446mn sqm.
Comments
Growth rates of investment and GFA new starts stabilized. Thanks to the low base effect in 3Q11, leading indicators such as investment and GFA new starts ceased their continuous slides, as we expected. Investment and GFA was +15.6% and -6.8% YoY, representing respective 0.2ppt and 3.0ppt recoveri es. We believe the two leading indicators have already hit their bottoms on a YoY basis, and will probably start to pick up gradually from 4Q, as the low base effect is expected to continue. From a QoQ basis, we expect investment to stay flat in 4Q. Good sales data sustained in August, and is expected to continue. YTD GFA sold fell 4.1%, representing a 2.5ppt recovery from July. In particular, August GFA sold and sales revenue increased 13% and 20% YoY respectively, in line with our expectations. We expect the good sales momentum to be sustained in September and October given the ample new launches and strong market sentiment.
Housing price inflationary pressure relieved to some extent. August ASP was Rmb6,021/sqm (+6.7% YoY), representing a 4.8ppt decline compared with July, which means the severe price inflationary pressure has been relieved, at least temporarily. We expect the government to further promote sales of medium-/low-priced projects targeting inelastic demand in order to drag down ASP. No rapid growth in housing prices is expected. Funding situation slightly improved. YTD funds rose 9.1% YoY (+2.9ppt) a significant improvement on the first seven months. Domestic loans and self-raised funding only saw a mild recovery, but advances and mortgages saw continuous apparent rebounds along with a sales recovery. We think deve lopment loans will not recover, but the total funding could further improve supported by advances and mortgages.
Data outlook: Property sales will continue to recover over the year, while it may still take some time for investment to record a significant QoQ increase. ASP has inflationary pressure in the short term, but is unlikely to surge by a lot.
Major developers sales performance
Developers with available January~August sales: Shimao(46%), Sunac (64%), Country Garden (13%); Vanke (0%).
Valuation and recommendation
We think investors have been overly concerned with policy moves and company earnings since July. However, limited unexpected negatives are ahead, as 1H12 results have shown, and all policy guesses have been proved wrong. The sector rebounded significantly last Friday, we expect it to further outperform, along with a continuous sales recovery in the coming months when it is also the policy quiet period: we favor Longfor, CRLand, Agile and Sunac China which may offer the highest return on risk in 4Q. And in the very near term, we call investors to focus on those high-beta names with over-corrected prices, such as Evergrande, Country Garden, and Sino Ocean.