China - Housing 06 (Nov 21 - Dec 26)

[behappyalways]

Cancel purchase restrictions!
Guangzhou fires first shot and rescue measures stimulate Chinese and Hong Kong stocks to surge
取消限購! 廣州開第一槍 救市措施刺激中港股瘋漲｜方念華｜FOCUS全球新聞 20240930 ‪@tvbsfocus‬
https://m.youtube.com/watch?v=OE8vhK7IvUQ


China Top 100 Developers See Sept. Sales Down 37.7% Y/y: CRIC
https://x.com/zerohedge/status/1840779888548085959

[behappyalways]

China's real estate market is just a few steps away from collapse!
The government's "strong stimulus" will save the bubble

離崩潰僅幾步之遙 中房市不能再拖! 政府"強刺激"救泡沫 TVBS文茜的世界財經周報 20240929

https://m.youtube.com/watch?v=QTXUlLrEdHg

[winston]

China Property – Fiscal stimulus details a potential make or break

The share prices of the Chinese property sector experienced significant volatility since a coordinated stimulus package was unveiled on 24 Sep at a press conference hosted by various government agencies.

Some of the announced policy measures targeted at the property sector include a 10 percentage points (ppt) cut in the minimum down-payment ratio for second homes to 15%, a reduction in existing mortgage rates by an average 50bps, increasing direct funding support to account for 100% of the CNY300b relending quota from 60% previously (effectively lowering the funding cost of the programme) and extending the effective period of the operating loan issuance rules and 16 measures to end-2026 from end-2024.

Subsequently, tier-1 cities announced loosening measures such as the relaxation of home purchase restrictions.

This round of easing measures appears to be more significant as compared to the last round of initiatives rolled out around end-May, in our view. That said, for a more concrete and sustainable sector recovery, we will still need to see further concerted efforts from the authorities especially on fiscal stimulus (market expectations are ~CNY2t), as well as an improvement in the labour market and wage growth.

Looking at recent industry data points which signalled a deterioration in fundamentals, it was understandable that the Chinese government decided to roll out more substantive policy tools in a bid to revive the beleaguered sector.

That said, there were encouraging signs of a sentiment uplift as exemplified by the property sales recorded during the Golden Week holidays.

Given the sharp share price rebound, which typically runs ahead of earnings revisions and recovery, the MSCI China Real Estate Index is currently trading at a 12-month forward price-to-earnings (P/E) multiple of 10.3x, which is 3.2 standard deviations (s.d.) above its 5Y historical average of 6.2x.

Forward price-to-book (P/B) multiple re-rated from 0.53x (as at 23 Sep 2024) to 0.70x (as at 9 Oct 2024), and is close to the 5Y average of 0.72x.

In terms of positioning, we believe there are only a handful of China real estate players that are worth holding as there are structural challenges facing China’s housing market.

As such, investors should take the opportunity in any share price rebound to switch out of struggling and distressed developers to higher quality names, such as KE Holdings [BEKE US; FV: USD32.60 and 2423 HK; FV: HKD84.75], China Resources Land [1109 HK; FV: HKD36.35] and China Overseas Land & Investment [688 HK; FV: HKD17.90].

Investors with higher risk appetites can also consider Longfor Group [960 HK; FV: HKD14.00], which is a better managed privately-owned enterprise (POE) developer with good quality landbank and relatively large investment property portfolio which helps generate recurring income streams.

Source: OCBC

[winston]

Market picks up in top cities

The number of homes being marketed at higher prices grew by as much as 260 percent week-on-week in China's top four cities in early October on the back of easing measures.

However, the number of deals dropped in the four mega cities during the week.

In Shenzhen, the number of transactions in the primary and secondary markets dropped 46 percent and 81 percent from the week before respectively.

As of Sunday, over 20 major mainland banks had announced the details of lower interest rates for outstanding home mortgages.

Source: The Standard

https://www.thestandard.com.hk/section- ... top-cities

[behappyalways]

The Chinese real estate market, a $62T asset class, remains troubled. Seeing its largest slump on record as prices fall in 70 surveyed cities during 2024.
https://x.com/Mayhem4Markets/status/1846869894266048559

[winston]

Beijing pushes for local government stimulus

by June Chen

China encouraged local governments to launch stimulus policies such as raising mortgage loan amounts to support families with kids to buy homes.

More than 30 cities have given housing purchase support to multi-child families, which include relaxing purchase restrictions, increasing the loan amount of housing provident fund, and giving housing purchase subsidies.

The preferential policy of public rental housing is the first step. The next stage is to offer housing subsidies and cancel purchase restrictions. In the future - combined with other financial policies - such families may be able to enjoy lower loan interest rates.

Source: The Standard

https://www.thestandard.com.hk/section- ... t-stimulus

[winston]

Foreclosures in China soar, threatening to choke off bank profits

The roster of homes seized and listed for auction leaped 43% last year

The roster of homes seized and listed for auction leaped 43 per cent last year.

Numerous Chinese banks have disclosed increases in mortgage defaults during the first half of this year.

The downward spiral in apartment prices has since accelerated.

The legal system is struggling to keep up with evictions. In some cities, like Qingdao, foreclosed apartments are being sold at auction before the occupants have moved out.

The buyers must persuade them to leave,

In a country with 90 million empty apartments after a decades-long construction boom, however, the evictions do not seem to be causing homelessness.

In addition to the rise in foreclosures, at least 7 million apartments sit unfinished across China.

Source: NY Times

https://www.businesstimes.com.sg/proper ... nk-profits

[winston]

China property market faces long recovery road despite restructuring progress

Sino Ocean and Shimao debt plans inch ahead in ‘positive signal’, but true recovery is still far off given structural issues, analysts say

Over the past few months, several major Chinese developers have secured fresh approvals for their debt restructuring plans, with creditors accepting substantial haircuts in hopes of recovering what is left of their funds.

Analysts call it a “positive signal”. Yet cash-strapped builders face relentless liquidity woes and may be forced into drastic price cuts to offload unsold properties.

In other words, the three-year slump in China’s property market shows no clear signs of resolution.

Source: SCMP

https://www.scmp.com/business/article/3 ... pe=article

[winston]

China’s housing market nightmare is nowhere near over as owners eye quick exits

While China’s September stimulus blitz has restored US$4 trillion of value to stock markets, the wealth effect in the property sector is less obvious and immediate

When Zhu Yufei came across reports that suggested a turnaround of mainland China’s property market was imminent, she felt a surge of optimism.

Verbal assurance from top officials and fresh interest-rate cuts have suddenly drowned years of misery among homeowners like her.

So far, that optimism has been fleeting.

The 41-year-old office clerk in Shanghai has been eager to sell her three-bedroom flat in the city’s southwestern Gubei district, only to find the market still in a spiral.

Her agent has recommended cutting the asking price further.

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

China property flare-ups resurface as crisis enters fifth year

As China’s property debt crisis enters its fifth year, there’s little indication that distressed developers are finding it easier to repay debt as a slump in home sales continues.

Their dollar bonds are still trading at deeply distressed levels, their debt issuance has nearly dried up, and the sector a notable laggard in stock markets.

While recent government policies have helped to arrest the speed of decline, it could take another one or two years for the sector to bottom,” said Leonard Law, senior credit analyst at Lucror Analytics.

“Against this backdrop, we can’t rule out the possibility of some more defaults next year, albeit the overall default rate should be much lower than before.”

Mainland Chinese and Hong Kong developers have issued US$67.3 billion of bonds this year, putting the market on track for its smallest annual issuance in at least in a decade.

Source: The Standard

https://www.thestandard.com.hk/breaking ... fifth-year