China - Housing 06 (Nov 21 - Dec 26)

[behappyalways]

Central China's State Bailout Good News For Similar Developers
https://www.zerohedge.com/markets/centr ... developers

[winston]

China Property Weekly Digest: Another week of solid sales recovery

The decline in MTD average weekly GFA sold in 27 cities we track further narrowed to 29.1% y-o-y (from 42.6% last week), led by another week of encouraging recovery that rose 49.9% w-o-w

First and second home mortgage rates in 103 sampled cities improved to 4.42% and 5.09%, respectively, in June. 58 of these cities have reached the benchmark first-time mortgage rate of 4.25%, as per the Beike database

Average short-selling interest edged up 3ppt to 15% last week; average southbound interest rose 7bps to 7.94%

Sector top picks: COLI (688 HK), COGO (81 HK), Longfor (960 HK), Yuexiu Property (123 HK), and CR Land (1109 HK)

Source: DBS

[winston]

China Property Sector: Brace for a round of recovery

Facing off tougher headwinds than in the last three sector downcycles; more stimulus likely on the way to keep the economy and sector in shape

Sector’s liquidity risks should have peaked; most distressed names would have been saved or fallen

Emerging signs of homebuyer sentiment stabilising and presales growth to resume

Share price to recover with high beta names to outperform in the near term, but a sustainable run demands the resumption of refinancing channels

Source: DBS

[winston]

Nomura: CN Property Sales Recover Persistently; Long-term Top Pick CR Land

According to industry data, the property sales across the 30 major Chinese cities have continued to recover throughout the past week (18-24 June), with the total property sales volume reaching 4.4 million square meters, up 8.9% WoW and largely flattish YoY, reported Nomura.

The broker remained optimistic on the share price performance of Chinese developers in the coming few weeks, favoring the beta names in its coverage, such as SEAZEN (01030.HK) and others.

However, Nomura maintained the view that the current physical property recovery will be a gradual and slow process, given the long-term concerns over homebuyers’ weak home price expectations and lower income levels of homebuyers due to decelerating economic growth.

Believing the current sector-wide rebound to be short-lived, Nomura stated that CHINA RES LAND (01109.HK) remains the only sector top pick in terms of long-term investment.

Source: AAStocks Financial News

[winston]

China's troubled property market has global investors on edge

Accounts for about a quarter of the world's second-largest economy are roiling China's credit markets, dragging down the nation's bank stocks and pummeling commodities from iron ore to copper.

Rolling Covid lockdowns and a rapidly escalating homebuyer boycott of mortgage payments on stalled projects.

Sitting on 46 trillion yuan (S$9.6 trillion) of outstanding mortgages and still has 13 trillion yuan of loans to the country's beleaguered developers.

Homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday.

As much as 2 trillion yuan of mortgages could be impacted by the boycott.

Home prices have fallen for 9 straight months.

About 70 per cent of household wealth is stored in property, along with 30-40 per cent of bank loan books, while land sales account for 30-40 per cent of local government revenues.

Source: Bloomberg

https://www.businesstimes.com.sg/real-e ... rs-on-edge

[behappyalways]

China On Verge Of Violent Debt Jubilee As "Disgruntled" Homebuyers Refuse To Pay Their Mortgages
https://www.zerohedge.com/markets/china ... r-mortgage

[behappyalways]

大陸爆發房貸危機 20省市150個爛尾樓盤｜方念華｜FOCUS全球新聞 20220715
https://m.youtube.com/watch?v=U-bO2ceWVwg

[winston]

China Property – Confidence shaken

Media reports initially showed that homebuyers of 35 projects in 22 Chinese cities had jointly decided to suspend their mortgage payments. This number has since increased to at least 100 projects in more than 50 cities, according to market watcher China Real Estate Information Corp (CRIC).

The reasons cited for the suspension of mortgage payment are prolonged construction suspension or delays, misuse of funds in escrow accounts and decline in average selling prices at nearby projects as compared to their purchase price from 2019 to 2021.

Based on the street’s estimates, the potential mortgage loans at risk would make up ~2% of the total mortgage loan outstanding (as at 31 Mar 2022).

This latest setback to the Chinese real estate sector also has spillover effects to the banking sector, while the negative wealth effect could also have an adverse impact on consumer confidence and spending.

Near-term implications include a likely dip in home purchases or at least a shift from buying new launches (which are typically still under construction) to buying from the secondary market.

There could also be a shift in demand from buying from non-state-owned enterprise (SOE) developers to SOE developers.

Banks could also adopt a more stringent approach in extending loans to developers and mortgages to homebuyers looking to buy units from private-owned enterprise (POE) developers. This would further worsen the liquidity situation in the property sector.

From a longer-term perspective, one of the bigger risks to the sector could be the abolishment of the pre-sales system, in our view. This means that in such a scenario, developers would only be able to sell projects which have completed their construction. This would have an impact on developers’ cashflows and return on equity, which could change the dynamics of the entire property sector.

Notwithstanding the 10.6% decline in price of the MSCI China Real Estate Index this week (as at 14 Jul 2022 close), the blended 12-month forward price-to-earnings (P/E) multiple of the sector has increased to 6.3x, as compared to 5.6x at the start of Jun 2022.

We believe this increase in multiple was due to earnings cut by the street. The current forward P/E multiple is now 0.5 standard deviation (s.d.) above the sector’s five-year average of 5.8x.

Given the latest overhang and uncertainties, we would not recommend buying on dips until there is clearer indication of government intervention and policy support.

Furthermore, the upcoming 1H22 earnings season could bring disappointment in earnings and tepid guidance on the outlook ahead.

To position for the recovery in the medium-to-longer term, we reiterate our stance to stick with the higher quality SOE real estate companies. We believe the POE property players, including the better-quality ones, will face weak sentiment and continued volatility in their share prices until there is more clarity on how this issue is resolved.

As such, we remove Country Garden Services (6098 HK) from our preferred picks list, but are inclined to retain Longfor Group (960 HK) as we remain confident on its financial position and ability to deliver its projects on time.

Our overall sector preferred picks are China Overseas Land & Investment [688 HK; FV: HKD28.76], China Resources Land [1109 HK; FV: HKD44.60], Longfor Group [960 HK; FV: HKD50.76] and China Resources Mixc Lifestyle Services [1209 HK; FV: HKD51.80].

Source: OCBC

[behappyalways]

China's Property Developers Offer Cars, Pigs as Real Estate Confidence Wanes | WSJ
https://m.youtube.com/watch?v=S42OQOhV3MI

[winston]

CN Home Mortgage Suspensions Force Buyers to Secondary Mkt to Avert Risk: Report

As of 19 July, China's homeowners of about 230 property projects issued mortgage suspension notices, involving 82 cities in 25 provinces, municipalities and autonomous regions, as CRIC Securities cited incomplete data.

The report elaborated that the mortgage suspensions nationwide have imposed certain impact on homebuyers.

For example, they would defer their home buying plans, and shift from first-hand properties to second-hand.

Related News: G Sachs Estimates Max. RMB2.4T Secured Loans at Risk; Top Pick CHINA OVERSEAS for CN Developers

The average transaction volume of new and second-hand houses in 10 typical cities in China in July reduced 41% and jumped 5% respectively on a monthly basis.

The fall in new home deals and rise in second-hand deals on a weekly basis were spotted in Beijing, Suzhou, Qingdao, Nanjing, Luohe and Jingdezhen.

This phenomenon indicated China's homebuyers turned to delivery-risk-free properties on the secondary market amid mortgage suspension, in a bid to shun the tidal waves in pre-sale market.

Source: AAStocks Financial News