Citic Securities: the market uncertainty rises again and the leading real estate enterprises have a competitive advantage.

SMM: June is the peak of pushing goods for real estate companies, but there are repeated health events, and we think there is uncertainty in real estate sales after July. There is the risk of sudden stall in some areas of the market and the risk of overheating in individual areas. We expect that only enterprises with superior capabilities will be able to deal with uncertain fundamentals calmly.

Real estate sales continue to recover

From January to May, the sales area of commercial housing was 487.03 million square meters, down 12.3% from the same period last year, or 7.0% of the decline. Sales of commercial housing totaled 4.6269 trillion yuan, down 10.6 percent, or 8.0 percent. In May, the sales area increased by 9.7% over the same period last year, and the sales volume increased by 14.0% over the same period last year. From June 1 to 14, the number of new and second-hand housing sales in the sample city increased by 13.3% and 13.5% respectively compared with the same period in 2019, and there is no doubt that sales will rise in June.

Investment enthusiasm of development enterprises continues to rise

With the recovery of sales, the national real estate development investment returned to the growth track. In the first five months of 2020, national investment in real estate development totaled 4.592 trillion yuan, down only 0.3 percent from the same period last year. In May, investment in real estate development increased by 8.1%. The absolute monthly level of new housing starts and completions has exceeded that of the same period last year. The total transaction price of land in 100 cities increased by 3.6% in the first five months of 2020 compared with the same period last year.

Health incidents are repeated, and some regional markets may face the risk of quick freezing since July.

With the serious differentiation of the market, the structural problems under the economic recovery can not be ignored. The market in the Yangtze River Delta and the Great Bay area is booming, but there is downward pressure on house prices in many regions, such as North China, Northeast China, Central China and so on. The foundation of the market recovery is weak, there is downward pressure on housing rents, and the rebound in sales is related to expectations of downward interest rates. Once the signing of the Kanpan of a second-hand house is blocked again due to a health incident, market expectations may change again. The Beijing market has a great impact on the expectation of home ownership in the whole northern district. The peak of pushing goods by development enterprises has arrived, and the price competition has intensified. We believe that some markets may start to face the risk of stall from July.

There is a risk of overheating in individual markets.

Not only because the regional differentiation is very obvious, but also because the land market transaction in a few hot cities attracts many development enterprises, there may also be the risk of overheating. In the context of two-way risks in the market, the implementation of policies in the city may be further strengthened. Of course, we believe that the risk of overheating exists only on a very small scale.

Risk factors:

It is not clear to what extent and to what extent repeated health incidents will affect market sales.

In the golden age of long-term doctrine, we should cultivate the ability to deal with uncertainty and be optimistic about capable industry leaders.

We believe that market uncertainty will rise again in the middle of 2020. In the context of the overall decline in profitability, cyclical points and the use of leverage really can no longer promote corporate corner overtaking. The most important competitiveness of enterprises in the new era is the cost-effective ratio of products and the cost of capital. Development quality, cost control and credit are the most difficult to achieve in a short period of time. We believe that the leader who pursues long-term doctrine and has the ability to moat has a competitive advantage. We are optimistic about Poly Real Estate, Longhu Group (00960), Xuhui Holdings Group (00884), Shimao Real Estate (00813), Sunchuang China (01918) and Vanke A.

"Click to participate in the second China (Yingtan) Copper Industry Summit Forum and the 15th China International Copper Industry chain Summit"

Scan the code to sign up for the summit or apply to join the SMM industry exchange group: