China International Capital Corporation (CICC) released a research report indicating that the year-on-year decline in new home sales narrowed in March. From a supply perspective, influenced by seasonal factors, the volume of second-hand home listings across 130 cities increased by 0.9% month-on-month. Specifically, listings in Beijing and Shanghai rose by 0.3% compared to the previous month. While there was a marginal increase in listing volume, the rate of growth was significantly slower than the same period last year, which saw a 2.0% increase. It is essential to continuously monitor the changing dynamics between buyers and sellers in the core urban markets.
Amid positive shifts on the supply side and incremental policy support, the turning point for housing prices in Beijing and Shanghai is drawing nearer. If the trend of optimized supply and demand structure during the spring sales season continues, it will further solidify the certainty of stabilizing local housing prices. Real estate stocks may also gradually transition into a beta-driven market phase. The main viewpoints from CICC are as follows:
Regarding new homes, the year-on-year decline in national sales area and value of newly built commercial housing narrowed to -7.4% and -13.3% in March, compared to -13.5% and -20.2% for the January-February period. The high-frequency registered sales area for new homes also saw a narrowed decline of -17% year-on-year in March, improving from -33% in the first two months.
For the secondary market, the transaction area based on high-frequency registration data fell 14% year-on-year in March, affected by the end of the Spring Festival holiday, following a 3% decline in January-February. However, sales in the final week of March were 24% higher than the average weekly sales in January. Overall, it is estimated that the total sales volume for both new and existing homes in March and the first quarter decreased by approximately 10% year-on-year, a significant improvement from the roughly 30% decline observed in the fourth quarter of the previous year.
Additionally, from the supply side, due to seasonal influences, the volume of second-hand home listings in 130 cities increased by 0.9% month-on-month in March, after a cumulative decline of 0.2% in January-February. Listings in Beijing and Shanghai increased by 0.3% month-on-month, following a cumulative decline of 7.3% in the first two months. Although there was a marginal increase in listing volume, the pace was substantially slower than the 2.0% growth seen in the same period last year. Continuous attention is needed on the evolving balance of power between buyers and sellers in core city markets.
Real estate investment in March decreased by 11.3% year-on-year, remaining largely consistent with the 11.1% decline in January-February. Specifically, the year-on-year decline in the floor area of buildings under construction at the end of March was unchanged from the end of February, which was -11.7%. The year-on-year declines in the high-frequency transaction floor area and value of residential land narrowed in March to -12% and -35%, respectively, compared to -32% and -48% in January-February. The year-on-year declines in the floor area of new construction starts and completed construction also narrowed in March. New starts fell 17% versus a 23% decline in January-February, while completions dropped 19% compared to a 28% decline previously.
Influenced by weaker domestic lending, the year-on-year decline in funds received by real estate enterprises widened slightly to -19% in March, from -16% in January-February. However, the declines in self-raised funds and sales proceeds both narrowed. Controlling new supply is a key prerequisite for reducing inventory and stabilizing prices, and future performance in the primary land market supply requires ongoing monitoring.
Regarding investment targets, current mainstream picks offer reasonable value. A-share recommendations include Xiamen C&D Inc. (600153.SH), Seazen Holdings Co.,Ltd. (601155.SH), Hangzhou Binjiang Real Estate Group Co.,Ltd. (002244.SZ), and China Merchants Shekou Industrial Zone Holdings Co.,Ltd. (001979.SZ). Hong Kong-listed recommendations include CHINA RES LAND (01109), C&D INTL GROUP (01908), CHINA JINMAO (00817), GREENTOWN CHINA (03900), China Overseas Grand Oceans Group Limited (00081), and Poly Property Group Limited (00119). For diversified sector exposure, the report recommends CHINA RES MIXC (01209), GREENTOWN SER (02869), HANG LUNG PPT (00101), and SWIREPROPERTIES (01972).
Risk factors include a worse-than-expected deterioration in the supply-demand structure within core cities, and a decline in risk appetite due to evolving external risks.
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