CITIC SEC: The policy arrow to stabilize housing prices is on the string, and by 2025, housing prices are expected to reach the bottom of the long cycle.

CITIC Securities released a research report stating that the data from the first quarter is steady, and strict control over new supply has been effective. The land market continues to be hot, but housing prices are still decreasing. Overall, CITIC Securities believes that real estate policies have been incorporated into the framework of expanding domestic demand, and anticipates that policies to stabilize housing prices are on the horizon. CITIC Securities believes that by 2025, housing prices will reach a long-term bottom, and is optimistic about real estate platforms with good operations, development, and assets, as well as service platforms with high dividend potential. Key points from CITIC Securities: - New home sales in the first quarter of 2025 have seen a slight decrease. - According to the National Bureau of Statistics, from January to March 2025, the national total sales of commercial housing amounted to 2.0798 trillion yuan, a year-on-year decrease of 2.1%, with a total sales area of 218.69 million square meters, a year-on-year decrease of 3.0%. The decrease in sales for sample companies in the first quarter was 14% and 21%, and among the 8 companies actively acquiring land, sales decreased by 2%, while the 6 companies with less land acquisition experienced a 42% decrease. Some large companies have insufficient inventory, which has had a negative impact on sales. However, it is expected that the long-term data from the statistical bureau will outperform sample companies significantly, which may not be sustainable. - Strict control over new supply has achieved some interim results, and the momentum of hot land sales continues. - In the first quarter, national real estate development investment amounted to 1.9904 trillion yuan, a year-on-year decrease of 9.9%; new construction and completion areas were 129.96 million square meters and 130.60 million square meters respectively, a year-on-year decrease of 24.4% and 14.3%. Under the policy of strict control over new supply, the scale of development investment and construction have continued to decline, and pressure from land acquisition policies and funding have caused real estate companies to proactively reduce construction. The supply of land remains high, with land transactions related to high-quality large-sized properties driving up land prices. Despite no significant increase in land supply, land transfer fees have increased. According to Wind, in the first quarter of 2025, the total transaction area of residential land in 100 large and medium-sized cities decreased by 0.7% year-on-year, but the total transaction amount increased by 14.3% year-on-year, and the average transaction price increased by 15.0%. In March, the average premium rate for land auctions was 12.5%, reaching 22.9% in first-tier cities, indicating fierce competition for high-quality land parcels. The change in attitude from companies actively acquiring land, as well as external factors such as lifting price limits and optimizing planning conditions, have provided favorable conditions for companies to launch high-quality products. The increase in profitability for companies will depend on their ability to create products with added value. - Housing prices have continued to decline with less increase, while second-hand listings have continued to rise and sales have decreased seasonally. - According to the National Bureau of Statistics, in March 2025, new housing prices in first-tier, second-tier, and third-tier cities increased by +0.1%/0.0%/-0.2% respectively, while second-hand housing prices increased by +0.2%/-0.2%/-0.3% respectively. There are signs of stability in core areas of core cities, but overall housing prices are still declining. Since the Spring Festival, the number of second-hand listings has continued to increase. As of April 13th, according to top real estate agency platforms, the weekly increase in second-hand listings in 141 sample cities was 0.7%, which is an increase of 5.9% compared to the end of 2024, indicating strong demand for housing exchanges. However, listing prices have been under pressure recently, as indicated by the Iceberg Index, with a week-on-week decrease in listing prices in Beijing, Shanghai, Guangzhou, and Shenzhen in the second week of April being -0.13%/-0.17%/-0.33%/-0.25% respectively. - Anticipated policies to boost domestic demand and stabilize housing prices have been put in place. - Since 2025, with increased uncertainty in external demand, the objectives of real estate policies have become more clear. The main purpose of stabilizing the real estate market is not to boost real estate development investment, but to stabilize the financial position of residents and increase their willingness to consume. Therefore, both policy documents and statements from leaders at all levels have incorporated real estate into the framework of expanding domestic demand post-2025, emphasizing the significance of stable housing prices for increasing consumption. It is expected that policies have entered a new phase, with a decrease in provident fund loan rates, housing subsidies, etc. creating significant opportunities. Risk factors: - Policies aimed at counter-cyclical measures may not meet expectations, leading to price declines in some lower-tier regions and for lower-quality products, as well as risks associated with sluggish inventory turnover. - Companies may face financial pressure and be unable to timely replenish high-quality land, leading to slow recovery of profitability. - The time required to digest non-performing assets through acquisition and storage may be longer than expected. Investment strategy: - Expecting a push from policies to reach the bottom of housing prices in 2025. The policy of strict control over new supply, along with the absorption of existing inventory and focus on quality, has proven effective, with continued release of improvement-driven demand. CITIC Securities is optimistic about real estate companies with good operational capabilities and assets, as well as high-quality service platforms.