East Money Information Securities: This round of the property market cycle is gradually returning to its residential attributes. Pay attention to four main themes.

East Money Information Securities released a research report stating that the essence of house prices is the result of different people buying them. In the past, real estate has been given more financial attributes, so during every downturn in the property market cycle, the effect of lowering interest rates and relaxing purchase restrictions is more apparent. Behind this is the fact that most people view real estate as an investment. In this current cycle, real estate is gradually returning to its residential attributes. If real estate is viewed as a consumer product, its price logic will correspond more to the changes in the purchasing power of different groups of people. Therefore, in the future, the temperature difference between different groups of people in the property market, as well as the difference between micro-individuals and macro-data perception, may exist for a long time. In this process, four main line logics are worth paying attention to: 1. Strong product pricing ability, able to continuously use high-quality land reserves to improve the land reserve structure, such as GREENTOWN CHINA, China Merchants Shekou Industrial Zone Holdings, etc.; 2. Strong holding property management ability, with stable cash flow development, such as CHINA RES MIXC, LONGFOR GROUP, etc.; 3. Re-start the cycle of expansion, while still at a low valuation, with more room for valuation repair expectations, such as Gemdale Corporation, CH OVS G OCEANS, etc.; 4. Top state-owned enterprise property companies, such as GREENTOWN SER, China Merchants Property Operation & Service, etc. The main points of East Money Information Securities are as follows: How much have house prices actually dropped? The traditional observation perspective focuses more on the monthly average house price changes in cities, but real estate is a non-standard product, and this data will be more influenced by the structure of transactions. In simple terms, if more improved properties are sold in a month, prices will be higher, and if more properties for essential needs are sold, prices will be lower, but this does not necessarily reflect actual price increases or decreases. The ideal observation indicator should focus on the changes in transaction prices of the same sample at different times, but in practice, this is difficult. Based on data availability, the bank is currently focusing on the changes in average transaction prices in various residential areas in Shanghai, with a cumulative decline of around 20% compared to the peak in 2021Q2. Different demands are diverging in this cycle The bank uses different total price ranges in Beijing and Shanghai as benchmarks, defining real estate as essential needs, just changed, and improved three-element structures. Essential needs have a total price range primarily below 3 million, accounting for about 50%-60% of the market volume and forming the foundation of the market. Their adjustment time is earlier, and they are currently nearing the bottom, especially evident in old dilapidated homes with a rental yield of 2-2.5%; The just changed segment has a total price range of 300-800 million, accounting for about 30% of the market volume, with a customer profile mainly made up of middle-class individuals who are more sensitive to price factors, and are currently in an adjustment period; The improved segment has a boundary of 800 million, accounting for about 10% of the market, with greater price dispersion in this segment, and the observed price center is also stabilizing. Looking ahead, as the two ends of essential needs and improvements gradually stabilize amid the K-shaped differentiation, the real estate market will transition from the past single "capital gains" attribute to a state where multiple attributes coexist. Core cities, core locations, and core quality still have a "capital gains" attribute, while densely populated areas in core cities and core locations tend to be more inclined towards a "rental yield" attribute, while most other real estate properties return to their consumer attributes. Risk warning: Limited real estate market samples, external environmental fluctuations, real estate policies, etc.