Core Viewpoint - The Chinese real estate market is undergoing significant changes, with a notable decline in property prices and a shift in buyer sentiment, leading to a reevaluation of investment strategies [1][5][8] Group 1: Market Trends - Property prices in cities like Shenzhen and Shanghai have decreased by approximately 30%, while in some northeastern cities, prices have dropped to extremely low levels [1] - The total housing stock in China has surpassed 600 million units, far exceeding the current population demand of 1.4 billion, indicating a fundamental shift in supply and demand dynamics [1] - Urbanization is contributing to a decline in new housing demand, with projections indicating a decrease of 2.63 million elementary school students by 2026, further signaling a shrinking demand side [2] Group 2: Policy Changes - A dual-track system for affordable and commercial housing is being established, with plans to introduce 6 million affordable housing units over the next five years, affecting the commercial housing market [2] - The proportion of existing home sales has increased significantly, from 10.5% in 2020 to an expected 26.5% in 2024, reducing the risk of unfinished projects for buyers [4] Group 3: Buyer Sentiment - The mindset of buyers is shifting, with a notable decrease in the willingness of younger generations to purchase high-priced homes, leading to a buyer's market [4][5] - By 2025, the number of second-hand homes listed in 100 cities is expected to exceed 3 million, reflecting a significant change in purchasing intentions among the 90s generation [4] Group 4: Investment Opportunities - Certain types of properties are still considered valuable investments, including renovated older neighborhoods, quality properties in core areas, and well-equipped new homes [5][6] - Emerging areas with improving infrastructure are attracting young families and are seen as having significant appreciation potential, despite currently lower prices [8]

Core Viewpoint - The Chinese real estate market is undergoing significant changes, with a fundamental shift in supply and demand dynamics, leading to a reevaluation of property values and investment strategies [1][2][4]. Group 1: Market Dynamics - The total housing stock in China has exceeded 600 million units, sufficient to accommodate 3 billion people, far surpassing the current population of 1.4 billion [1]. - The population structure is changing, with a decrease of 47 million in the post-2000 generation compared to the post-1990 generation, and a total decline of 110 million from the post-1980 to post-1990 generation [1]. - Urbanization rate is nearing 70%, and the number of new homebuyers is significantly decreasing, with a projected decline of 2.63 million in the number of elementary school students by 2026 [2]. Group 2: Policy Changes - A dual-track system for affordable and commercial housing is being established, with plans to introduce 6 million affordable housing units in the next five years [2]. - Rent for affordable housing in cities like Beijing is already 30% lower than market prices, impacting the commercial housing market [2]. - The proportion of existing home sales is increasing, rising from 10.5% in 2020 to an expected 26.5% in 2024, reducing the risk of unfinished buildings for buyers [2]. Group 3: Future Trends - Mortgage rates have fallen below 3%, with potential for further decreases, leading to lower home buying costs [4]. - Cities are gradually relaxing purchase restrictions, with adjustments in non-core areas of major cities like Shanghai and Shenzhen [4]. - The market is shifting from a seller's market to a buyer's market, with a significant increase in the number of second-hand homes listed, surpassing 3 million in 2025 [4]. Group 4: Investment Opportunities - Three types of properties are identified as having potential investment value: renovated old communities in core urban areas, quality properties in prime locations with rental yields over 3.5%, and well-equipped new or nearly new homes that focus on living experience [6].

Report Industry Investment Rating There is no information provided in the report regarding the industry investment rating. Core Viewpoints of the Report - The economic data in the first half of 2025 showed a "mixed" pattern. Exports remained resilient, the growth rate of social retail sales increased significantly, but there were "hidden concerns" behind the growth. The decline in real estate investment continued to widen, and it will take time for prices to stabilize [4]. - The intensity of "rush exports" is expected to weaken in the second half of the year. The sales and production of the household appliance industry may cool down, which will affect social retail sales and industrial added value. The decline in real estate investment will continue to expand, and it is necessary to pay attention to the incremental support for urban renewal funds and the introduction of a financing system compatible with the new real - estate development model. It will take time for prices to stabilize [4][5]. Summary According to the Catalog 1. What are the new changes in exports? - **Tariff situation**: The average tariff rate of the United States on China is around 40%, an increase of 29 percentage points compared to before Trump took office. The exemption of some commodities in April 2025 accounted for 24% of China's exports to the United States in 2024 [10]. - **Export data**: In May 2025, China's exports in US dollars increased by 4.8% year - on - year, and imports decreased by 3.4%. In RMB, exports increased by 6.3% year - on - year, and imports decreased by 2.1%. Exports to the US and India decreased significantly, while exports to the UK and the EU increased significantly. The export of labor - intensive goods mostly had negative growth, but the export of clothing and toys rebounded [13]. - **Export delivery value**: The year - on - year decline in export delivery value was obvious. The new export order index moved down from the previous central level, and the kinetic energy of new export orders weakened [18][22]. 2. What policy expectations are there? Consumption policy - **Policy introduction**: In the past year, many consumption - promoting policies have been introduced, indicating that there is potential in the consumption market. However, China's consumption rate is low, and there are also structural problems in consumption [26]. - **Reasons for low consumption rate**: The main factors determining the household consumption rate are consumption ability and marginal consumption propensity. China's income structure shows obvious differentiation, and the imperfect social security system makes residents have a strong preventive savings motivation [33][38]. - **Policy measures**: The "Boosting Consumption Special Action" addresses the problems of consumption ability and consumption tendency by increasing income and reducing burdens. The "Guiding Opinions on Financial Support for Boosting and Expanding Consumption" further expands the scope of financial support for consumption, and the focus of consumption policies may shift to the service consumption field in the future [44][49][52]. Real - estate policy - **City renewal action**: The Politburo meeting in April proposed to intensify the implementation of the urban renewal action, which helps the real - estate investment to stabilize. The key point of follow - up attention is whether there will be incremental support for urban renewal funds [53]. - **Real - estate sales model**: The transition to the spot - sale model means the end of the high - turnover model of real - estate enterprises. The supporting policies, especially the financing policy, are not clear, which affects the funds of real - estate enterprises. It is necessary to pay attention to the introduction of a financing system compatible with the new real - estate development model [5][63]. Infrastructure policy - **Investment situation**: From January to May 2025, infrastructure investment increased by 5.6% year - on - year. If the scale of land reserve special bonds continues to increase this year, the special bond funds invested in traditional infrastructure fields may be less than in 2024 [64]. - **Structural differentiation**: In the context of debt resolution, infrastructure construction with the central government as the construction and expenditure subject may be stronger, while that with local governments as the subject may be weaker. The investment structure differentiation may continue [66]. - **Development space**: Railway investment still has room for development, and canal construction is in full swing. It is estimated that the overall growth rate of infrastructure in 2025 will be around 7.0% [66][70][73]. 3. Can prices stabilize and rebound? - **Price influencing factors**: The impact of currency on prices depends on the supply - demand relationship. Increasing the money supply may lead to an imbalance between supply and demand and make it difficult for prices to rise. The key to boosting prices is to expand effective demand and smooth the supply - demand cycle [76]. - **Policy measures**: The central bank will implement a moderately loose monetary policy, maintain sufficient liquidity, and create a good monetary and financial environment for the reasonable recovery of prices [76]. - **PPI situation**: The tail - wagging factor in the first half of the year continued to drag down the performance of PPI, and it will take time for prices to recover [80].

Core Viewpoint - The acceleration of "existing house sales" is being implemented across at least 32 provinces and cities in China since 2024, which will have profound impacts on real estate companies and local governments [1][4]. Group 1: Policy Implementation - The central government has prioritized the promotion of existing house sales as a key policy agenda, emphasizing its role in preventing delivery risks [3][4]. - By the end of 2024, the policy will be fully implemented, marking a significant shift in the housing market dynamics [3][4]. Group 2: Impact on Real Estate Companies - Existing house sales will increase financial pressure on developers, requiring them to adapt their financing models as they can only recoup funds after project completion [9]. - The development cycle will lengthen, compelling companies to focus more on quality and customer needs in project planning and execution [9]. - The shift to existing house sales will accelerate the consolidation of the industry, favoring larger firms while putting smaller companies at greater risk [9][11]. Group 3: Changes in Business Models - Companies are likely to transition towards lighter asset models, increasing their focus on construction and management services rather than heavy investment in land acquisition [11][12]. - The proportion of residential construction projects is expected to rise, with more firms entering the construction management sector [11][13]. Group 4: Market Dynamics - The penetration rate of construction management in first-tier cities is expected to increase, while second-tier cities will remain stable and third- and fourth-tier cities may experience a decline [17]. - The existing house sales model will lead to a more competitive environment in the construction management sector, with larger firms dominating the market [21]. Group 5: Financing and Payment Structures - The existing house sales model will necessitate changes in payment structures for construction management projects, linking payments more closely to project milestones rather than sales revenue [20][21]. - Companies will need to collaborate with local governments to secure land and mitigate financial constraints, leading to a rise in joint ventures and partnerships [20].

Core Viewpoint - The recent draft measures from Xinyang, Henan province, propose the implementation of a "current housing sales" model, which aims to enhance the management of pre-sale housing and ensure better protection of buyers' rights [1][2]. Group 1: Current Housing Sales Model - The new measures stipulate that all newly developed residential properties on newly sold land must adopt the current housing sales model, requiring projects to reach a certain construction progress before applying for pre-sale permits [1][2]. - The current housing sales model is seen as a significant reform direction in the real estate sector, aimed at improving the quality of housing products and ensuring better financial assessments by developers when acquiring land [1][2][3]. Group 2: Impacts on Developers and Market - The implementation of the current housing sales model is expected to reduce risks associated with traditional pre-sale housing, such as discrepancies in property delivery and project failures, thereby enhancing the attractiveness of housing projects [2][3]. - Developers will need to focus more on quality in project planning, design, and construction to attract buyers, which could lead to an overall improvement in product quality within the industry [2][3]. Group 3: Regulatory and Financial Considerations - The new regulations will enforce stricter conditions for applying for pre-sale permits, requiring developers to provide substantial evidence of construction progress and financial investment [2][3]. - Financial institutions will need to adapt to the current housing sales model, as it may extend the sales recovery period for developers, necessitating stronger financial support to ensure stability in the sector [3][4].

Summary of Poly Developments Conference Call Company Overview - **Company**: Poly Developments - **Date**: April 2025 Key Points Industry and Market Performance - In April 2025, Poly Developments' subscription was concentrated in 38 core cities, accounting for 91% of total subscriptions, with first and second-tier cities making up approximately 80% [2][5] - The sales of incremental projects maintained a high proportion of 61% in April, indicating the company's strength in core areas and new projects [2][5] - The overall visitor volume in April 2025 decreased by about 40% year-on-year, but the top 50 star projects contributed 50% of the visits, showing increased attractiveness of leading projects [2][9] - During the May Day holiday, the subscription amount remained stable compared to last year, attributed to improved conversion rates and significant sales efforts at the end of April [2][10] Financial Performance - The total amount of new expansion projects from January to April 2025 reached 30.8 billion yuan, with an equity ratio of 82%, marking a recent high [2][11] - As of the end of April 2025, the comprehensive interest-bearing debt cost for Poly Developments fell below 3% for the first time, at 2.96%, with new debt costs at 2.8% [2][13][14] Sales and Inventory Management - In April 2025, the contract amount was 24.6 billion yuan, a year-on-year decrease of 25%, with a cumulative contract amount of 87.7 billion yuan from January to April, down 9% year-on-year [4] - The overall sales rate in April was not very high, with first-tier cities at 45% and second and third-tier cities between 35% and 40% [2][8] - The push sales amount in April was 19 billion yuan, with the last five days contributing 56% of the total, primarily in preparation for May Day sales [2][7] Expansion and Investment Strategy - Poly Developments disclosed four new expansion projects in April, totaling 450,000 square meters and an investment amount of 12.8 billion yuan, representing a 400% increase year-on-year [2][11] - The company aims to achieve an annual investment target of 100 billion yuan, having already realized about 40 billion yuan by April [12] Future Outlook - The company expects market heat to rise in the coming months, with several new projects scheduled to launch in May and June [15] - Recent government policies, including interest rate cuts, are anticipated to positively impact the real estate industry, enhancing liquidity and supporting recovery [16] Challenges and Adaptations - The shift to a current housing sales model is expected to change the industry dynamics, requiring companies to enhance their comprehensive capabilities [17][18] - Poly Developments has established a fast construction system to reduce the time from land acquisition to completion to 14 months, with some projects potentially completed in 12 months [3][19] Internal Structure - Poly Developments primarily handles development in most cities, with only a few cities, such as Shenzhen, managed by Poly Properties [21]