China Property_ Positioning ahead of potential further HPR easing in Shenzhen

Summary of Conference Call on China Property Sector Industry Overview - The conference call focused on the China Property sector, particularly the tier-1 cities including Shenzhen, Guangzhou, Beijing, and Shanghai [1][30]. Key Points and Arguments 1. Home Purchase Restrictions (HPR) Easing: - Guangzhou was the first tier-1 city to fully relax HPRs in 2024, with expectations that Shenzhen and other tier-1 cities may follow in 2025 [1]. - Potential further HPR relaxation in Shenzhen is anticipated, which could stabilize the market due to a higher migrant population and lower average housing GFA per capita compared to the national average [1][31]. 2. Market Stabilization and Recovery: - The property sector is at the lower end of its trading range, suggesting a potential rebound in valuations [2]. - Ongoing policy easing, including funding support and possible RRR cuts, could improve price stabilization and boost market confidence [2]. 3. Sales and Inventory Analysis: - Coverage developers have an average of 15% saleable land bank exposure to tier-1 cities, with leading companies like COLI, CMSK, and CRL having an average of 27% [2]. - Inventory levels in tier-1 cities are currently at an average of 19 months, which is lower than the 80-cities average of 27 months [13][16]. 4. Demographics and Housing Demand: - Nearly 50% of residents in tier-1 cities do not have Hukou registration, indicating a significant rental market and pent-up demand that could be unlocked with HPR relaxation [5]. - The average housing GFA per capita in tier-1 cities is 25% below the national average, further supporting the case for demand recovery [5]. 5. Price Trends: - Property prices in tier-1 cities have dropped by 5% to 11% from their peak, with some reports indicating a 30% decline in secondary property prices [11]. - The total home cost index has returned to levels comparable to 2H16, driven by price declines and mortgage rate cuts [12]. 6. Sales Performance: - Tier-1 cities showed varied sales performance in January 2025, with Shenzhen outperforming while Beijing and Shanghai lagged [18]. - The secondary market price index in tier-1 cities is stabilizing, indicating a potential recovery trend [18]. 7. Investment Recommendations: - Recommended stocks include COLI, CRL, Greentown, and Longfor, with a focus on positioning ahead of policy momentum and market recovery [2][27]. Additional Important Insights - The conference highlighted the importance of demographic factors in driving housing demand, particularly in high-tier cities where rental markets are significant [5]. - The potential for further HPR relaxation could lead to a more robust recovery in the property market, especially for non-local residents [31]. - The analysis of inventory levels suggests that while current levels are manageable, they are indicative of a market that is still adjusting from previous downturns [13][16]. This summary encapsulates the critical insights and data points discussed during the conference call, providing a comprehensive overview of the current state and outlook of the China Property sector.