中国房地产行业 - 要清除中国住房库存需要什么-构建正向反馈循环是关键-China Property_ What would it take to clear China's housing inventory (No. 3)_ Forming a positive feedback loop is the key

Summary of the Conference Call on China's Property Market Industry Overview - The focus is on the China Property market, specifically addressing the challenges of clearing housing inventory and stimulating demand in the context of economic recovery. Key Points and Arguments 1. Positive Feedback Loop: Forming a positive feedback loop is essential to overcome deflationary pressures and weak demand, drawing lessons from historical government interventions in the 90s Shanghai property market [1] 2. Supply and Demand Dynamics: There is a need to build more housing units in tier-1 and tier-2 cities, with a benchmark housing supply ratio of 1.1-1.15X observed in developed countries. This could help revive upstream industries and stimulate demand [2] 3. Historical Context: The current housing industry and macroeconomic backdrop differ significantly from the late 90s, suggesting that the impact of accelerated housing construction will be smaller than in previous cycles [2] 4. Funding Requirements: Developers may require a liquidity injection of Rmb1.4tn-2.8tn to cover incremental construction and land purchases, with an ideal scenario needing up to Rmb1.1tn if demand stimulus is effective [5] 5. Household Subsidies: To improve affordability, an estimated Rmb0.2tn-1.0tn in subsidies may be necessary, alongside further mortgage easing and removal of home purchase restrictions in tier-1 cities [5] 6. Market Activity Recovery: Property market activities are expected to moderately recover to 2022-2023 levels under different scenarios [7] 7. ASP Trends: There has been a renewed weakening trend in Average Selling Prices (ASP) across 70 cities, with Class I cities experiencing the steepest month-on-month decline since October 2024 [10][11] 8. Inventory Management: Without additional sales, inventory levels in tier-1 and tier-2 cities could surge significantly, necessitating additional sales volume to maintain manageable inventory levels [65] Additional Important Insights 1. Historical Case Study: The late 90s housing market reform in China led to oversupply but was eventually resolved through targeted stimulus measures, which could provide a framework for current policy responses [27][28] 2. Economic Contribution: The property sector's contribution to GDP has decreased from a peak of 27% to the high-teen percentage level, indicating a need for revitalization [48] 3. Developer Implications: Liquidity injections are expected to benefit developers with land banks in higher-tier cities, but increased supply competition may pressure pricing and delay margin recovery [82][83] 4. Leverage and Funding Gaps: Developers may face significant funding gaps, with estimates suggesting a gap of Rmb4.2tn-5.7tn by the end of 2026 under different scenarios [55] 5. Affordability Challenges: The average home price to income ratio in tier-1 cities is above 20X, indicating a significant affordability gap that needs to be addressed through subsidies and easing of restrictions [64][72] This summary encapsulates the critical insights and data points discussed in the conference call regarding the current state and future outlook of the China property market.