Citi(US:C)2025-12-16 03:27Summary of Conference Call on China Property Market Industry Overview - The conference call focuses on the China Property market, highlighting the ongoing challenges and potential recovery strategies within the sector. Key Points and Arguments Market Conditions - Price Stabilization: Coordinated policies in both property and financial sectors are seen as essential to break the downward price spiral, with a projected timeline of 2 years for stabilization [1][2] - Home Price Expectations: A survey by PBoC indicates only 9% of depositors expect housing prices to rise in 2026E, reflecting a significant lack of confidence [1] - Secondary Listings: The market is experiencing a surge in secondary listings, with 4.7 million units expected in 2025, leading to a 9% year-over-year decline in secondary prices [1][11] Sales and Inventory Trends - Sales Decline: National sales are projected to drop by 11% year-over-year to Rmb 7.6 trillion, with residential sales at Rmb 6.8 trillion [4] - Inventory Levels: Record-high inventory levels are noted, with 36 months of new home inventory, necessitating approximately 2 years to return to historical averages [1][11] - Foreclosure Sales: Foreclosure sales have been minimal, accounting for only 0.3% of the secondary market, with 92,000 units sold at an average discount of 24% [1][11] Economic Impact - Household Wealth: Real estate constitutes 66% of household wealth, indicating that home price fluctuations significantly impact consumer spending and GDP [1][2] - Local Government Revenue: Land sales have decreased to 25% of local government revenue, down from a peak of 44% in 2020, indicating a shift in financial reliance [1][2] Future Projections - Price Decline: Home prices are expected to decline by 3-5% in 2026E, with top cities stabilizing first by the end of that year [9][11] - New Home Supply: New home supply is anticipated to contract further, with land acquisition and starts expected to drop by 10% and 15% year-over-year, respectively [4][9] - Demand-Side Stimulus: A new round of local stimulus is anticipated in 4Q25, although its effectiveness in altering price expectations remains uncertain [2][4] Regulatory Environment - Resale Restrictions: Many cities have removed resale restrictions, leading to increased secondary supply and impacting price expectations [1][40] - Market Regulation: There is a focus on regulating online property information and media to stabilize market expectations [2] Additional Important Insights - Investment Units: An estimated 6.7 million investment units are expected to enter the market, exacerbating supply pressures due to eased resale restrictions [1][42] - Vacancy Rates: A 12% vacancy rate translates to approximately 36 million vacant units, indicating significant overcapacity in the market [1][11] - Long-Term Structural Changes: The shift towards higher-quality GDP growth is seen as a long-term structural change, with property contributing around 10% to GDP in 2026E [1][2] This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of the China property market, emphasizing the challenges and potential recovery strategies.