Golden Week Sales Surge: Policy Implementation and Market Fundamentals Set for 4Q24 Revival
UOB Kay Hian
October 10, 2024
The Chinese property market is witnessing a turnaround, with significant developments during Golden Week 2024 and critical policy implementations set to drive further improvements in 4Q24. The combination of rising sales and government support is poised to stabilize property prices and boost overall market fundamentals, benefiting property developers and management companies alike. In this article, we delve into the key drivers of this market rebound and analyze the companies positioned to gain from these favorable conditions.
Encouraging Sales During Golden Week
Golden Week 2024 brought a surge in property sales across China, with daily average transactions in 50 major cities growing by 65% year-on-year (yoy) for new homes and 98% yoy for second-hand homes. This remarkable growth is attributed to the government’s enhanced policies aimed at stimulating the real estate market. Tier 1 cities such as Shenzhen and Beijing led the charge, with sales increasing by 261% and 153%, respectively.
This uptick was also reflected in the performance of leading mall operators, which saw tenant sales grow by over 20% during the same period. The consistent positive sales growth showcases strong consumer confidence, which is crucial for sustaining the recovery momentum in the property market.
Shifting Focus to Policy Implementation in 4Q24
The spotlight in 4Q24 is expected to shift from immediate sales performance to the effective implementation of recently introduced policies. In late September 2024, the Chinese central government announced measures aimed at stabilizing the real estate sector. A critical component of these measures is the destocking policy, which raises the available proportion of low-cost Pledged Supplementary Lending (PSL) for participating companies from 60% to 100%. This change is set to reduce the funding costs for property developers and investors involved in the destocking process, making it a highly attractive proposition.
The government’s efforts to ease home purchase restrictions, particularly in Tier 1 cities, are expected to narrow the year-on-year decline in property sales volume to just 8% in 4Q24. This is a significant improvement from the 12.5% drop recorded during the July-August period. Furthermore, new home prices in Tier 1 cities, which fell by 3% in August, are expected to stabilize by the end of the year, potentially having a positive ripple effect on property prices in Tier 2 cities.
Market Outlook for Property Sales and Pricing
For the entirety of 2024, property sales volume is projected to decline by 17% yoy, but the easing of home purchase restrictions and the destocking policy should help offset some of the losses. The recovery of secondary property transactions, fueled by flexible pricing strategies, is likely to benefit property management companies, particularly through value-added services (VAS) such as interior decoration and real estate agency businesses. These services are high-margin operations and are expected to see increased demand in 2H24.
Listed Companies Poised to Benefit
CR Mixc Lifestyle (1209 HK)
CR Mixc Lifestyle is one of the top beneficiaries of the recovery in secondary property transactions. The company excels in providing value-added services, such as interior design and real estate agency operations, which constituted approximately 6.1% of its total revenue in the first half of 2024. With the rebound in secondary transactions expected to accelerate, CR Mixc is well-positioned to capitalize on the growing demand for these high-margin services.
The company’s expertise in managing large-scale property portfolios and its strong service offerings give it a competitive edge in a market that is becoming increasingly focused on value-added solutions. CR Mixc’s growth potential in 4Q24 remains strong, especially as policy implementation boosts market sentiment and drives higher transaction volumes.
Longfor Properties (960 HK)
Longfor Properties, a leading developer, stands to benefit from both the recovery in property sales and the stabilization of prices in Tier 1 cities. The company’s diversified portfolio, which spans across Tier 1 and Tier 2 cities, makes it well-positioned to capitalize on the expected improvements in market conditions in 4Q24.
As the destocking policy takes effect, Longfor is expected to see increased demand for its residential projects, particularly in regions where home purchase restrictions are being eased. The company’s robust balance sheet and proven ability to execute large-scale developments ensure that it remains a key player in China’s property market recovery.
China Overseas Property Holdings (2669 HK)
China Overseas Property Holdings (COPH) is another major player expected to benefit from the recovery in secondary property transactions. The company’s focus on delivering high-quality property management services, including interior design and real estate agency solutions, positions it to capitalize on the increasing demand for value-added services in the property management sector.
With the implementation of government policies aimed at stimulating the real estate market, COPH is well-equipped to seize opportunities arising from higher transaction volumes and improved market sentiment. The company’s ability to deliver strong operational performance while maintaining cost-efficiency makes it a standout performer in the sector.
Conclusion
As 4Q24 approaches, the Chinese property market is set for a rebound, driven by strong sales during Golden Week and the implementation of government policies designed to stabilize the sector. Property management companies, particularly those offering value-added services, are well-positioned to benefit from the recovery in both primary and secondary transactions. Key players like CR Mixc, Longfor Properties, and China Overseas Property Holdings are expected to capitalize on these favorable market conditions, making them top picks for investors looking to gain exposure to China’s property sector in the coming months.
UOB Kay Hian
October 10, 2024
