Housing sales during the Golden Week is weak

According to our records, the data of 32 Chinese cities with real-estate turnover continuously released since 2013 show that the real estate transaction volume decreased by 47.7% in the first week of October, down 34.7% on a year-on-year basis and compared with the average weekly volume in September Low 24.7%.

In the first and second tier cities, the average selling price of real estate increased by 1.2% in the first and second week of October, driven by housing prices in the first and second tier cities (up 9.1% over the previous week). The nationwide real estate inventory fell 0.9% from the previous week but due to falling trading volume, the number of months needed to go to inventory was extended from 12.6 months at the end of September to 24.6 months in the first weekend of October.

According to statistics released by the 10 domestic housing enterprises with September contract sales area, monthly sales increased 31.9% in total due to the increase of market concentration. However, the contracted sales area of ​​these 10 companies only increased by 18.4% yoy. This clear difference shows that strong sales are driven primarily by price increases, not contractual sales growth.

Based on the above analysis, we can speculate that if the real real estate market in 2018 remained unchanged, the face of the current strict purchase policy and the already high housing prices, housing prices next year, the possibility of substantial growth is slim. Therefore, we further speculate that developers can only achieve the highest double-digit revenue growth.

If we assume that the real estate transaction volume will decline from the fourth quarter of 2017 to 2018, developers’ contracted sales growth in 2018 will likely be lower than the current market expectation; we expect real estate transaction volume to rise sharply in the next few weeks , But the year will decline. From the weakened golden week real estate sales data, the risk factors we are worried about seem to be getting worse.

Currently the market generally believes that the real estate market is in a period of rising policy risk and falling sales volume. However, the major developers’ P / E valuation in 2017 is still 10x, which is one standard deviation above the historical average; the net asset discount of 15% A standard deviation of the historical mean. We think this valuation is not in sync with the normal business cycle in China’s real estate industry. In other words, the real estate real market is still in the early stages of construction, while the mainland property stocks are priced in the expansion phase. Therefore, we still recommend investors to seize the opportunity to profit.