On Oct. 17, China’s Ministry of Housing and Urban-Rural Development, along with the Ministry of Finance and other authorities, announced new measures to stabilize the country’s property market. We think the most significant directive pertains to upsized credit support for stalled projects, as overall funding will increase to over CNY 4.0 trillion by the end of 2024 (CNY 2.2 billion loans approved as of Oct. 17).
We expect an acceleration in loan disbursement, with distressed developers receiving more funds, which we think should prop up homebuyer confidence. However, the market may be disappointed by the lack of new incremental stimulus, except for the reiteration of local governments’ autonomy to relax buying curbs.
Despite 5%-17% share price declines in property names following the conference, our longer-term thesis is unchanged. We expect new-home sale prices to bottom around mid-2025, with a mild rebound thereafter. This is supported by easing borrowing costs, absorption of excess inventory, and further fiscal support on property buying.
While the China property sector’s share prices stay choppy, we see buying opportunities in leading state-owned developers, such as China Overseas Land & Investment CAOVF and China Resources Land CRBJF. Both companies are likely the biggest beneficiaries of the home sales revival during October’s national holiday, and they remain our top sector picks, given their robust financial health and attractive valuation.
Authorities pledged to introduce cash subsidies to at least one million apartments for urban village and shantytown redevelopment. They also shared initiatives to allow local governments to purchase idle land from developers through special bond issuances or the central bank’s re-lending. Meanwhile, the ministries encouraged financial institutions to purchase bonds issued by property developers and insurance companies to invest in developers’ stocks. We believe these will provide renewed support to homebuilders’ credit quality.
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