China Property Tracker:Sluggish Market Consistent with Our Trip Takeaways

New home sales fell 9% WoW. Our coverageuniverse’s 1Q14 sales rose 5% YoY. Our propertytrip last week shows homebuyers on the sidelines,ASP still under pressure and liquidity remains tight.

    New home sales remained weak: According to Soufun,new home sales volume fell 9% WoW and 36% YoY.MTD sales were weak, dropping 31% YoY while YTDsales are off 26% YoY. First-tier cities underperformed,falling 17% compared with a 7% drop in the second-tierones. The coastal regions’ YTD sales were weak withPRD (-38%) and Bohai Rim (-38%) the worst, followedby YRD (-20%). The western and central regions (-12%)are relatively resilient.

    Our coverage universe’s 1Q14 sales up 5% YoY:The average YTD 1Q14 run-rate is 21%, but with largedisparity. CG and R&F achieved over 70% YoY growthand 22-25% run-rates. CRL, Sino Ocean and COGO’ssales plunged over 40% YoY with 10-14% run-rates.This may put more pressure on the lagging operators totrade price/margins for volume

    Hangzhou, Wuhan and Changsha trip takeaways:We visited developers, the upstream supply chain of theproperty industry (cement, concrete and machinery),trusts and banks in these cities. We expect more ASPpressure in 2Q14 and the ongoing sluggish sales toundermine investor sentiment. New home sales in thesecities have been sluggish. More projects have begun toadopt price cuts/discounts, e.g., 20 out of 90 projects onsales in Hangzhou offer over 5% price concessions asper CRIC. Project sales launches have been delayedbut will crowd the 2Q14 pipeline, putting more pressureon ASP. However, developers show no signs of slowingconstruction given their targets to gain market share andaccelerate asset turnover. First-time home mortgagerates in Wuhan and Changsha rose to 5-10% premiumsover the benchmark rate. Development and mortgageloans have slowed, although trust and other alternativefunding channels are still competing for quality lenders