China Property Weekly:Property sales for the week ending Jan 25, 2015
Sales in Chongqing and Shanghai to drive volume up: Average daily salesvolumes for the past week in the major eight cities we track were up 14% W/Wand 16% Y/Y, but were 23% lower than the average in December. Sales weremainly driven by the increase in sales in Chongqing and Shanghai, up 29% and26% respectively. After the previous strong rebound in December, developersare launching fewer new projects in January/February due to seasonality. Weexpect volume to slow down gradually until Chinese New Year in February.
Kaisa may be forced to fire-sell its assets, as per news reports: Since lastweek, according to news reports (including HKEJ, HKET, Sina, Guandian,Tencent Finance, Renminwang) Kaisa is in a rush to raise cash and is innegotiations with a few banks and developers regarding the disposal of itsassets. It is reported that a few developers (SUNAC, OCT, Vanke) have alreadybeen in touch to purchase its assets separately or a stake at the listco level. If theasset disposal of Kaisa is really going through, we believe a few developerscould be able to buy some of Kaisa’s assets at good value. We believe theindustry could benefit if the deal is completed as it could remove a near-termoverhang on potential default in the offshore high yield bond market.
Fuzhou government to purchase housing at 15% off for resettlement:Fuzhou government announced that they will purchase commodity homes in theprivate market at 15% off, using them as relocation housing for resettlement,which at the same time could alleviate current high inventory levels in the city.
Commodity homes that Fuzhou government plans to purchase have unit sizes of45-135 sqm, which should be available for pre-sale or are completed already. Itis reported that the price would be based on valuations by seven propertyvaluers. We have started seeing more local governments using such tools to tryto decrease inventory, but we do not think this will widely spread to low-tiercities as this could further stretch local governments' balance sheets after thedrop in land sales in 2014.
Beijing has no plans to remove HPR, currently: It was reported by NBD thatMr Chen Gang, Vice Mayor of Beijing, said that HPR removal in Beijing is notbeing considered at the moment, although housing prices in Beijing have beendeclining under a market correction. After the previous mortgage easing andcancellation of home-price cap, he thinks the current property market is headingtowards a healthy trend. We have seen that the removal of a price-cap and theeasing on mortgages happened earlier in 2014, so these are not something new.
On potential easing in HPR, we observed that the way official talked about it is“less straight” than before, from “strictly not easing” to “no plan currently”.
While we do not see the need to remove HPR in these cities, should thegovernment want to support the property market in the very short term, thepossibility of HPR removal / adjustment in tier-1 cities still exists.