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China’s real estate market in 2013. Jan. 2013 New York. Summary of key points. The real estate market hit the bottom in the first half of 2012… The recovery appears broadly based and is gathering pace…. Further policy response may be in pipeline Yet another bubble may be avoided….
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China’s real estate market in 2013 Jan. 2013 New York
Summary of key points • The real estate market hit the bottom in the first half of 2012… • The recovery appears broadly based and is gathering pace…. • Further policy response may be in pipeline • Yet another bubble may be avoided…
The market is recovering… • Sales volume goes up • Growth of operating cash inflow turns positive • Price index rebounds…
Floor Space of Commodity Buildings Sold, YoY, % Source: Essence Securities, CEIC database
Operating cash inflow of top 20 listed companies, YoY, % Source: Essence Securities, CEIC database
Average Price of Sample Residential Bldgs, 100 cities, yuan/sq.m Source: Essence Securities, Wind database
The recovery appears broadly based… • It spreads to office building and commercial building markets as well • It also extends to second and third-tier cities
Floor Space of Commodity Buildings Sold, YoY,% Source: Essence Securities, CEIC database
Sequential price change of residential Bldgs Source: Essence Securities, Wind database
Fixed asset investment follows… • investment picks up • Floor space started stabilizes • Land sales • Cash balance of top companies improves
Real Estate Investment, YoY,% Source: Essence Securities, CEIC database
Real Estate Investment, YoY,% Source: Essence Securities, CEIC database
Growth of operating cash outflow of top 20 companies Source: Essence Securities, Wind database
Floor Space of Commodity Building Started, YoY,% Source: Essence Securities, CEIC database
Floor Space of Commodity Building Started, YoY,% Source: Essence Securities, CEIC database
Land Space Purchased by Real Estate Enterprises, YoY,% Source: Essence Securities, CEIC database
Total Value of Land Purchased by Real Estate Enterprises, YoY,% Source: Essence Securities, CEIC database
Net Operating Cash Flow & Net Financing Cash Flow of top 20 companies Source: Essence Securities, Wind database
Net operating and financing cash flow as a share of sales volume for top 20 companies Source: Essence Securities, Wind database
Another bubble may be unlikely Further policy response… • Appreciation pressure on exchange rate largely vanishes… • Depressed interest rate goes up as a result • Since 2011 rental yield on home appears stablise between 2-3%…
Policy response • As residential market recovers gradually and prices rise again, political pressure to intervene is growing… • Property tax and stricter enforcement of current restrictive policy are expected
Position for Forex Purchase, YoY, % Source: Essence Securities, PBOC
1-year RMB Expected Appreciation, % Source: Essence Securities, Wind database
Treasury Bond Yield, 1 year &10 year, % Source: Essence Securities, CEIC database
Lending Rate, % Source: Essence Securities; PBOC
Rental Yield of Second-hand Residential Buildings,% Source: Essence Securities; Centaline