- November 27, 2020
In this latest November Issue of At The Forefront of China Property, we are highlighting that the Property Austerity New Normal has returned with the most data pointing towards that the industry having now fully recovered from COVID-19 impact. Aoyuan (3882.HK), Powerlong (1238.HK) and CCRE (832.HK) remain as our top picks among developers.
Key Highlights
- We believe the property industry has fully recovered from the COVID-19 impact by all measures.
- Property austerity measures such as price restrictions, financing restrictions will limit growth and profitability, but the industry is generating healthy cash flows which we believe is positive for credit.
- We believe the termination of reorganization between Evergrande (3333 HK, NR) and Shenzhen Real Estate (000029 SZ, NR) during the past month reinforces the policy stance to contain developers’ debt and equity financing to prevent an overheated property market.
- Moreover, we have also noted that some cities have also tightened regulations on pre-approved new home prices and pre-sale requirements to curb price growth momentum.
- YTD industry cash flow YoY growth has returned to positive (+2.0%) for the first time this year amid the pick-up in national contracted sales.
- Average run rates of Top-30 HK-listed developers have reached 79.6%, suggesting most developers are on track to realize annual contracted sales targets.
