Wall Street is bullish on real estate again! Citigroup: It's time to re-examine the Chinese real estate industry.

On March 12th, Vanke's stocks and bonds rose together, driving the entire real estate sector to soar. Reports indicated that the surge in real estate stocks was related to a rumor demanding banks to strengthen financing support for the state-owned real estate developer Vanke, and urging bondholders to consider extending the maturity of private debts, indirectly signaling the rebuilding of market confidence.

On the same day, Citigroup analysts led by Griffin Chan mentioned in a report that there have been some positive changes in the Chinese real estate industry recently, including: 1. Bank support for Vanke, 2. Gradual recovery in new home sales, 3. Increase in transaction volume in the second-hand housing market. After a three-year deleveraging cycle, signs of improvement are emerging, and industry credit risks are expected to further decrease to manageable levels. Investors should consider adopting a neutral bullish stance in the second quarter of 2024:

"We expect Vanke to continue receiving bank support, and in the fourth quarter of 2023, Vanke's sales were strong (exceeding 30 billion yuan from September to December; January to February: top two in the industry).

In the past week of March, new home sales visitor numbers in first and second-tier cities such as Shenzhen, Nanjing, and Wuxi have started to rise, although specific data has not been released yet. This trend indicates that market demand may be gradually recovering. In addition, second-hand home sales have rebounded from the lows of January and February to the levels of September to December."

Citigroup emphasized that "current investors' exposure to Chinese real estate stocks is at a low level, providing favorable conditions for market recovery."

Signs of Real Estate Market Recovery

1. Resurgence of second-hand home transactions in Beijing, Shanghai, Guangzhou, and Shenzhen

According to statistics from Zhongyuan Real Estate, during the weekend of March 2nd to 3rd, the total number of second-hand homes sold in Beijing was about 1,700 units, a significant increase from the previous weekend's 1,100 units, with an additional 200-300 units compared to the weekends before the Spring Festival. In the weekend of March 9-10, the total number of second-hand homes sold in Beijing reached 2,100 units, with nearly 1,200 units on the 10th.

Data from the Shanghai Real Estate Trading Center shows that from March 1st to March 8th, the daily number of second-hand homes sold in Shanghai ranged from 478 units to 676 units, with an average daily transaction volume of 571.5 units, more than double the average daily transaction volume in February (250 units).

According to data monitored by the Zhuge Data Research Center, in the 10th week of 2024 (March 4th to March 10th), the transaction volume of second-hand residential properties in the top 10 key cities was 14,463 units, up 11.23% from the previous week, and down 35.9% year-on-year. The transaction volume has shown a "three consecutive weekly increase" on a weekly basis, while the year-on-year decline has continued to narrow slightly.

According to a report by Ke Rui, in March, 28 key cities are expected to have a total of 7.48 million square meters of new residential supply, up 124% from the previous month and down 60% year-on-year. With the increase in supply, transactions are expected to recover, with an anticipated month-on-month increase. However, considering the high base from last year, the year-on-year decline may continue, and some cities may experience a partial "early spring."2. Real Estate Developers Become More Active in Land Acquisition

According to data from CRIC, in January and February, the total land acquisition amount of the top 100 real estate developers reached 157.7 billion yuan, a significant increase of 30.6% year-on-year. It seems that real estate developers' investment enthusiasm has somewhat recovered. At the same time, the premium rates for land in core cities have also increased. For example, in the land auctions in Hefei, the highest premium reached 54%, and even historical record-breaking land prices were achieved. In the first land auction of the new year in Hangzhou, the average premium rate for 7 land parcels also reached 19.1%.

3. New Housing Market: Buyer Confidence Index Increases by 4.3% MoM

According to the "February 2024 National Housing Index Report," the nationwide search for housing has increased by 18.6% MoM. Among the 65 cities under key monitoring, 25 cities saw a MoM increase in new housing prices, and 36 cities saw a MoM increase in the average listing price of second-hand homes. The buyer confidence index rose by 4.3% MoM, with nearly 40% of real estate agents believing that the demand for second-hand homes in March will increase.