20220506-招银国际-What_policy_relaxation_means_for_lower_tier_cities_–_Zhuzhou_s_case_study_4页_748kb

China Property Sector Summary: Zhuzhou Case Study

Core Content

This document provides an analysis of the impact of policy relaxation on the property market in Zhuzhou, Hunan, following the Poli-Bureau meeting on 29 April 2022. It outlines the city's property market performance from 2018 to 2021, the major events that led to the downturn, and the recent stimulus measures introduced to stabilize the market. The report also includes additional policy relaxations in other cities and CMBIGM's investment ratings and disclaimers.

Main Points

Property Market Performance in Zhuzhou (2018-2021)

• GFA Sold (Mn sqm): 8.6 (2018), 6.8 (2019), 6.9 (2020), 5.7 (2021)
• YoY Change: +13.8% (2018), -20.3% (2019), +1% (2020), -16.9% (2021)
• Sales Value (RMB Bn): 50.5 (2018), 42.0 (2019), 41.3 (2020), not disclosed (2021)
• Unsold GFA (Mn sqm): 1.0 (2018), 1.0 (2019), 0.9 (2020), not disclosed (2021)

Major Events Leading to Downturn

• 2020: Zhuzhou Huachen, the largest local developer, began facing liquidity issues due to unpaid development loans, private financing, and construction fund delays. The government provided a RMB500mn bailout to address migrant worker wages and construction payment arrears.
• 2021: Huachen defaulted and entered bankruptcy and restructuring. Zhuzhou Granduer Group, the second largest developer, also filed for bankruptcy twice but was denied by the government. National developers like Evergrande and Greenland also faced delivery issues, further eroding buyer confidence.
• Market Impact: Construction units delayed project completion, government platforms halted delivery on limited buyer interest, and the market entered a standstill.

Recent Stimulus Policies (2022)

• Date: 29 April 2022
• Measures:
  • 50% subsidy on deed tax
  • RMB50K talent housing subsidy
  • RMB10K first home subsidy
  • Mortgage relaxation (second home viewed as first after mortgage repayment)
  • Increased maximum loan quota for provident fund loans (up to RMB800K)
  • Reduced second home down payment ratio for provident funds (50% to 30%)
• Purpose: To fulfill necessity-housing needs and reduce costs for buyers.
• Impact: Some projects saw adequate sales, but prices were below guidance by 10-20%. For example, Jianfa Yangzhu sold units at a 20% discount, and Yunfa Zanglongwan sold more than 10 units at a 10% discount.

CMBIGM View

• The stimulus policies are expected to help alleviate some pressures on the property market.
• However, the timing is viewed as late, as the two leading local developers had already filed for bankruptcy.
• More time is needed to restore buyer confidence, but the city is expected to recover and emerge stronger from the crisis.

Key Information

• Population Net Outflow: 120K people from 2018-2021, equivalent to about 50K units and 5mn sqm of GFA.
• Government Role: Struggling to boost the economy, with limited ability to bail out developers.
• Industry Ratings:
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
• CMBIGM Disclaimer: The report contains general market information and is not tailored for individual investors. It is not an offer or solicitation to buy/sell securities, and CMBIGM is not liable for any losses incurred from reliance on the report.

Conclusion

Zhuzhou's property market has experienced a significant downturn over the past few years, exacerbated by the bankruptcy of leading developers and population outflow. Although the city has introduced stimulus policies to stabilize the market, the timing is seen as late, and more time is required to rebuild buyer confidence. CMBIGM believes the city will eventually recover and strengthen, but the process may be slow and challenging.