Policy updates for January and the year ahead:(1) China’s State Council has asked the Ministry of Land torelease its “Ownership registration circular for all types ofproperty” as a further step towards creating a nationaldatabase of property ownership information. In the eyes ofthe market, such a development would drag down ASPs;(2) Mr. Jiang Daming, head of the Ministry of Land, hascalled for caps on new construction land supply for citieswith populations of over 5m. The idea is to optimize landuse and, possibly, push up home prices; (3) Developersunder our coverage for the most part reported satisfactoryachieved sales in 2013 and have set encouraging 2014sales targets.
Market updates。
Latest inventory levels have shown that, on average, ittakes nine-to-ten months to destock saleable GFA inChina’s major cities. As the end of 2013 approached,surging ASPs in tier-1 cities in terms of MoM changes werereined in. We expect ASPs to hold steady in 2014F. Inmany of China’s tier-3 cities, selling pressure has pushedASPs down giving rise to concerns over a hard landing incertain regions. Monthly YoY sales growth was slower in2013 than in 2012, suggesting the possibility of a decline inproperty investment caused by a slowdown in GFA newstarts in 2014.
At the heart of the national property and land registrationsystem is a database of property ownership information.
The system has been in the works for several years now asthe central and local governments hammer out the detailswhich will have deep implications for all concerned. In themeantime, the cap on construction land supply is likely toraise prices on the existing stock of construction land,causing ASPs in affected cities to rise accordingly.
Risk. 2013 results may be weaker than expected shoulddevelopers choose to delay booking plans for the year.
Reacting to administrative controls, banks may also adopta conservative stance towards mortgages and propertyloans in 1Q14F. The resulting weak credit environmentcould undermine sector valuations.
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