Despite the rapid fall in inventories, the market still needs about six to nine months to absorb the “fat tail” of supply that is the legacy of the exuberance of 2007-08. But, even with a moderate 10-15% recovery in 2009 sales and a re-acceleration in housing starts, we should see a return to equilibrium and the start of a new cycle by 2Q10.
The land market came alive in May-June, culminating in several headline-grabbing transactions in Beijing with the “diwang” (“King of sites”) sold to Franshion Properties for RMB15,216/sqm. However, we still believe that developers are by and large rational, only chasing the super-prime sites; it is still early days yet, given the 18-month hiatus.
The latest US unemployment figure is a stark reminder of the economic difficulties still ahead. Also, the PBOC could regulate credit in coming months. With 80-85% of sales going to end-users, even a moderation in liquidity will have a limited impact, perhaps only slowing the price rise.
With an oligopoly emerging, the listed universe deserves a long-term re-rating. Moreover, all major developers are delivering on significant volume increases as they broaden or deepen their footprints. Further NAV and earnings upgrades are on the horizon, justifying the current valuations. We prefer regionally-focused plays such as Sino-Ocean, Shimao and Guangzhou R&F, which appear set to deliver a quantum jump in sales and earnings.
Sponsored Links
No comments:
Post a Comment