Tight regulation of real estate, the gradual implementation of the policy
35 cities HAVE introduced restriction rules, the 3rd control measure is in full swing in the country.
Monetary policy continued to tighten, increasing the financial pressure in the real estate industry. On February 8 benchmark interest rates was raised by 0.25 percentage points, and on February 18 deposit reserve ratio was raised by 0.5 percentage point. Two monetary policies not only increase the financial pressure on the real estate business, but also increase the pressure on lending to home buyers.
The scale of welfare housing construction is clear. On 2011 there will be construction of 10 million units. In the next five years there will be a construction of 36 million units. The Central Government has great determination, land, capital and other areas are under implementation, the expansion of the scale of housing will squeeze the development space of real estate development. The scale of future housing construction growth is not optimistic.
Investment in real estate development and sales still has substantial growth, there is decline in land acquisition area
Investment in real estate development, housing construction area, new construction area, sales area and completion area were increased, land acquisition area fell, control policy gradually revealed, the future real estate development and investment growth will slow down. Rate growth has slowed down, prices in some cities began to loosen, but prices overall remain high and volatile state.
Optimistic about the investment opportunities in the real estate industry
And the simultaneous development of affordable housing real estate market structure will limit the real estate business to grow, along with the reduced size of the market, market competition will become more intense, real estate companies will gradually differentiation. Large companies that have capital and resource advantages will gain greater development space, while companies with poor management capacity, few cash flow will be more difficult to survive. The future of real estate mergers and acquisitions integration will increase.
From the recently published annual reports of listed companies in the real estate industry, the first-line real estate’s P/E is only about 12 times in 2010, the situation is expected considering the results of 2011, compared with about 10 times P/E. We believe that the current real estate valuations reflect the pessimism brought by basic control policy. There is not much room for downward adjustment, and it has a valuation advantage. We are optimistic about the first-line real estate companies who have advantages of scale and financial benefits, and small park development enterprises less affected by regulatory policies.
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