中国房地产：加倍下注（二）——需求也将推动复苏

EquitiesREMD Double down (II)-Demand toalso power the recovery China ◆Following our recent supply squeeze notes, we turn our focusto demand, whichwe also see supporting the rebound… Michelle Kwok*Head of Asia Real Estate and HK Equity ResearchThe Hongkong and Shanghai Banking Corporation Limitedmichellekwok@hsbc.com.hk+852 2996 6918 ◆…driven by:(1) urbanisation, (2) upgraders, and (3)household formation, creating a floor for housing absorption Oliver Yu*Analyst, Asia Real EstateThe Hongkong and Shanghai Banking Corporation Limitedoliver.y.o.x.yu@hsbc.com.hk+852 2288 2050 ◆Preferredpicks: CRL, C&D, China Jinmao and Beike (Buys) Stephen Wang*, CFAAnalyst, Asia RealEstateThe Hongkong and Shanghai Banking Corporation Limitedstephen.wang@hsbc.com.hk+852 2284 1675 Recovery powered by structural drivers:China’s property market is quietly staginga recoverythat has yet to be fully appreciatedby the stock market,leaving itundervalued in our view. While the aftermath of theconfidence crisis due todevelopers’defaults since 2021and ongoing tradetensions remain a distraction,fundamental dynamicsare shifting in ways that remain overlooked. Having discussedour supplysqueeze theme extensively (Supply squeeze: A structural buffer, 10 Apr;Time to double down, 23 Apr),in this note weaddress housing demand andfind therecovery is powered by deepstructural drivers that outweigh trade tensions anddemographic risks. * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations A durable floor for housing absorption:Our recovery narrative isunderpinned bydeep-rooted domestic demand and structural tailwinds. Apowerful combination ofquality-focused upgrader demand (33m middle-class families), sustainedurbanisation (c3.8m familieseach year) and housing needs driven by annualhousehold formation (5-6mfamilies)createsa durablefloorfor annual housingdemand, despite persistent demographic pressures. This translates into 817m sqmGFA per year,on par withthe 2024 level (Figure1). We see upside to this calculationdriven by other factors we discuss on page 2. This demand recovery cycle will bequality-driven and therefore more sustainable, in our view. Property remains the bedrock of household wealth:Currency depreciationconcerns boost demand for real assets while the government has also helped topreserve property wealth via implicit guarantees amid the market’s decline asevidenced by Vanke’s bailout. Property continues to anchor household balancesheets, as it represents 65.9% of urban household wealth(PBoC, 2019). Thisexplains why stimulating real estate has been part and parcel of the government’sdomestic policy agenda, particularly amid heightened trade tensions. Preferredpicks: leveraging on China’s urban density shift:The gravitational pulltowards the big top-tier cities is creating a “winner-takes-most” backdrop that benefitsdevelopers with large quality landbanks in these cities. Our key picks are CRL, C&D,China Jinmao and Beike. Downside risks are an unexpected slow-down in salesdriven by falling household confidence from prolonged economic weakness. From‘neutral-land’with love The 19thedition of the EM Sentiment Survey Click to view Issuer of report:The Hongkong and ShanghaiBankingCorporation Limited Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:https://www.research.hsbc.com Why demographics won’t derail recovery Upgraderdemandprevails Upgrade demand is the new engine. While urbanisation and marriage rates are slowing down,which are the main negative demographicsinvestors’are concernedabout, upgrader demand isgrowing to be the key pillar of housing demand, in our view. According tothe Hurun 2018 ChinaNew Middle-Class Report, there are around 33.2m middle-class families(net assets >RMB3m)in China, accounting forc7% of the number of families. We expectthese familiesto contributeclose to 50%ofthe national new home demand, aspiringtolarger homes with higher-qualitybuildings in better locations. Urbanisation offsets population decline Urbanisation continues in China, though at a slower pace, and brings over 10m new urbanresidents annually. These new citizenscreatesolid demand for new homes, and we think theyare in a better position nowthan inthe upcycle of property due to better affordability of homes,as home prices have corrected substantially since 2021 and the historicallow mortgage ratesreduce their burden of monthly repayment. What’s the upside and downside to our estimates? Key upsides City migration. In addition to urbanisation, urban residents moving across cities could bealso a significant contributor to housing demand. Downsizing of families.The size of families will continue to shrink as more grown adultsmove away from their parents. Demand for larger homes.When household wealth con