Long-anticipated plans for the Greater Bay Area (GBA) have been unveiled bringing back to mind what the future holds for developers leveraged to that region. In our view, the economic transformation of the region would engender longer-term demand sustainability, viz-a-viz the previously-witnessed demand-induced shantytown redevelopment transactions. Under Equity Research's coverage, KWG Group (1813 HK), Agile Group (3383 HK) and Shimao Property (813 HK) have substantial exposure to the GBA, with 50%, 30.5% and 22.7% of their land banks located in the area, respectively. China Vanke (2202 HK) could also be another option for consideration. Moving forward, we expect national residential sales value to contract by 1 – 3 % YoY in 2019, but that should in itself give more leeway for local governments to continue selective loosening of their property cooling measures.
Organic growth market, loosening of measures are still the base case, and a 5.2x forward P/E are all supportive of the Chinese property market.
Organic demand growth drivers Xinhua reported that the Central Committee of the Communist Party of China and the State Council have released the development plan for the Greater Bay Area (GBA), which comprises Hong Kong, Macao and nine cities in the Guangdong Province (Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Huizhou, Zhaoqing, Jiangmen and Zhongshan). Certain timelines have been prescribed in the plan, such as establishing a framework for an international first-class bay area by 2022, as well as integrating the markets within the GBA by 2035, with innovation underpinning the economic system. Hong Kong, Macao, Guangzhou and Shenzhen will be the four core cities in the GBA, with each continuing to leverage their comparative advantages moving forward. Over the longer term, the focus on key cities will likely be supportive to property prices, while infrastructure projects should help narrow the existing price disparity across cities (especially satellite ones) in the Guangdong province.
China Real Estate Key Statistics