The Zhitong Finance App learned that CMB International released a research report saying that mainland regulators issued the “Notice on Improving the Commercial Housing Sales System” on August 28, recommending raising the pre-sale threshold for newly built commercial housing to a “structural cap” and implementing full supervision of pre-sale funds for newly sold land.
The bank believes that full implementation of the policy will tighten developers' liquidity, extend the capital recovery cycle from 3 to 6 months to 6 to 12 months, accelerate the exit of small developers with insufficient capital from the market, and further concentrate market share on state-owned enterprises; on the demand side, it will reduce the risk of unfinished and delayed delivery, and help boost buyers' confidence. CMB International sees this as a landmark move to break the vicious cycle of the industry, and regulators directly target the root cause of the problem. Investors reacted more positively than expected and focused on the long-term impact. The policy strengthened the themes of supply contraction and market share concentration, and put the industry on a medium- to long-term recovery track. There is limited room for downside, and selective allocation of shares is recommended.
CMB International believes that this reform is a key measure to “exchange short-term pain for the long-term health of the industry”. It directly addresses delivery risks that erode buyers' confidence and shows the position of regulators taking the initiative to break the vicious cycle of the industry. For active trading state-owned enterprise developers, the impact of the policy should be limited due to low cash flow pressure, smooth financing channels, and low capital costs. The bank proposes to actively and selectively allocate high-quality state-owned enterprise leaders with a high proportion of commercial properties and land reserves in core cities.