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New home sales in China in the first three weeks of June did not show a seasonal upward trend, with weak supply and demand being the main reason, said CICC in a research note.
Last week, sales area of new homes in 61 sample cities rose slightly by 2% week on week, and the sales area of second-hand homes in 15 sample cities fell by 5%, but due to the high base last year, the former expanded the year-on year drop sharply to 41%, while the latter declined by 3%, compared to 13% rise in the previous week, it said.
Sales area of both new and second-hand homes in the first three weeks on June was basically flat compared to May, and sales showed a certain bottoming out trend, it noted.
June is usually the seasonal peak for new home launches and transactions, but the number of launches in key cities slid by 20% in the first three weeks compared to May, and the number of transactions did not increase, due to the weakness of both supply and demand, it said.
Looking ahead, considering that the policy on the demand side will continue to be moderate under the framework of city-based policies and home sales may remain at the current low level in the short to medium term, but the de-stocking trend due to weak supply may promote the stabilization of housing prices in the medium-term dimension, according to the note
CICC believed that under the current policy tone, the decline in prosperity has opened up some room for appropriate and precise policy, and the possibility of the industry seeking another bottom due to individual financial pressure is not high. The broker therefore suggested investors to allocate some capital in the mainland property sector.
Among the Hong Kong-listed mainland developers, China Overseas Land & Investment (00688.HK), China Resources Land (01109.HK), C&D International Group (01908.HK) , Yuexiu Property (00123.HK) , China Overseas Grand Oceans Group (00081.HK) and the high-dividend paying Hang Lung Properties (00101.HK) are recommended.