GF Securities released a research report stating that as of October 6, 2024, the national "four limits" policy restriction index has dropped to a historical low, and future policy relaxation space will mainly focus on high-energy cities. The current policy intensity has significantly increased, and the fundamentals after the new policy (during the National Day period) have been strong, with the sector having both continuous policy expectations to catalyze in the fourth quarter and the opportunity to verify the policy's impact on the fundamentals. Under the current policy intensity, it is expected that the overall market value repair trend of real estate companies in the medium term may be referenced at 1xNAV, which is equivalent to an average of 1.4xPB, and it is recommended to increase the allocation ratio of the real estate sector.

The central government proposed to stop the decline and stabilize, and local policies followed up with optimization.

According to the press conference held by the State Council Information Office, on September 24, 2024, the central bank, the Ministry of Housing and Urban-Rural Development, and others introduced real estate relaxation policies: the minimum down payment ratio for the second set at the national level was reduced from 25% to 15%, and the reserve requirement ratio and interest rates were lowered to guide the reduction of existing mortgage loan interest rates by about 50bp; the support ratio for affordable housing re-lending funds was increased from 60% to 100%, and policy banks and commercial banks were allowed to support qualified enterprises to marketize the acquisition of real estate land. On September 26, according to the meeting of the Political Bureau of the Central Committee, it was the first time that promoting the "stabilization of the real estate market" was clearly stated.

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After the "924 new policy," many key cities followed up with policy relaxation. According to the official websites of local governments, Guangzhou completely canceled the purchase restriction policy for resident families, and the first/second set commercial loan down payment ratio in Beijing and Shenzhen was reduced to 15%/20%, and Shanghai's first/second set commercial loan down payment ratio was reduced to 15%/20%-25%. As of October 6, 2024, the national "four limits" policy restriction index has dropped to a historical low, and future policy relaxation space will mainly focus on high-energy cities.

Market transactions have shown a rebound, and the performance of online signing is still to be released.

According to intermediary data during the National Day period in 2024, the average daily transaction of second-hand houses in 72 cities was 2,622 sets, a week-on-week increase of 23.4% compared to the week before the festival, and an increase of 81.5% compared to the average daily transaction during the National Day period in 2023 (1,445 sets), with the transaction increase coming from both high viewing volume and viewing conversion rate. During the National Day period, the average daily new viewing of second-hand houses in 72 cities was 62,000 groups, a week-on-week increase of 45.0% compared to the week before the festival, and the visit conversion rate (transaction/visit) reached 4.3%, an increase of 0.3pct compared to the Mid-Autumn holiday. The four first-tier cities performed excellently, with the number of second-hand transactions in Beijing and Guangzhou increasing by 273.7% and 118.4% year-on-year, respectively. Since the online signing and transfer are the last link in the housing transaction process, the housing management bureau's online signing data lags behind the actual transactions to some extent, and some actual transactions during the National Day period will gradually be released on the online signing end in the near future.

House prices are an important observation variable.

According to the transaction data of intermediary housing sources, the house prices in 96 cities continued to rise for four consecutive weeks after the 517 new policy (weeks 21-24 of 2024), with an average weekly increase of 0.4%. After that, starting from the end of June, house prices fell for 11 consecutive weeks, with an average weekly decrease of -0.6%, and since entering September, the house price decline has significantly narrowed. The central government has clearly stated the requirement of "stabilizing the market," and house prices are an important observation variable.

Investment advice: The current policy intensity has significantly increased, and the fundamentals after the new policy (during the National Day period) have been strong, with the sector having both continuous policy expectations to catalyze in the fourth quarter and the opportunity to verify the policy's impact on the fundamentals. Under the current policy intensity, it is expected that the overall market value repair trend of real estate companies in the medium term may be referenced at 1xNAV, which is equivalent to an average of 1.4xPB, and it is recommended to increase the allocation ratio of the real estate sector.

In terms of individual stock selection, based on the safety of cash flow and stable operation, choose high-quality real estate companies with low valuation and high sales growth. China Overseas Development and Yuexiu Property meet the characteristics of high average price and large repair space to 1xNAV. If comparing the current PB and the PB high point in May-June 2024, it is recommended to pay attention to China Overseas Development (00688), Yuexiu Property (00123), China Resources Land (01109), Longfor Group (00960), Huafa Shares (600325.SH), C&D Inc. (600153.SH), and C&D International Holdings Group (01908) with larger elasticity space.Risk Warning: The scale, pace, and effectiveness of policy implementation may fall short of expectations; the current market confidence is relatively weak, and if inventory reduction is not effective, the prosperity index will face further downward pressure; assuming there is a risk of further market decline, it will affect the pace of recovery in corporate profitability.