China’s PMI kept rising for five months from March to July, and monetary environment kept improving significantly for three months from April to June; during June, M1 and M2 growth rose to 8.9% and 14.7% respectively, the total amount of social financing had a YoY increase of 4%, while in June, the growth of medium and long-term resident loans was very weak, mainly because its proportion in gross credit dropped to some extent from the relative high position. Therefore, with regard to mortgage loans, the room for improvement brought by the loan structure is not large, and more reliance should be placed upon the expansion of gross credit.

Policy relaxation intensified, cancellation of purchase restrictions becoming a full trend, door of directional relaxation for real estate loans opened.

At present, more than 30 cities have relaxed or canceled purchase restrictions, and more importantly, real estate credit policies also show great changes, a typical event of which is that, Fujian Province and Shaoxing City have introduced new policies respectively to stimulate the housing market. Wherein, both the encouragement toward demand for first housing and the relaxed standard for identification of second housing are favorable for taking the credit means to significantly improve the demand’s ability and intention to enter the market.

Driven by policies for the cancellation of purchase restrictions, in July, sales in key cities improved, but the price index of 100 cities still showed a MoM decline.

In July, the commercial housing sales of 30 cities grew by 9% on a MoM basis, wherein, the residential housing sales in Hangzhou and Fuzhou grew sharply by 54% and 89% respectively. In July, the stocking and de-stocking cycle of 13 cities stayed at a historic high position, wherein, the de-stocking cycle 14.5 months in first-tier cities, 13.4 months in second-tier cities, and 19 months in third-tier cities. In July, the residential housing price index of 100 cities showed an expanded MoM drop to 0.81%, and the number of cities with a MoM decline of residential housing prices increased to 76. It’s predicted that, with the continuous improvement of sales, and the reduction of inventory pressure, the price fall will tend to slow down.

Land transaction volume and premium level dropped markedly, while land price per floor area remained high.

In July, the residential land transaction area of 40 large and medium-sized cities fell by 33% on a MoM basis, and the premium rate was 13.1%; from January to July, the residential land transaction area fell by 17% on a YoY basis, while the transaction price increased by 6% on a YoY basis, and the land price per floor area increased by 27% on a YoY basis. As local governments controlled land transfer, no apparent adjustments were seen in land price MoM.

Overall sales of leading real estate enterprises better than market average, while attitudes toward land acquisition diverged greatly.

Since this year, Vanke has been very cautious, with its land acquisition (ratio of land spending and sales amount) only accounting for 10%, while Poly and China Overseas are much more optimistic, with their land acquisition reaching 28% and 39% respectively.

Summary: The increased relaxation of real estate policies will, for sure, drive sales to turn better, while prices will lag behind sales and gradually become stabilized; in the short run, the worst time is passing, and the upward range depends on the gross credit and the credit structure. However, economic stabilization and economic transformation will mean the gross “drawing off water” space is large, and for real estate enterprises, days may be “not so painful, but hard to say comfortable”.