Founder-CEO & Chief Analyst, Real Estate Foresight

Robert Ciemniak

Founder-CEO & Chief Analyst

Real Estate Foresight

Since 2012, REF has been helping investors with market research, project due diligence, and strategy development. This has ranged from detailed assessments and estimates on distressed developers' project portfolios to market due diligence on specific projects to macro-level questions linked to demand for commodities. The unique combination of the housing markets and developer data from data partner China Index Academy in Beijing, primary research, and technology-powered alternative data collection from public sources result in a valuable content set used in REF analytics and reports.

Predictive Analytics for China Property

Macroeconomics

<ul>
<li>The common narrative today is how the deteriorating demographics in China will have a negative impact on the housing demand</li>
<li>The official aggregate figures indicate the same with the population aging, birth, and marriage data</li>
<li>The twist to this narrative is that in the near term, the situation for the non-rural population growth looks quite different from the overall figures
</li>
</ul>


The common narrative today is how the deteriorating demographics in China will have a negative impact on the housing demand
The official aggregate figures indicate the same with the population aging, birth, and marriage data
The twist to this narrative is that in the near term, the situation for the non-rural population growth looks quite different from the overall figures



China Housing - Demand-Supply Fundamentals Part #2: The “Demographic Twist"

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

Cross Asset Strategy

<ul><li>Trust /: Five things to know about Chinese trust firms’ scramble to offload risky assets</li><li>Personnel /: China appoints vice foreign minister as ambassador to U.S.</li><li>Corruption /: Jilin Province Trust’s former chairman sentenced to 14 years in prison</li></ul>

Trust /: Five things to know about Chinese trust firms’ scramble to offload risky assetsPersonnel /: China appoints vice foreign minister as ambassador to U.S.Corruption /: Jilin Province Trust’s former chairman sentenced to 14 years in prison

CX Daily: Five Things to Know About Chinese Trust Firms’ Scramble to Offload Risky Assets

<ul><li>Cover Story: China’s race to provide for its aging population</li><li>Shanghai lays out plan to end lockdown and reopen business by June</li><li>Chart of the Day: China’s record-breaking unemployment rates amid Covid lockdowns</li></ul>

Cover Story: China’s race to provide for its aging populationShanghai lays out plan to end lockdown and reopen business by JuneChart of the Day: China’s record-breaking unemployment rates amid Covid lockdowns

CX Daily: China’s Race to Provide for Its Aging Population

<ul>
<li>
In Depth: The winners and losers of China’s credit easing 
</li>
<li>
Leaders from China, France and Germany press for settlement to Russia-Ukraine war
</li>
<li>
Chinese metal giant faces heavy losses on wild nickel ride
</li>
</ul>



In Depth: The winners and losers of China’s credit easing 


Leaders from China, France and Germany press for settlement to Russia-Ukraine war


Chinese metal giant faces heavy losses on wild nickel ride



CX Daily: The Winners and Losers of China’s Credit Easing

Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

For all the roller coaster rides the sector has taken investors on over the years, the Chinese property developers have been unsettlingly consistent in one regard. The CNY1tn fixed asset investment (FAI) homebuilders coughed up in May continued a two-decades long secular trend that may make or break China's still fragile recovery (Exhibit 1).
The Debt-Fueled Supercycle. The sector has seen its share of excesses and corrections, exemplified by the post-GFC FAI expansion and subsequent retrenchment. Covid might have driven up construction costs, but the enthusiasm of would-be homeowners has shown no signs of abating. Just as the developers are working overtime to deleverage their balance sheets, household debt is piling up and may approach alarming levels over the next five years if mortgage growth doesn't decelerate quickly enough.
The Inventory Drawdown. Behind the headline FAI number is a more nuanced picture of inventory reductions and landbank replenishment. Housing starts slowed in May and dipped below project completions on a 12-month rolling basis. This affords cash-strapped property firms an opportunity to rebuild their cashflows, while deploying cash to projects in hand.
The Insatiable Demand. The 0.5% m/m or 5% y/y rise in home prices last month may appear benign in other settings. In the context of China's already exorbitant base, recent data points are a cause for concern. Among the largest cities across the country, those in the Greater Bay Area stand out as outliers, with valuations skyrocketing in spite of the latest round of lockdowns.
The Aggressive Developers. The increasingly bullish undertones of sell-side notes that have landed on our desks are centered around the inventory drawdown / cashflow rebuild story of the perceived higher-quality names in the space. We are not buyers of that story just yet and our work suggests that many developers have been acquiring land at a more aggressive rate than they had planned at the beginning of the year. Regulators are already keeping a close eye on recent transactions and we think we should too.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 746px;">Exhibit 1: Monthly Housing FAI | 3M Moving Avg (CNY bn)</td>
</tr>
<tr>
<td style="width: 746px;">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/144/original/image_45072834061624549646155.png?1624549646" class="editor-image img-responsive" data-smartkarma-image-id="215144"></figure>
Source: National Bureau of Statistics, Our analysis
</td>
</tr>
</tbody>
</table>
Related Insights
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<li>
<a href="https://www.smartkarma.com/insights/china-financials-silver-linings-playbook" target="_blank" data-smartkarma-citation="insights:53013" rel="noopener">China Financials: Silver Linings Playbook</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/glut-and-famine-we-might-see-snow-in-china-this-summer" target="_blank" data-smartkarma-citation="insights:52840" rel="noopener">Glut and Famine: We Might See Snow in China This Summer</a> </li>
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<a href="https://www.smartkarma.com/insights/china-macro-operation-twist-the-deposit-version" target="_blank" data-smartkarma-citation="insights:53435" rel="noopener">China Macro: Operation Twist | The Deposit Version</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/china-macro-consumers-remain-on-the-sidelines-as-their-home-equity-grows" target="_blank" data-smartkarma-citation="insights:53210" rel="noopener">China Macro: Consumers Remain on the Sidelines, as Their Home Equity Grows</a> </li>
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<a href="https://www.smartkarma.com/insights/china-macro-ppi-peaks-while-cpi-eases-tightening-fears" target="_blank" data-smartkarma-citation="insights:52778" rel="noopener">China Macro: PPI Peaks, while CPI Eases Tightening Fears</a> </li>
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<a href="https://www.smartkarma.com/insights/china-macro-exports-disappoint-but-it-s-still-early-in-the-game" target="_blank" data-smartkarma-citation="insights:52728" rel="noopener">China Macro: Exports Disappoint, but It's Still Early in the Game</a> </li>
</ul>

For all the roller coaster rides the sector has taken investors on over the years, the Chinese property developers have been unsettlingly consistent in one regard. The CNY1tn fixed asset investment (FAI) homebuilders coughed up in May continued a two-decades long secular trend that may make or break China's still fragile recovery (Exhibit 1).
The Debt-Fueled Supercycle. The sector has seen its share of excesses and corrections, exemplified by the post-GFC FAI expansion and subsequent retrenchment. Covid might have driven up construction costs, but the enthusiasm of would-be homeowners has shown no signs of abating. Just as the developers are working overtime to deleverage their balance sheets, household debt is piling up and may approach alarming levels over the next five years if mortgage growth doesn't decelerate quickly enough.
The Inventory Drawdown. Behind the headline FAI number is a more nuanced picture of inventory reductions and landbank replenishment. Housing starts slowed in May and dipped below project completions on a 12-month rolling basis. This affords cash-strapped property firms an opportunity to rebuild their cashflows, while deploying cash to projects in hand.
The Insatiable Demand. The 0.5% m/m or 5% y/y rise in home prices last month may appear benign in other settings. In the context of China's already exorbitant base, recent data points are a cause for concern. Among the largest cities across the country, those in the Greater Bay Area stand out as outliers, with valuations skyrocketing in spite of the latest round of lockdowns.
The Aggressive Developers. The increasingly bullish undertones of sell-side notes that have landed on our desks are centered around the inventory drawdown / cashflow rebuild story of the perceived higher-quality names in the space. We are not buyers of that story just yet and our work suggests that many developers have been acquiring land at a more aggressive rate than they had planned at the beginning of the year. Regulators are already keeping a close eye on recent transactions and we think we should too.



Exhibit 1: Monthly Housing FAI | 3M Moving Avg (CNY bn)




Source: National Bureau of Statistics, Our analysis




Related Insights


China Financials: Silver Linings Playbook 

Glut and Famine: We Might See Snow in China This Summer 

China Macro: Operation Twist | The Deposit Version 

China Macro: Consumers Remain on the Sidelines, as Their Home Equity Grows 

China Macro: PPI Peaks, while CPI Eases Tightening Fears 

China Macro: Exports Disappoint, but It's Still Early in the Game 


China Properties: Like Clockwork, Real Estate Investments Haven't Skipped a Beat

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Logan Property Holdings (3380 HK)

China Housing - Demand-Supply Fundamentals Part #2: The “Demographic Twist"

The common saying goes "China will get old before it gets rich", but for the market for new homes, there are some important twists to the...

Robert Ciemniak

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Trust /: Five things to know about Chinese trust firms’ scramble to offload risky assets Personnel /: China appoints vice foreign minister as...

Caixin Global

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Cover Story: China’s race to provide for its aging population. Shanghai lays out plan to end lockdown and reopen business by June

Caixin Global

CX Daily: The Winners and Losers of China’s Credit Easing

In Depth: The winners and losers of China’s credit easing. Leaders from China, France and Germany press for settlement to Russia-Ukraine war

Caixin Global

China Properties: Like Clockwork, Real Estate Investments Haven't Skipped a Beat

Housing FAI in May continued a secular trend that may make or break China's recovery. Inventory drawdowns may afford developers some breathing...

Stanley Tsai, CFA

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