Industry Overview
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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW This section contains certain statistics, industry data or other information which have been derived from government, official or other public sources. We believe that the sources of such information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by us, the Sole Sponsor, [REDACTED], the [REDACTED], any of their respective directors, officers, affiliates, advisors or representatives, or any other party involved in the [REDACTED], and no representation is given as to its accuracy. We, the Sole Sponsor, [REDACTED], any of their respective directors, officers, affiliates, advisors or representatives, and any other party involved in the [REDACTED] make no representation as to the completeness, accuracy or fairness of such information and accordingly such information should not be unduly relied upon. SOURCE OF INFORMATION The Company commissioned the C&W Report from Cushman & Wakefield (C&W) relating to the economy of the PRC, the residential property market in Guangdong, Hainan, Yunnan and Hunan provinces and the industries in which our Group operates. C&W has charged a total fee of HK$800,000 for the preparation of the C&W Report. C&W is a global real estate adviser, which offers a range of services including investment agency, leasing agency, property and facilities management, project and building consultancy, investment and asset management, market research and forecasting and valuation. C&W has 400 offices in 70 countries. C&W also serves as the Company’s independent property valuer for the [REDACTED]. C&W provided services through its independent valuation team and independent market research team. The C&W Report was prepared primarily by the designated market research team of C&W based on data from the PRC government, renowned research institutions and the proprietary databases of C&W. In the course of research, C&W conducted interviews with local marketing agents in the residential property sector. The following sets out the main reasons why C&W adopted the above sources of information and considered them as reliable: • It is general market practice to adopt official data and announcements from various Chinese government agencies; and • C&W understands the data collection methodology and source of the subscribed database from China Real Estate Index System. While preparing the C&W Report, we have relied on the major assumptions listed below: • The macro-economic environment of each of the PRC, Guangdong, Hunan, Hainan, and Yunnan Province is expected to grow at a steady rate; • The political environment of the PRC remains stable; and • The real estate industry of each of the PRC, Guangdong, Hunan, Hainan, and Yunnan Province is expected to grow at a steady rate. Our Directors are of the view that the information set forth in this section is reliable and not misleading as the information was extracted from the C&W Report and C&W is an independent professional market research company with extensive experience in its profession. Our Directors confirm that to the best of their knowledge and information and taking reasonable care, there is no adverse change in the market information since the date of the C&W Report, which may qualify, contradict or have an impact on the information in this section. OVERVIEW OF THE PRC ECONOMY Over the past five years, the PRC’s GDP growth has remained healthy, with nominal GDP value increasing from RMB56,885 billion in 2013 to RMB90,032 billion in 2018, representing a CAGR of approximately 9.6%. Urban disposable income per capita has increased from RMB26,467 in 2013 to –84– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW RMB39,251 in 2018, representing a CAGR of approximately 8.2%. Total fixed assets investment in the PRC has increased from RMB44,629 billion in 2013 to RMB64,567 billion in 2018, representing a CAGR of approximately 7.7%. This increase in purchasing power has led to an increase in willingness of urban residents to consume. 2013-2018 2013 2014 2015 2016 2017 2018 2019 (Q1) 2019 (Q2) 2019 (Q3) CAGR Nominal GDP (RMB billion) 56,885 63,646 67,671 74,413 82,712 90,032 21,343 23,750 24,687 9.6% Real GDP Growth (%) 7.8% 7.3% 6.9% 6.7% 6.9% 6.6% 6.4% 6.2% 6.0% N/A GDP per capita (RMB) 41,805 46,531 49,229 53,817 59,660 64,644 N/A N/A N/A 9.1% Urban disposable income per capita (RMB) 26,467 28,844 31,195 33,616 36,396 39,251 11,633 21,342 31,939 8.2% Fixed asset investment (RMB billion) 44,629 51,276 56,200 60,647 64,124 64,567 N/A N/A N/A 7.7% Sources: China Statistical Yearbook 2018, National Bureau of Statistics, C&W KEY DRIVERS OF THE PRC PROPERTY MARKET Over the past 10 years, the rate of urbanisation in the PRC has increased by approximately 1.0% to 1.5% annually, reaching 58.5% in 2017. An increase of 1.0% represents an increase of approximately 13 million rural people migrating into urban areas, which generates substantial housing demand and increases consumption levels in urban areas. According to the “National Plan on New Urbanisation (2014-2020)” (《國家新型城鎮化規劃 (2014—2020) 》) issued by the PRC State Council, the urbanisation rate is aimed to reach 60% by 2020, and measures such as small town development, improving the integrated transportation network, and improving standards of public services, will be implemented to raise the level and quality of urbanisation in the future. Following the release of “The Notice on the Implementation of Key Tasks for Promoting New-type Urbanization in 2018” 《關於實施2018年推進新型城鎮化建設重點任務的通知》by 國家發展改革委 in March 2018 and The Key Tasks of New Urbanization Construction in 2019 《2019年新型城鎮化建設重 點任務》in April 2019, the “settled in” restrictions of those cities with permanent population between 1 to 3 million will be removed, whereas the same restrictions of those cities with permanent population between 3 to 5 million will be relaxed. It is believed that urbanization rates of these lower tier cities will be improved. 2013-2018 2013 2014 2015 2016 2017 2018 2019 (Q1) CAGR (%) Population (million) 1,361 1,368 1,375 1,383 1,390 1,395 N/A 0.5% Urban population (million) 731 749 770 793 813 831 N/A 2.7% Urbanisation rate (%) 53.8% 54.8% 56.0% 57.3% 58.5% N/A N/A N/A Sources: China Statistical Yearbook 2017, National Bureau of Statistics, C&W OVERVIEW OF THE PRC PROPERTY MARKET The government aims to maintain a stabilised housing price using different policy tools to curb speculation. Amongst other measures deployed, a strict policy taken was the home purchase restrictions imposed on the entire province of Hainan in April 2018 (“全域限購”), such that non-Hainan residential households who want to buy a residential unit in certain districts including Haikou, Sanya and Qionghai must provide income tax records or proof of social security payments for the past 60 months or more in Hainan from at least one member of the applicant’s family. Also, no upward adjustment can be made to the registered selling price within 6 months from the date of registration. Any adjustment to the registered price must go through the registration process again. Despite the continuing policy control on the PRC property market in 2018, the transaction volume of residential properties in the country recorded a growth. The details of the above have been discussed in the Regulation Overview of the document. Benefitting from the growth of PRC economy, domestic investment and consumption, the PRC property market has been growing rapidly. Total investment in real estate development projects increased from RMB8,601 billion in 2013 to RMB12,026 billion in 2018, representing a CAGR of approximately 6.9%. The investment on residential property increased from approximately RMB5,895 billion in 2013 to RMB8,519 billion in 2018, representing a CAGR of approximately 7.6%. The investment on commercial property increased from approximately RMB1,194 billion in 2013 to RMB1,418 billion in 2018, representing a CAGR of approximately 3.5%. Major real estate indicators of the PRC are set out below: –85– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW 2013-2018 2013 2014 2015 2016 2017 2018 2019 (Q1) 2019 (Q2) 2019 (Q3) CAGR Total real estate investment (RMB billion) 8,601 9,504 9,598 10,258 10,980 12,026 2,380 3,781 3,640 6.9% Residential Real estate residential investment (RMB billion) 5,895 6,435 6,460 6,870 7,515 8,519 1,726 2,791 2,698 7.6% Total GFA of commodity residential properties sold (million sq.m.) 1,157 1,052 1,124 1,375 1,448 1,479 260 402 385 5.0% Average selling price of commodity residential properties (RMB per sq.m.) 5,850 5,933 6,473 7,203 7,614 8,544 8,954 9,478 9,390 7.9% Commercial Real estate commercial investment (RMB billion) 1,194 1,435 1,461 1,584 1,564 1,418 247 371 361 3.5% Total GFA of commercial properties sold (million sq.m.) 85 91 93 108 128 120 19 27 24 7.2% Average selling price of commercial properties (RMB per sq.m.) 9,777 9,817 9,566 9,786 10,323 11,151 11,431 11,284 10,531 2.7% Sources: China Statistical Yearbook 2018, National Bureau of Statistics, C&W Historical price trends of raw materials The major construction materials used in our Group’s property development projects include cement and steel, which are subject to market fluctuation and volatility.