"Property sales and investment dropped in the first few months because of higher base in the same period of 2013 when home buyers rushed to close deals due to concerns over a hike in home costs after the enforcement of new government controls," Li Zhanjun, an analyst at Shanghai-based E-house China Research and Development Institute, told the Global Times on Sunday.
"If you compare this year's data with those of 2012 and 2011, sales and investment this year were quite normal. So the property market will not collapse and there is still real demand for homes," Li said.
Qing Hong, director of the policy research center of the Ministry of Housing and Urban-Rural Development, also said Saturday at a forum in Beijing that 60 percent of demand for homes will come from urbanization by 2020 and there will be huge demand for small and medium-sized homes in the future.
Sales are not going to be flat, trust me bluethunder. Remember, they primarily are in the new home market. Here are some stats that you never see beyond the headlines about last month.......................................................................................Thirty-five cities saw month-on-month drops in new home prices last month, contrasted with eight in April. Only 15 cities saw month-on-month increases, substantially down from 44 in April. The average home price in the 70 cities slipped 0.15% from the previous month, marking the first drop in more than a year, according to the bureau.
The average new home price in April increased 0.06% month on month.......................So the big headlines of the decrease in housing prices MOM fail to point out that NEW housing prices are still increasing. This is the bulk by far of EJ's/LEJU's biz.
Unfortunately, even though Goldman has stated they are basically unaffected, EJ and LEJU are going to go down hard as well
When the market tide turns, friends sometimes become enemies as they fight for a firmer footing.
The mainland's real estate website operators are now engaged in a war with property agencies after cracks started to appear in the housing market.
They want to charge more for property listings because falling property transactions are cutting revenues but property agencies have hit back and threatened to withdraw their listings.
"The property market is very sluggish now. The third-party website plans to raise prices regardless of such a change, and agencies are reacting in an understandable and reasonable way," said Century 21 China Real Estate, a major property agency, referring to SouFun Holdings, the country's largest real estate website operator.
Century 21 was one of five agencies with nationwide networks that recently boycotted an attempt by SouFun to charge more for property listings on its website at a time when the real estate market is cooling because of oversupply and tight credit. The other four were Centaline China, Homelink, 5i5j and Maitian.
They said SouFun's charges had soared more than tenfold in the past five years, while their own commission rates had hardly changed.
Property transactions have been falling, with Century 21's data showing second-hand home sales slowing last month to the second lowest in 25 months in Shanghai, while transactions in Beijing fell 27.5 per cent year on year.
SouFun responded on June 11 by offering a 40 per cent discount on existing packages plus a few free listings, which the company estimated would cost it at least 500 million yuan (HK$621.8 million). It also offered the property agencies low-interest loans of up to 10 million yuan to help them survive the downturn.
From the "tone" I heard, we have every reason to believe they will at least meet if not exceed forecasts. I would be thrilled if they could bump them again but I do not want to get too far ahead of myself. Conveniently, no one every mentions wage growth in China in their affordability ratios. All they really mention is the current wage earnings and the price of housing currently. No one dare breath a word of that wage growth, it would make housing prices in China look "too reasonable".
LEJU delivers their product/strategy. Whether the stock responds positively is unfortunately another story. Even though EJ/LEJU beat AND raised guidance for the Q and FY, the stocks are both unchanged and even down from then. The market simply does not believe them and is caught up in providing them a value more in line with the downward shifting RE market in China. Even though, again, both companies are somewhat detached from that as demonstrated by their EPS and REV forecasts.......
She spoke excellent English, and I did make that point with her, that a press stream of announcements would be most welcome. Milestones, contract wins, etc. She seemed receptive. Remember, she took the time to CALL ME from Beijing and spend a half hour with me.
We discussed Jacqueline, the Goldman analyst, who always puts out the lowest PT. I told her that Goldman moves the big money as you (or someone) had stated and she laughed at that like she was surprised. She felt they were too conservative. My sense, and she did not get specific, is that the numbers were tracking really well. We talked about the correlation between transaction numbers and their E Commerce biz. And it is all about the penetration rate of E commerce, and how low it actually is right now. There is a world of growth to come outside of the transaction business, ie. Now the growth will not be 238% like it was last Q, but it will still be significant for this Q. Goldman predicts 140% and I got the sense even that that number was low,
More to come later about margins.
We did discuss. That will not happen. Seldom do you see mergers or acq in China. Their cultures vary from company to company. LEJU wants stickys while SFUN wants one timers. More later. Tried em-ing you at your yahoo em but it kicked out.
I had a half hour conversation with IR Tues night. Connection was not great so alot was lost due to that. IR feels their numbers are tracking well. We talked Goldman and the others. I got nothing negative. I can share more later.
Yeah, that Z disparity with LEJU/EJ is shocking. I see Z caught another upgrade after hours. I am going to ask Melody to put out some milestone announcements once in a friggin while.
Good second question but no way on God's green earth will they answer it.
I listened to their CC three times now. My main takeaway is their penetration rate is so low now that they almost cannot help but upgrade their forecast. They are in only 49 cities and with that the penetration rate is like 3%. I thought they were in the top of the 2nd innning whereas really they may be in the bottom of the 1st. They seemed detached a bit from transactions with their e commerce biz precisely because of this low penetration rate. They do follow the cyclicality of Chinese RE but that still is not stopping their explosive growth in e commerce.
According to their CFO on the CC, they have about 1000 projects ongoing with developers and they expect MEANINGFUL GROWTH the rest of the year. I am going to suggest to Melody to friggin merge with SFUN and just take over the industry lock stock and barrel.
Very interested also in what SFUN has to say tomorrow morning. At least they are trying to be proactive. Again, back to the Z comparison, their PE is like a gazillion and we barely can make it out of single digits, and we are an Internet company also with explosive growth. I guess investors do not trust anything Chinese and we have been swept away with that.
blue, I made comments on the technical beat down on SFUN on their board, the RSI dropped below 27 almost surely indicating a bottom, or at least a 90% likelihood of one. I bought some calls shortly after the open Friday on SFUN.
LEJU IR and I are having a phone consult Tuesday evening. I am going to talk to her about the TAKE RATE and such. I am also going to listen to the CC's again, but from what I remember on one of the CC's (either LEJU or EJ), the projects were all lined up. So, independent of the transaction numbers, that is how they were able to raise guidance for the year. My take from the phrase "lined up" is that the developers had made their commitments on building projects and therefore the marketing and e-commerce elements were set via contract. But I will ask about that as well.
Any other questions you or anyone here have? I am happy to discuss them with LEJU IR Tuesday evening.
hanover, yes, i do use SKYPE, but LEJU IR said they would call me instead.
When it bounced below 27 on the RSI this morning, had to bounce hard, and is. Doubt it will hold though. Need to see some transactions start to increase, that will set a floor here.
Much ado about nothing.................maintained a rating on Buy E-House (China) Holdings Ltd (NYSE: EJ) and reduced its price target of $12.70 (from $13.50). Leju Holdings (NYSE: LEJU) price target was reduced to $17.20 (from $18.50). Analyst Jacqueline Du said he sees limited impact from a price cut at SouFun Holdings (NYSE: SFUN).
"We believe the impact of the price cut on E-house/Leju will be limited, given: 1) we forecast only 5-9% listing revenue contribution for Leju in 2014E-2015E vs. 28%/31% for Soufun; 2) as of 1Q14, Leju recorded US$4mn listing revenue with c. 20,000 paying agents, or ARPU of US$67 per month against Soufun of US$42mn listing revenue/194,000 paying agents/ARPU of US$72 per month. However, c.90% of Leju’s listing revenue is from the higher-priced Beijing market while Soufun has more diversified exposure in major cities, suggesting Leju’s pricing is already lower," said Du.
"However, we now factor in more difficulty for Leju to expand its listing business to more cities amid the market downcycle. We maintain our view that Leju needs an enhanced model to better align with secondary brokers’ transaction performance and thus improve the outlook. For 2014- 17E, we cut Leju’s revenue forecasts by 3%-4% and non-GAAP net income by 8%-9%. Our respective forecasts for E-house decline 2%/7% accordingly. We expect e-commerce revenue to see 140% yoy growth in 2Q14E and our view on e-commerce penetration potential remains unchanged," he added.
However, sees fit to reduce the already stingy price targets.
Lowering prices in China always brings out the nasties though, but you're right, they have to do it at some point. Why not do the big flush, get it done with, and move on from here. LEJU's IR wants me to call them in Beijing Friday morning. How the heck do you call China, get a phone card? Serious question.
However you slice it, SFUN's peers trade at an average of 39X (see DB write up from 4/14/14) and Z is over 100. Whatever, you can be right about the company and wrong about the stock, and this is a big bad wrong.
Technically speaking, any time SFUN's RSI crashed below 28 in the past 3 years, the stock has bounced hard. And for an extended period. It is sitting at 27.70. Here we sit with Zillow's PE over 100 and SFUN at 12.
blue, this is a mystery of herculean proportions. EJ trounced estimates, raised guidance, and, a big fat nothing. you can be right on the company but wrong on the stock price. never has this been so true. LEJU seems to be its own entity, it is as if it has zero relationship to EJ. None whatsoever.