摩根士丹利-中国地产取消商品房预售初评-China Property First Take on Cancellation of Housing Pre-sales

August28,202602:03PMGMT

ChinaProperty|AsiaPacific

FirstTakeonCancellationofHousingPre-sales

MOHURDhaveissuedapolicytoregulatehomesales,withallnewprojectsencouragedtosellatcompletion,andpre-salesdepositsofexistingprojectstobelockedinescrowaccountsuntildelivery.Thismaynotablyharmdevelopersbutbenefitagentsamidalikelysharpdeclineonnewsupplynextyear.

Thepoliciesareconsistentwithregulator'scallfora"long-termmechanism",andcouldimpactthehousingmarketinthebelowareas:

•(+)Protecthomebuyersbetteronhousingdelivery,loweringtheirconcernsaboutnewhomes,especiallythosedevelopedbyprivateplayers.

•(+)Boostdestocking(especiallysecondarysupply)incitieswithover-supply,alleviatinghomepricespressurewithbetterdemand-supplydynamics.Tier1citiesmayseeastrongerhomepriceuptrend.

•(-)Loweringdevelopers'sales,ROEandIRRgivenslowerassetturnoverandlargercapitalizedinterest,whichwillunlikelybeoffsetbybettermargins

withoutnotablehomepriceincreases.Thiscouldleadtoanindustryde-rating.

•(-)Developerscouldreducelandbanking(harmingnewstartsandrealestateinvestment),andfactorinhighermarginbufferforlandbidding,weighingonlocalgovernments'(LGs)landsalesincome,especiallyinlow-tiercities.

Weexpectthepolicytohamperinvestorsentimentontheoverallindustry,butcouldunevenlyimpactfundamentalsamongdifferentplayers.

•Developers:1)playerswiththinlandbanksandlargelegacyinventorycouldunderperformonsalesintheshort-term;2)SOEswithlowleverageand

strongcapitalaccessmaygainmarketshareatafasterpaceinthemediumterm;3)thosewithhigh-end/luxurypositioningwouldbelessimpactedgiventheirusuallaterlaunchingtimelinesthanmass-marketproducts;and4)

thosewithrobustrecurringincomecouldseelessvolatileearnings.

•Propertyagencies:Beneficiariesfrompotentiallyhighershareofexistinghomesalesamidsignificantlyreducednewsupplystartingfromnextyear(developersonaveragewithlandbanklifeof2+years).

•PMCs:Immuneintheshort-term,butcouldseeevenweakerGFAtransferfromdevelopersinthemediumterm,likelyintensifyingthecompetitionforless-profitableexistinghousing.Commercialoperatorscouldseemore

robustrevenue/earningsgrowth,makingthemmorefavoredbyinvestors.

Signpoststowatch:1)policydetailstobesetbyLGsinTier1/2cities;2)policyexecution;and3)landsalesandpricesofupcomingauctions.Seestock

implicationsandrecommendationsbelow.

Idea

MorganStanleyAsiaLimited+

StephenCheung,CFA

EquityAnalyst

Stephen.Cheung@+8523963-0385

CaraZhu

EquityAnalyst

Cara.Zhu@+8522848-7117

EddyWang,CFA

EquityAnalyst

Eddy.Wang@+8522239-7339

ChinaProperty

AsiaPacific

IndustryViewIn-Line

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

Idea

2

StockImplicationsandRecommendations

Webelievedeveloperscouldbemeaningfullynegativelyimpacted,whilesecondary

propertyagentscouldbenefit.Stockswithrelativelycrowdedpositioning(e.g.,CRLandandCOLI)andhighdevelopmentbeta(e.g.,COLI,C&D,Jinmao,andGreentown)couldseedeepersharepricecorrectionsintheneartermdespitetheirsolidfundamentals.

Intermsoffundamentals,amongourcoverage,developersinthebelowcategoriescouldpotentiallyseedeepery-ydeclinesinpropertysalesin2027.

•Thinlandbank:C&D,Greentown,andJinmao

•Largelegacyprojects:GreentownandLongfor

•LimitedlandbankingYTD:COLI,CMSK,Yuexiu,andLongfor

WesuggestaccumulatingKE(BEKE.US)nowgivenitisthekeybeneficiaryofexisting

homessales,andbuyingthepotentialdipsonCRLand(1109.HK)andSeazenA/H

(601155.SS/1030.HK)giventheirrobustmalloperationscouldreduceearningsvolatility.Onthecontrary,wearecautiousonGreentown(3900.HK),VankeA/H

(000002.SZ/2202.HK)andGemdale(600383.SS)giventheirlowlandbankqualityandweakexecution.

PolicyDetails

OnAugust28,theMinistryofHousingandUrban-RuralDevelopment(MOHURD),theMinistryofNaturalResources(MNR),andtheNationalFinancialRegulatory

Administration(NFRA)jointlyreleasedguidelinestoacceleratetransitionfromthepre-salemodeltowardsthecompleted-homesalesmodel.

Pushtowardscompleted-homesales:

•Fornewlyauctionedlandprojectsandprojectsthathavenotyetobtained

constructionplanningpermits,authoritieswillprioritizecompleted-homesales.

•Existingprojectsthatalreadyobtainedplanningpermitsbeforethepolicy

announcementwillcontinuetofollowpreviouspre-salerules,butareencouragedtoadoptcompleted-homesales.

•Completed-homesaleswillbesubjecttofilingandregulatoryoversight.

•Buyersareentitledtorefundsandcompensationifdeliveryobligationsarenotfulfilled.

Tighterpre-salerequirements:

•Forprojectsadoptingthepre-salemodel,buildingstructuremustbecompletedbeforepre-sales.

Strongerescrowsupervision:

•100%ofhomepurchasefunds,includingdownpaymentsandmortgageproceeds,mustentersupervisedescrowaccounts.

•Escrowfundscanonlybereleasedafterprojectcompletionanddeliveryconditionsaremet.

•Ifadeveloperfailstodeliverontime,homebuyershavetherighttoterminatethepurchaseagreementandreceiveafullrefund,withthedeveloperbearing

contractualliabilities.

MorganStanleyResearch3

4

Idea

DisclosureSection

TheinformationandopinionsinMorganStanleyResearchwerepreparedoraredisseminatedbyMorganStanleyAsiaLimited(whichacceptstheresponsibilityforitscontents)and/orMorganStanleyAsia(Singapore)Pte.(Registrationnumber199206298Z)and/orMorganStanleyAsia(Singapore)SecuritiesPteLtd(Registrationnumber200008434H),regulatedbytheMonetaryAuthorityofSingapore(whichacceptslegalresponsibilityforitscontentsandshouldbecontactedwithrespecttoanymattersarisingfrom,orinconnectionwith,MorganStanleyResearch),and/orMorganStanleyTaiwanLimitedand/orMorganStanley&CoInternationalplc,SeoulBranch,and/orMorganStanleyAustraliaLimited(A.B.N.67003734576,holderofAustralianfinancialserviceslicenseNo.233742,whichacceptsresponsibilityforitscontents),and/orMorganStanleyWealthManagementAustraliaPtyLtd(A.B.N.19009145555,holderofAustralianfinancial

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Forvaluationmethodologyandrisksassociatedwithanyrecommendation,ratingorpricetargetreferencedinthisresearchreport,pleasecontacttheClientSupportTeamasfollows:US/Canada+1800303-2495;HongKong+8522848-5999;LatinAmerica+1718754-5444(U.S.);London+44(0)20-7425-8169;Singapore+656834-6860;Sydney+61(0)2-9770-1505;Tokyo+81(0)3-6836-9000.AlternativelyyoumaycontactyourinvestmentrepresentativeorMorganStanleyResearchat1585Broadway,(Attention:ResearchManagement),NewYork,NY10036USA.

AnalystCertification

Thefollowinganalystsherebycertifythattheirviewsaboutthecompaniesandtheirsecuritiesdiscussedinthisreportareaccuratelyexpressedandthattheyhavenotreceivedandwillnotreceivedirectorindirectcompensationinexchangeforexpressingspecificrecommendationsorviewsinthisreport:StephenCheung,CFA;EddyWang,CFA;CaraZhu.

.

GlobalResearchConflictManagementPolicy

MorganStanleyResearchhasbeenpublishedinaccordancewithourconflictmanagementpolicy,whichisavailableat

/institutional/research/conflictpolicies.A

Portugueseversionofthepolicycanbefoundat.br

ImportantRegulatoryDisclosuresonSubjectCompanies

Inthenext3months,MorganStanleyexpectstoreceiveorintendstoseekcompensationforinvestmentbankingservicesfromChinaJinmaoHoldingsGroupLtd,ChinaOverseasLand&InvestmentLtd.,ChinaResourcesLandLtd.,ChinaVankeCompanyLtd.,KEHoldingsInc,LongforGroupHoldingsLtd.,YuexiuPropertyCoLtd.

Withinthelast12months,MorganStanleyhasreceivedcompensationforproductsandservicesotherthaninvestmentbankingservicesfromChinaJinmaoHoldingsGroupLtd,GreentownChinaHoldings,KEHoldingsInc,LongforGroupHoldingsLtd..

Withinthelast12months,MorganStanleyhasprovidedorisprovidinginvestmentbankingservicesto,orhasaninvestmentbankingclientrelationshipwith,thefollowingcompany:ChinaJinmaoHoldingsGroupLtd,ChinaOverseasLand&InvestmentLtd.,ChinaResourcesLandLtd.,ChinaVankeCompanyLtd.,KEHoldingsInc,LongforGroupHoldingsLtd.,YuexiuPropertyCoLtd.

Withinthelast12months,MorganStanleyhaseitherprovidedorisprovidingnon-investmentbanking,securities-relatedservicestoand/orinthepasthasenteredintoanagreementtoprovideservicesorhasaclientrelationshipwiththefollowingcompany:ChinaJinmaoHoldingsGroupLtd,ChinaResourcesLandLtd.,ChinaVankeCompanyLtd.,GreentownChinaHoldings,KEHoldingsInc,LongforGroupHoldingsLtd..

TheequityresearchanalystsorstrategistsprincipallyresponsibleforthepreparationofMorganStanleyResearchhavereceivedcompensationbaseduponvariousfactors,includingqualityofresearch,investorclientfeedback,stockpicking,competitivefactors,firmrevenuesandoverallinvestmentbankingrevenues.EquityResearchanalysts'orstrategists'compensationisnotlinkedtoinvestmentbankingorcapitalmarketstransactionsperformedbyMorganStanleyortheprofitabilityorrevenuesofparticulartradingdesks.

MorganStanleyanditsaffiliatesdobusinessthatrelatestocompanies/instrumentscoveredinMorganStanleyResearch,includingmarketmaking,providingliquidity,fundmanagement,commercialbanking,extensionofcredit,investmentservicesandinvestmentbanking.MorganStanleysellstoandbuysfromcustomersthesecurities/instrumentsofcompaniescoveredinMorganStanleyResearchonaprincipalbasis.MorganStanleymayhaveapositioninthedebtoftheCompanyorinstrumentsdiscussedinthisreport.MorganStanleytradesormaytradeasprincipalinthedebtsecurities(orinrelatedderivatives)thatarethesubjectofthedebtresearchreport.

Certaindisclosureslistedabovearealsoforcompliancewithapplicableregulationsinnon-USjurisdictions.

STOCKRATINGS

MorganStanleyusesarelativeratingsystemusingtermssuchasOverweight,Equal-weight,Not-RatedorUnderweight(seedefinitionsbelow).MorganStanleydoesnotassignratingsofBuy,HoldorSelltothestockswecover.Overweight,Equal-weight,Not-RatedandUnderweightarenottheequivalentofbuy,holdandsell.InvestorsshouldcarefullyreadthedefinitionsofallratingsusedinMorganStanleyResearch.Inaddition,sinceMorganStanleyResearchcontainsmorecompleteinformationconcerningtheanalyst'sviews,investorsshouldcarefullyreadMorganStanleyResearch,initsentirety,andnotinferthecontentsfromtheratingalone.Inanycase,ratings(orresearch)shouldnotbeusedorrelieduponasinvestmentadvice.Aninvestor'sdecisiontobuyorsellastockshoulddependonindividualcircumstances(suchastheinvestor'sexistingholdings)andotherconsiderations.

GlobalStockRatingsDistribution

(asofJuly31,2026)

TheStockRatingsdescribedbelowapplytoMorganStanley'sFundamentalEquityResearchanddonotapplytoDebtResearchproducedbytheFirm.

Fordisclosurepurposesonly(inaccordancewithFINRArequirements),weincludethecategoryheadingsofBuy,Hold,andSellalongsideourratingsofOverweight,Equal-weight,Not-RatedandUnderweight.MorganStanleydoesnotassignratingsofBuy,HoldorSelltothestockswecover.Overweight,Equal-weight,Not-RatedandUnderweightarenottheequivalentofbuy,

MorganStanleyResearch5

Idea

hold,andsellbutrepresentrecommendedrelativeweightings(seedefinitionsbelow).Tosatisfyregulatoryrequirements,wecorrespondOverweight,ourmostpositivestockrating,withabuyrecommendation;wecorrespondEqual-weightandNot-RatedtoholdandUnderweighttosellrecommendations,respectively.

CoverageUniverse

InvestmentBankingClients(IBC)

OtherMaterialInvestmentServices

Clients(MISC)

StockRatingCategory

Count

%ofTotal

Count

%ofTotalIBC

%ofRating

Category

Count

%ofTotalOther

MISC

Overweight/Buy

1529

42%

442

47%

29%

750

43%

Equal-weight/Hold

1582

43%

396

42%

25%

773

44%

Not-Rated/Hold

3

0%

1

0%

33%

1

0%

Underweight/Sell

560

15%

97

10%

17%

217

12%

Total

3,674

936

1741

DataincludecommonstockandADRscurrentlyassignedratings.InvestmentBankingClientsarecompaniesfromwhomMorganStanleyreceivedinvestmentbankingcompensationinthelast12months.Duetoroundingoffofdecimals,thepercentagesprovidedinthe"%oftotal"columnmaynotadduptoexactly100percent.

AnalystStockRatings

Overweight(O).Thestock'stotalreturnisexpectedtoexceedtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Equal-weight(E).Thestock'stotalreturnisexpectedtobeinlinewiththeaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

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Underweight(U).Thestock'stotalreturnisexpectedtobebelowtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Unlessotherwisespecified,thetimeframeforpricetargetsincludedinMorganStanleyResearchis12to18months.

AnalystIndustryViews

Attractive(A):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeattractivevs.therelevantbroadmarketbenchmark,asindicatedbelow.

In-Line(I):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeinlinewiththerelevantbroadmarketbenchmark,asindicatedbelow.

Cautious(C):Theanalystviewstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthswithcautionvs.therelevantbroadmarketbenchmark,asindicatedbelow.

Benchmarksforeachregionareasfollows:NorthAmerica-S&P500;LatinAmerica-relevantMSCIcountryindexorMSCILatinAmericaIndex;Europe-MSCIEurope;Japan-TOPIX;Asia-relevantMSCIcountryindexorMSCIsub-regionalindexorMSCIACAsiaPacificexJapanIndex.

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