Primary residential sales area dropped 21% YoY in second week of Nov Accordingto Soufun data on 26major cities in China, primary residential sales area continued todrop in the second week of Nov, falling 21% YoY and 10% WoW. This ongoing declinein residential GFA sold is in line with our previous forecast for a new down-cycle.    Restrictive policies to continue; declining contract sales ahead Due to ongoingrestrictive policies, rapidly-rising land prices and a cyclically high contract sales basefigure in 2017YTD, we expect most China developers to post a decline in contract salesin 2018. We see limited catalysts for the sector.    Company updates    Logan Property (3380HK, NR) Logan is a Shenzhen-based residential developer, witha land bank of 7.5m sqm in the Guangdong-Hong Kong-Macau Bay Area (5.6m sqm ofthis in Shenzhen). 10M17contract sales rose 42% YoY to Rmb34.9bn, representing justover 100% of its 2017full-year sales target of Rmb34.5bn. Its property projects in theBay Area have a market value of Rmb315bn.    We visited its Logan City project in Huizhou this week. The project has a total GFA of5.0m sqm, comprising high-rise residential flats and some villas (ASP ofRmb15,000/sqm for both products). The project is a ten-minute drive from the PingshanDistrict of Shenzhen. It was launched for sale in 2013and is now sold out. Most buyerswere from Shenzhen.    China Aoyuan Property (3883HK, NR): management expects solid contract salesgrowth in 2018The Guangzhou-based developer has 40projects with a GFA of around4.8m sqm in eight cities inside the Guangdong portion of the Guangdong-Hong Kong-Macau Bay Area. Its 10M17contract sales rose 56% YoY to Rmb30bn, GFA sold rose33% YoY to 2.95m sqm, and ASP was Rmb10,188per sqm.    We visited its Jade Bay project in the Pingshan District of Shenzhen this week. Thehigh-rise residential flats project has a total GFA of 0.3m sqm (ASP of Rmb31,000/sqm).It was launched for sale in Oct 2017and is already sold out, with most buyers whitecollarworkers from nearby companies.    Management expects to see continued high-teen growth for contract sales in 2018,hoping to achieve contract sales revenue of Rmb50bn during the year.

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