A recent commonly cited concern by investors is that long-term property demand will disappoint. We disagree. We think the policy/reform focus of the new leadership is highly supportive of the structural long-term demand thesis. In particular, we estimate the urbanisation focus will lead to a potential increased demand of 10m residential units p.a. through to 2030. As such, we see the current high sales volume as sustainable in the long term, with little riskof a substantial price bubble. Nevertheless, there are geographic/segmental differences to this theme which define relative stock preferences. 　　Significant scope for further urbanisation by 2030 　　Our positive long-term structural sectorview reflects the new leadership’s ‘China Dream’ and our view that China will evolve into a high-income country by 2030. This development will be underpinned by four drivers: urbanisation, agriculture modernisation, industrialisation, and informatisation. These drivers, combined with increasing prosperity, will increase China’s urbanisation rate (we expect 70% by 2030) and drive strong demand for new properties. 　　Urbanisation to increase residential demand by 10m units annually 　　Given assumed urbanisation rates and a target of 50% urban population coverage for commodity residential housing in 2030, we forecast an average annual demand of approximately 1,015msm (580msm first-time homes and 435msm first-time upgrade homes) in new commodity residential apartments through to 2030. This is equivalent to about 10m units p.a. (6.4m first-time homes and 3.6m first-time upgrade homes). These estimates suggest end-user property sales volume could increase a further 14% from 2012 levels (890msm) over the next 15-20 years, and also implies end-user property completion needs to pick up by 60% from 2012 levels(630msm). In addition, we estimate approximately 6m new social housing units p.a., will be needed through to 2030. These estimates represent substantial upside potential for developers, especially developing end-user properties. 　　Strong income growth could support significant increases inproperty prices 　　As China becomes a ‘high-income country’, we expect a corresponding growth in disposable incomes, which will supportfurther increases inproperty prices. If monthly disposable incomes grow by 7% p.a. to 2030 (in line with GNI per capita), coupled with a debt-servicingratio of 40%, we estimate property prices could rise by 216% in 2030 from current levels. Furthermore, we note that the positive impact from interest-rate liberalisation, which should lead to lower interest rates, could be further supportive to affordability and could underpin growth in property prices by258% from current levels by 2030。

Table Of Contents
The ‘China Dream’ (中國夢) and economic reform .............. 3
Long-term growth potential of China property ................. 11
New-form urbanisation ..................................................... 22
We are positive on Tier-2/3 cities, central and western .... 29
Agricultural modernisation also requires urbanisation ...... 38
Informatisation supports industrialisation ......................... 40
Industrialisation supports urbanisation ............................. 45
Taking a look at valuations ................................................ 48
Urbanisation trend ............................................................. 64
Taking a look at housing affordability ............................... 69
Government policy summary ............................................ 76
A closer look at supply ...................................................... 92
Local residential market .................................................... 97
NAV and land bank breakdown ...................................... 113