(Yicai) Aug. 12 -- Prices of China’s five real estate investment trusts based on affordable houses subsidized by the government have grown faster than other REITs the year, thanks to the implementation of supporting policies.

The CICC Xiamen Affordable Rental Housing Infrastructure Close-End Infrastructure Fund [SHA: 508058] and the China Beijing Affordable Housing Center Rental Housing Close-End Infrastructure [SHA: 508068] soared more than 30 percent so far this year.

Meanwhile, the Hotland Innovation Shenzhen Talent Affordable Rental Housing Close-End Infrastructure [SHE: 180501], the Guotai Junan Chengtou Kuanting Affordable Rental Housing Close-End Infrastructure [SHA: 508031], and the Huaxia Resources Youchao Rental Housing Close-End Infrastructure Fund [SHA: 508077] surged over 20 percent in the period.

In comparison, the China Securities Index’s CSI REITs Total Return Index [CSI: 932047] logged an overall increase of 12.6 percent so far this year.

China’s central bank announced the setting up of a CNY300 billion (USD42 billion) re-lending fund in May aimed at supporting local state-owned enterprises in buying unsold residential properties. The initiative’s main purpose is to repurpose the properties as affordable housing, as part of a wider effort to address both the national housing glut and growing demand for affordable housing among lower-income groups.

The supporting policies are showing effects, so the market remains bullish about affordable housing REITs, driving their prices up, an expert told Yicai.

However, the financial performance of affordable housing REITs was weaker than the average of other Chinese REITs in the second quarter.

China’s five affordable housing REITs reported revenue of CNY13.8 million to CNY43.4 million (USD1.9 million to USD6 million) and net profit of CNY2.6 million to CNY18.7 million (USD362,100 to USD2.6 million) in the three months ended June 30, according to data from Wind Information.

In comparison, the country’s 36 publicly-traded REITs reported average revenue and net profit of CNY69 million and CNY10.7 million, respectively, Wind data also showed.

As a response, the Hotland Innovation Shenzhen Talent Affordable Rental Housing Close-End Infrastructure and the Huaxia Resources Youchao Rental Housing Close-End Infrastructure Fund recently announced schemes to expand their fundraising.

China’s affordable housing system is becoming more and more complete thanks to the increase in market supply.

On Aug. 7, Shenzhen Public Housing Group announced it would buy residential properties, apartments, and dormitories, prioritizing entire buildings or housing units as well as houses under 65 square meters close to transportation hubs, metro stations, and other facilities, to turn them into affordable home rentals.

Fuzhou has launched online subscriptions for the first batch of affordable houses. Other Chinese cities, such as Guangzhou, Hangzhou, Shenzhen, and Xi’an, started construction of their first affordable housing projects.

However, the increased supply of affordable houses for rent may lead to a wider-than-expected decline in the affordable housing REITs' performances and prices, thus impacting the profitability of their assets, according to Huatai Securities.

Editors: Xu Wei, Futura Costaglione