2021 has entered the end of the year. For the real estate market, "changes in real estate companies", "intensive regulation" and "policy bottom appears" are the key words of this year.
This year, policies such as the "Three Red Lines" and "Concentrated Land Supply" for real estate companies were officially implemented at the beginning of 2021. The real estate industry has also ushered in major changes - in the past, the industry's high leverage, high The turnover and high-return model is no longer there.
This year, with the intensive introduction of regulatory policies across the country, the sales of the real estate industry also showed a trend of "high at first and then low". According to statistics from the Centaline Real Estate Research Center, the number of real estate regulation policies across the country continued to be high in November, with as many as 56 real estate regulation policies in a single month, and the cumulative number of real estate regulation policies during the year was as high as 586.
Looking forward to the future, many industry insiders said in interviews with reporters from the Securities Times that "stability" will be the main tone of the property market next year. The direction of various regulatory policies at the end of the year is to stabilize the property market, which also represents the policy view. end. On the other hand, policies are expected to focus on the "three stability" tasks, implementing city-specific policies and focusing on both supply and demand; at the same time, the development of the long-term rental housing market will be moderately accelerated and the construction of affordable housing will be promoted.
The policy bottom appears
At the beginning of 2021, policies involving the financing and land acquisition of real estate companies were introduced one after another, including the "three red lines" regulatory new policy that has attracted much market attention.
In fact, as early as August 20 last year, the Ministry of Housing and Urban-Rural Development, the People’s Bank of China, etc. clarified that the fund monitoring and financing management rules for 12 key real estate companies will be piloted on September 1 of that year, that is, What the industry calls the "three red lines" policy for financing real estate companies has been officially implemented since the beginning of this year.
Since the implementation of the three red lines policy, real estate companies have generally accelerated the process of reducing interest-bearing liabilities, especially leading real estate companies.
According to statistics from Haitong Securities, in the first half of 2021, the leverage ratio of some leading real estate companies has declined. As of the end of the first half of 2021, in addition to Greenland Holdings, Beijing Capital Holdings, Huafa Holdings, Financial Street, Guangming Real Estate, and Lushang Real Estate, the three red lines of some leading A-share listed companies in its statistics (the asset-liability ratio excluding advances from accounts Less than 70%; net debt ratio less than 100%; cash short-term debt ratio greater than 1) all meet the standards.
In February, a residential land classification control document issued by the Ministry of Natural Resources leaked out. The document requires residential land in key cities to achieve "two concentrations": centralized release of transfer announcements, and residential land announcements in 2021 cannot be More than 3 times; centralized organization of transfer activities. Among them, key cities include 4 first-tier cities and 18 second-tier cities.
The centralized land supply policy has changed the pace of land acquisition by real estate companies, and is also regarded by the industry as one of the biggest market changes in real estate in 2021.
“In 2021, after the land market operated at a high level in the first half of the year, the overall land market began to show obvious signs of downward adjustment in the second half of the year. As the real estate market transactions cooled down, the pressure on the capital chains of real estate companies increased. Real estate companies are becoming less and less enthusiastic about acquiring land." Zhang Dawei, chief analyst of Centaline Real Estate, told a Securities Times reporter that centralized land supply has changed the original development rhythm of real estate companies. As the real estate market changes and becomes uneven, the centralized land supply policy is expected to continue to adjust in 2022.
Data from the Centaline Real Estate Research Center also shows that as of November, the amount of land sales in the 100 hotspot cities across the country in 2021 was 4.05 trillion, a decrease of 7.4% compared with the same period in 2020. Judging from land market data, it has become a trend for the popularity to continue to decrease. Especially in the second half of 2021, the land market has continued to be sluggish.
Since then, various policies such as price limits, sales restrictions, and purchase restrictions have been introduced intensively, and signals of increased regulation in the real estate industry have been continuously released. According to statistics from the Centaline Real Estate Research Center, the cumulative number of real estate controls from January to August 2021 exceeded 400, setting a new historical record.
It is worth noting that since September, real estate policies have gradually begun to warm up, which has become common knowledge in the industry.
At the end of September, the central bank proposed to maintain the healthy development of the real estate market at its third quarter regular meeting. In October, some cities such as Harbin introduced relevant policies to stabilize the real estate market. In December, a high-level meeting proposed to "support the commercial housing market to better meet the reasonable housing needs of home buyers" and proposed for the first time the promotion of a "virtuous cycle" in the real estate industry.
In Zhang Dawei's view, preventing the property market from falling too fast is expected to become a future policy trend, and "stability" is the most certain keyword for the property market next year.
"In the past two years, the regulation of the property market has become increasingly strict. On one side are price limits on new and second-hand houses in hot cities, and on the other are price limits on new houses in many cities across the country. A sharp increase in house prices will amplify financial risks, while house prices are falling off a cliff. The decline is also not stable and will also affect the financial system. At the end of the year, various regulations began to stabilize the property market, and more than 20 cities across the country launched housing purchase subsidies, which represents the bottom of the policy. ”
China Everbright Bank Financial Market Department. Macroeconomic analyst Zhou Maohua also told reporters that stability is the top priority in real estate regulation, and local governments have implemented city-specific policies to implement the "three stability" tasks. "We cannot allow housing prices to rise irrationally and real estate companies to increase leverage in a disorderly manner. At the same time, we cannot allow real estate to be too cold. Both overheating and overcooling of the real estate market are harmful." Looking forward to the future, policies will still focus on the "three stability" tasks, because Urban policies and supply and demand efforts will be made, and regulatory policies will be pre-adjusted and fine-tuned based on the specific regional real estate market supply and demand conditions; at the same time, the development of the long-term rental housing market will be moderately accelerated and the construction of affordable housing will be promoted.
“It is expected that under the general tone of ‘housing is for living, not for speculation’, short-term credit policies will continue to increase their support for the demand for first-time and improved housing. Local governments will respond to the central government’s requirements to implement city-specific policies and strengthen real estate development. Targeted measures have been taken to solve the problem of unsmooth chains, and the implementation of support policies has been accelerated. In addition to increasing home purchase subsidies, there are also expectations for fine-tuning policies such as lowering loan interest rates and reducing some transaction taxes," said Chen Wenjing, deputy director of research at the Index Division of the China Index Research Institute. Tell reporters.
Risk events are expected to be reduced
Against the backdrop of continued tightening of the financing environment for real estate companies this year, many well-known private real estate companies may have debt defaults or signs of default in the second half of the year.
In July 2021, Blu-ray Development issued an announcement that some of its debts had not been repaid as scheduled; in August, Sunshine 100 also stated that it had failed to pay due convertible bonds. In September, news came out that Evergrande Group’s financial management had stopped paying. This incident triggered Evergrande’s own liquidity crisis, and to a certain extent also foreshadowed the possible debt risks of other real estate companies in the future.
Since October, companies including Fantasia, Modern Land, and Sinic Holdings have had difficulty repaying their U.S. dollar debts, which has also led to a sharp decline in real estate U.S. dollar bonds.
According to statistics from the Centaline Real Estate Research Center, since October, there have been greenland holdings, Sunshine City, Kaisa, Agile, Greentown China, Hopson Development, Xincheng Development, Yuzhou Group and other real estate dollar bonds. There was a sharp decline. Chinese real estate dollar bonds generally fell by nearly 20%. Among them, bonds due in 2021 were hit the hardest, followed by bonds due in 2022, and bonds due in 2023, 2024, and 2025 fell more gently.
“The core reason behind this is real estate regulation, especially the three red lines that have inhibited the financing channels of real estate companies, while the tightening of sales has made it difficult for companies to collect payments, and the tightening of development loans and mortgage loans has made real estate companies repay their debts. Capacity has dropped sharply," Zhang Dawei told reporters.
It is worth noting that many real estate companies are also actively trying to save themselves through downsizing, financing, etc. It has become common knowledge in the industry that real estate company risk events are expected to be reduced.
Liu Shui, head of research at the Enterprise Division of the China Index Research Institute, told reporters that as the industry pays more attention to liquidity risks, some real estate companies on the verge of danger have begun to take active measures to sell off assets and shareholders. Replenishing funds through borrowings, additional issuance of shares, etc. has played a positive role in alleviating short-term debt pressure. "The current financing-related policies have basically bottomed out. Ensuring normal financing and policy correction have become the main directions of supervision. The reasonable financing needs of real estate companies are being met. Therefore, overall, risk events for real estate companies will gradually decrease in the future."
Real estate companies are actively seeking changes
It is worth noting that this year’s real estate market sales have shown a trend of “high at first and then low”, which has also attracted great attention in the industry.
According to the latest data released by the National Bureau of Statistics on December 15, from January to November 2021, the sales area of ??commercial housing was 1.58 billion square meters, a year-on-year increase of 4.8%, an increase from January to November 2019 6.2%, a two-year average growth of 3.1%; in terms of sales: from January to November 2021, commercial housing sales were 16.2 trillion yuan, a year-on-year increase of 8.5%, an increase of 16.3% from January to November 2019, a two-year average growth 7.8%.
However, looking at a single month, sales in the real estate market have been declining for many consecutive months.
Data from the China Index Research Institute shows that in November, the market was still in the adjustment stage. Superimposed on the impact of the high base in the same period last year, the national commercial housing sales area and sales fell by 14.0% and 16.3% respectively, maintaining the same level for four consecutive months. There was a double-digit decline, but due to factors such as the marginal improvement in the credit environment, the decline narrowed by 7.7 and 6.3 percentage points respectively from the previous month.
“Affected by factors such as early control efforts and tight bank mortgage quotas, the real estate market adjustment pressure increased in the second half of the year, the market as a whole cooled down, individual real estate companies defaulted, and home buyers’ wait-and-see sentiment increased, further dragging down the market. Activity dropped, and real estate companies’ sales area and sales declined. ”
In Chen Wenjing’s view, real estate companies increased their marketing efforts in the first half of the year, and their sales area reached the highest level in the same period in history, and the overall performance exceeded expectations. The market cooled significantly in the third quarter, and the sales area of ??commercial housing declined year-on-year.
From the perspective of short-term market trends, it is common knowledge that the sales of real estate companies have declined and the pressure of short-term debt repayment has increased. Against this background, many real estate companies have chosen to increase revenue and reduce expenditure.
Take Vanke as an example. On November 17, Vanke initiated an internal initiative to change the inertial way of thinking in the golden era, integrate the business philosophy throughout, subtract actions and expenses that do not produce value, and spend more. Doing big things with small money and other work requirements.
Zhang Dawei believes that in addition to increasing revenue and reducing expenditure, maintaining liquidity, and making small profits with peace of mind, real estate developers must change their thinking and focus on improving product quality. "The next step is a moment of major reshuffle among real estate companies. Whoever has better quality will be more able to attract users and get a share of the shrinking real estate market. Only by recognizing the situation clearly and accelerating transformation can we have a chance to survive the industry winter and win. Tickets for the second half of the competition.”
On the other hand, the transformation of real estate companies is also often mentioned this year, but the industry reminds us to make decisions before taking action. Liu Shui believes that the overall profit margin of the real estate industry continues to decline. Under this background, real estate companies must not be blind. After all, there are thresholds and capital investment in cross-fields. Transformation cannot be made for the sake of transformation. Therefore, enterprises should base their own actual situation and development on Development strategies need to be carefully adjusted.