What is the impact of the new loan regulations on the housing market——
The real estate industry will accelerate differentiation
Our reporter Kang Shu
Entering 2021, there will be no hot topic in the banking and real estate industry than the recent real estate loan management and key real estate enterprise fund monitoring and financing management rules issued by relevant departments.
What changes will these "hard-core" real estate financial control measures bring to the real estate industry?
How is the real estate industry trending?
Restrict excessive loans into the housing market
On December 31, 2020, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued the "Notice on Establishing a Centralization Management System for Real Estate Loans of Banking Financial Institutions."
The "Notice" divides the balance of real estate loans and personal housing loans into five levels for classified management, and sets the upper limit of the proportion of real estate industry loan balance and the upper limit of the proportion of personal housing loan balance.
The balance of real estate loans is mainly for real estate development enterprises, and the balance of personal housing loans is mainly for home purchase loans from home buyers.
In layman's terms, the new loan regulations aim to restrict bank loans from entering the real estate industry excessively.
As we all know, the real estate industry is a highly capital-intensive industry.
In the past 20 years, the real estate industry has achieved rapid development through high leverage, high debt, and high turnover.
The high risks contained in it have attracted increasing attention.
Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, proposed in the article "Improving the Modern Financial Supervision System" that the real estate industry bubble should be resolutely curbed.
At present, my country's real estate-related loans account for 39% of banking loans, and a large amount of bonds, equity, trusts and other funds enter the real estate industry.
It can be said that the real estate industry is the biggest "gray rhino" in terms of financial risks in my country at this stage.
Feng Jun, president of the China Real Estate Association, said that many real estate companies have too high debt ratios, their sales have been blocked, and payments have fallen sharply, which has led to pressure on cash flow and superimposed debts that are due to increase business risks.
Under the influence of this epidemic, this problem has become more prominent.
Therefore, real estate companies should pay attention to the problem of excessive leverage, which not only affects the high-quality development of the real estate industry, but is also a potential risk to the macro economy.
The large-scale and excessive entry of funds into the real estate industry has not only allowed the real estate bubble to accumulate, but also squeezed the share of investment in the real economy.
In fact, this new loan regulation is not the first time that financial regulation has been implemented in the real estate sector recently.
In August 2020, the Ministry of Housing and Urban-Rural Development and the People's Bank of China held a symposium on key real estate companies, and formulated rules for capital monitoring and financing management of key real estate companies.
The "three red lines" set by the regulation and supervision of the financing of key real estate companies are: the asset-liability ratio of real estate companies after excluding advance receipts shall not exceed 70%; the net debt ratio of real estate companies shall not exceed 100%; "Cash short-term debt ratio" is less than 1.
Once real estate companies "step on the line", they cannot increase or need to strictly control the scale of interest-bearing liabilities, and the deadline for completing the above targets is before the end of June 2023.
Industry insiders generally believe that the "three red lines" and the real estate loan concentration management system are two-way management and control, which not only regulates the fund users, but also regulates the fund suppliers, which is conducive to the long-term stable and healthy development of the real estate industry.
High leverage of real estate companies is difficult to sustain
Regarding the "three red lines", Vanke Chairman Yu Liang once said that this is a major game rule change in the industry and a challenge to all developers. It heralds the end of the era of real estate financial dividends.
Evergrande used practical actions such as discounts and promotions by all means to eliminate the crisis of "stepping on the line".
According to data, in 2020, Evergrande achieved contract sales of 723.25 billion yuan, an increase of 20.3% year-on-year; and realized sales collection of 653.16 billion yuan, an increase of 38.5%.
Its measures such as selling houses at 30% discount and buying shops at 0 yuan are frequently searched.
Industry insiders believe that Evergrande’s efforts to "ship out" and reduce debt reflect the common situation faced by the industry, and it is also the "microcosm" of the real estate industry's efforts to reduce debt.
Peng Lifeng, deputy director of the Financial Markets Department of the People's Bank of China, stated that the purpose of establishing the new regulations for real estate enterprise asset management is to enhance the marketization, regulation and transparency of real estate enterprise financing management, promote the formation of stable financial policy expectations for real estate enterprises, and rationally arrange operations Activities and financing activities.
At the same time, correct the blind expansion of some enterprises to enhance the anti-risk ability of real estate enterprises.
Wang Shao, president of the Guangdong Real Estate Association, believes that under the background of real estate financial regulation, volume, price, and profit are no longer what they used to be.
The concentration of leading companies and the differentiation of regional markets have become more intense, and higher requirements are placed on companies' brand building, financial operations, and product control capabilities.
Wang Shao said that "high leverage and high debt" is a severe test of the ability of a company's capital operation. A little carelessness will lead to "turnover" failure.
Preventing risks and changing the growth mode is a barrier that real estate companies must cross. The "high leverage, high debt, and high turnover" operating model that developers used to enjoy will become a "swan song".
Industry insiders believe that the real estate industry will truly enter a stage of reshuffle and differentiation.
With the scarcity of financial resources, it is increasingly difficult for small and medium-sized real estate companies to obtain financial resources, and the cost is getting higher and higher.
Housing rental will receive more support
Minister of Housing and Urban-Rural Development Wang Menghui stated at the National Housing and Urban-Rural Construction Work Conference that in 2021, the long-term real estate mechanism plan will be implemented steadily to promote the stable and healthy development of the real estate market.
It also requires all localities to earnestly implement their main responsibilities, closely follow the market situation, use reserve policies accordingly, and comprehensively use economic, legal and necessary administrative means to stabilize land prices, house prices, and expectations.
This shows that the long-term real estate mechanism will be implemented steadily and continuously improved in the future.
Existing purchase restrictions, loan restrictions, land, taxation, and financial regulatory policies will continue to apply. In view of the ever-changing market, reserve policies may also take the stage.
"Housing and not speculating" still needs to be firmly adhered to, and the overall smooth operation of the real estate market is worth looking forward to.
The Central Economic Work Conference held at the end of 2020 proposed that great attention should be paid to the construction of affordable rental housing.
This shows that in the future, rental housing will receive more policy support and will become the focus of development.
The industry believes that in the future, the development of rental housing will continue to exert efforts in increasing the supply of rental housing, the protection and expansion of rental rights, and the regulation and support of the development of rental companies.
Rents will be more stable by then, and renting will become another long-term living option.