In the post-leverage era, how do real estate companies travel through the "winter"?
The real estate industry has undergone major adjustments in the past year. How can real estate companies break through the difficulties and move forward?
Where is the opportunity?
For the real estate industry, this year has experienced an unprecedented test. The housing market has cooled down and the local market has been cold. Due to the tight capital chain, some highly indebted real estate companies have fallen into debt defaults, operating difficulties, project suspensions, layoffs and salary reductions.
However, reducing debts and squeezing bubbles is for better development. Only in desperate situations can we survive, and we will take care of ourselves.
What has the real estate industry experienced during the year of resumption?
How to break through the difficulties and move forward?
Where are the opportunities in the future?
Squeezing bubbles and eliminating risks
As we all know, real estate has always been a highly leveraged, high turnover, and highly indebted industry.
High leverage is a "double-edged sword". It can not only bring rapid expansion of scale, but also be accompanied by high debt and high risk. Especially when regulations are tightened and the industry is experiencing large market volatility, many real estate companies are due to high Fall down in debt.
Since the second half of last year, the general control tone of "housing to live without speculation" has been lowered. On the basis of existing policies such as purchase restriction, loan restriction, sales restriction and price restriction, the "three red lines", "two centralization of housing loans" and "centralized supply" Heavy policies such as "local land" have been introduced in turn, combined with strict inspections of illegal funds such as operating loans and credit loans, and the intensity of policy control has shocked the industry.
Starting with the "three red lines", under the overweight of major policies, since 2021, the real estate industry has undergone major adjustments, and market sales and payments have fallen sharply.
According to Crane data, in terms of cities, the real estate market continued to cool in October. The transaction area of commercial residential buildings in the 29 key monitored cities decreased by 3% month-on-month, 22% year-on-year, and 12% year-on-year.
At the corporate level, more than 80% of the top 100 real estate companies saw a year-on-year decline in their monthly performance. Among them, 44 real estate companies saw a year-on-year decline of more than 30%.
At the same time, the risks of some high-debt real estate companies have been exposed. From the initial financial chain break of Tahoe and Fusheng, to this year's Blu-ray Development, China Fortune Land Development, Evergrande and other individual real estate companies have successive debt crises, and then to October USD debts of real estate companies such as Fantasia, Sony Holdings, and Dangdai Real Estate constituted a substantial default.
At the same time, due to the weakening of liquidity caused by weak sales and cash flow, refinancing was blocked, international rating agencies such as Moody's downgraded the ratings of more than 10 real estate companies.
If the previous reduction in leverage and liabilities of real estate companies has been on the surface as a whole, then, since the "three red lines", the central government has been resolute, and under supervision, real estate companies have reduced their debts.
Vanke Chairman Yu Liang once said, "The three red lines are penetrating supervision, with real debts on stocks, full coverage on and off the balance sheet, and the previous financial skills have no effect."
With layers of supervision and penetration, real estate will undergo profound changes in 2021, and some real estate companies will experience short-term pains, such as debt defaults, operating difficulties, business shrinkage and layoffs.
However, from the perspective of the long-term development of the industry, reducing leverage and debt can squeeze out the financial bubble, which is conducive to the healthy development of the real estate industry. For the company itself, it is also conducive to changing the behavior of blind expansion in the past and enhancing its ability to resist risks.
Lin Feng, CEO of CIFI Group, said that the industry’s deleveraging decision must be right from a long-term and overall perspective. It can lay the foundation for the future stable development of the industry and is beneficial to long-term companies.
Leverage is not as good as early, and passive is not as active. When industry risks have not yet accumulated to the point where they have to explode, active and systematic adjustments can be made in order to fall smoothly and orderly.
Eighteen martial arts "live"
As early as two years ago, Yu Liang had made the argument of "living", and now, in the same sentence.
"Live" has become a true portrayal of many real estate companies.
How to survive?
In 2021, in our view, accelerating sales and collection of funds, prudent acquisition of land, and active debt repayment have become the overall trend, and organizational structure adjustments, refined management, and asset sales have occurred frequently.
For example, on the sales side, although the market is getting colder, major real estate companies are still actively promoting sales and repayment; in the land market, under the pressure of "centralized land supply" and debt reduction and debt repayment, real estate companies tend to be more cautious and rational. Land acquisition is even reduced; on the financing side, in the context of the tightening of the overall environment, individual real estate companies that are in liquidity crisis sell their assets in exchange for living space; in terms of organizational structure, from leading real estate companies to small and medium-sized enterprises Enterprises continue to perform strategic adjustments and pursue efficient development through measures such as adjustment of organizational structure, refined management, and asset-light reforms.
In fact, with the gradual disappearance of leveraged dividends, real estate companies have shifted from being driven by funds and resources in the past to being driven by management.
According to Yu Liang, with the arrival of the "three red lines", the era of financial dividends is over and the industry enters the era of management dividends.
From the perspective of industry insiders, in the era of management dividends, real estate companies need to continuously improve their management, operation, and service capabilities in order to stand out.
In addition to our own efforts, the policy environment is also undergoing subtle changes.
At the end of September, the Monetary Policy Committee of the People's Bank of China held its third quarterly meeting of 2021 pointed out that it is necessary to maintain the healthy development of the real estate market and safeguard the legitimate rights and interests of housing consumers.
On October 15, Zou Lan, Director of the Financial Markets Department of the People’s Bank of China, stated that some financial institutions had some misunderstandings about the financing management rules of the 30 pilot real estate companies in the “third-tier and fourth-tier” financing management, and they were not allowed to have interest-bearing debt balances for “red file” companies. The misunderstanding is that banks are not allowed to issue new development loans, and after the repayment of loans from the sales of enterprises, new projects that should have been reasonably supported cannot receive loans, which has also caused some enterprises to tighten their capital chains to a certain extent.
In response to these circumstances, the People's Bank of China and the China Banking and Insurance Regulatory Commission held a real estate finance work seminar at the end of September to guide major banks to accurately grasp and implement the prudential management policies of real estate finance, maintain the stable and orderly distribution of real estate credit, and maintain the steady and healthy development of the real estate market.
Analysts said that the position of the competent authority has given the market a certain degree of confidence, which is conducive to the restoration of the current real estate market sentiment and the normal operation of the financial market.
Where are the new opportunities?
At present, the real estate industry has reached a new "crossroads." When the "basic disk" of real estate development business is experiencing development pains, many companies are thinking about where the future opportunities of the real estate industry are?
Lin Feng said that for a long time, I have heard many colleagues speculating about what the policy will come out, when it will come out, and discussing how to reduce prices and discounts, but rarely hear people discuss how to research customers, build products, and improve services. "Don't forget, then It is the foundation for us to settle down."
In fact, around the country's future development plans, real estate companies can look for opportunities in many areas such as urban renewal, old community renovation, rental housing, logistics real estate, and property management.
Taking logistics real estate as an example, tremendous demand and growth have erupted under the epidemic.
According to the CBRE China Investor Intention Survey 2021, logistics real estate was selected as the most popular investment target by 47% of the investors surveyed, ranking first in the survey for the first time since 2016.
Everbright Securities pointed out that compared with the strong market demand, the current development of my country's logistics real estate still has room for improvement, and logistics real estate is gradually changing from alternative investment in real estate to a core investment category.
In addition, the property management centered on customers and services, and long-term rental housing that meets the housing needs of new citizens and young people, also has a lot of room for development.
Yu Liang said, “We still have huge opportunities around the synchronous development of the city and the synchronous development of our customers.”
Beijing News reporter Duan Wenping