Land auction market "changed"
China News Weekly reporter/Chen Weishan
Published in the 1021th issue of China News Weekly on November 22, 2021
After the collective postponement in early August, in early November, most of the second round of centralized land supply in 22 key cities has come to an end. Contrary to the fiery heat of the first round, the second round of centralized land supply ended dismal.
According to statistics made by the Zhongzhi Research Institute in late October, the second batch of centralized land supply in 20 cities including Beijing, Shanghai and Hangzhou has been completed. A total of 70 plots have been sold out and 195 parcels have been cancelled. The overall sale has been cancelled. The card rate reached 31.8%, and in the first batch of centralized land supply, the unsold card withdrawal rate was only 6.5%.
The pass-through rate of withdrawals in the five cities of Changsha, Beijing, Shenyang, Hangzhou, and Guangzhou even exceeded 50%.
The high rate of withdrawals from unsold auctions in these cities, which are already popular and frequently seen in the past, has surprised the outside world.
The original intention of the centralized land supply was to stabilize land prices and stabilize expectations. However, in the second half of the year when the market was cold and the financing of real estate companies was almost exhausted, it was difficult to evaluate the effects of the centralized land supply policy alone.
Some insiders sighed that the original intention of centralized land supply was to reduce market enthusiasm. After adjusting some of the rules in August, especially when real estate companies encountered difficulties in the second half of the year, they directly "killed" the second round of centralized land supply market.
At the time when the second round of centralized land supply ended dismal, the third round of centralized land supply has also started, but it seems difficult to complete the reversal within two months.
New land auction regulations squeeze real estate profits
On November 1, Wuxi completed the third round of centralized land auctions, becoming the first city in three rounds of land auctions, and 85% of the land was sold at the reserve price.
The overall premium rate dropped to 0.01%, in sharp contrast to the 12% premium in the first round.
The popularity of local auctions has dropped to a freezing point, which may be unexpected by policy designers.
The official news of the "two episodes" first appeared in February this year.
The head of the Department of Natural Resources Development and Utilization of the Ministry of Natural Resources accepted an exclusive interview with Xinhua News Agency and confirmed that the centralized announcement and centralized supply of residential land in key cities is the "two centralized" land supply form, which aims to "reduce the lack of relevant information brought about by the public transfer of land. The impact on market expectations, to correct irregularities such as randomness, fragmentation, and uncertainty of information disclosure, and to prevent competition caused by market entities not mastering important related information."
Prior to this, the centralized land supply in Qingdao and Tianjin started quietly, and the announcement of homeland transfer was issued in three batches throughout the year. Tianjin even specified the three announcement time points in March, June, and mid-September.
As a result, the form of three rounds of centralized land supply in 22 key cities this year is recognized by the outside world.
Local government land transfers used to last for a whole year, and they were accused of using “hunger marketing” to push up land prices. According to statistics from Huatai Securities Research Report, 22 key cities followed the “low first and then high” land supply rhythm in the previous two years. The quarterly land supply construction area ratio is 18%, 27%, 26%, and 29%.
In mid-May, Qingdao's first batch of centralized land supply ended. 54 of the 55 homes were sold at the reserve price. However, as one of the first cities to announce the use of "two centralized" land supply, the low premium rate has nothing to do with centralized land supply.
A person from the Qingdao company of a brand-name real estate company explained to China News Weekly that the impact of centralized land supply on Qingdao is minimal, "because 98% of Qingdao's land is sold as a'targeted land'."
"Targeted land use" refers to pre-application for land use, that is, if units and individuals have the intention to use specific plots included in the bidding, auction and listing transfer plan, they can submit a pre-application for land use and promise the land price they are willing to pay before participating in the bidding. Shoot and get the land.
Due to the pre-communication, fierce competition is difficult to appear in the bidding, auction and listing process, which is a "targeted land supply" in a sense.
The aforementioned real estate company said that the centralized land supply is just to concentrate the actual land acquisition time of the real estate company to a specific period of time.
Qingdao is one of the few cities with low market enthusiasm in the first round of centralized land supply.
By the end of June, the first round of centralized land supply in 22 cities ended, and the effect of the policy was considered to be less than expected.
According to statistics from the China Index Research Institute, the overall average transaction floor price of 22 cities is 9,591 yuan per square meter, an increase of 38.3% over the average transaction floor price in 2020.
Except for Chongqing and Wuhan, 20 cities have set premium ceilings. In the first round of centralized land supply, the number of land parcels up to the upper limit did not decrease but increased. For example, the proportion of land parcels up to the upper limit was even more than 90% in Wuxi.
In Chongqing, where there is no upper limit on the premium, the premium rate of more than half of the plots exceeded 50%, which directly pushed up the price increase of new houses in Chongqing, ranking first among 70 large and medium-sized cities in April and May.
"Vest" flying horizontally is another proof of the heat of the first round of centralized geo-supply.
"Vest" refers to a subsidiary established by a real estate company in a city that centrally supplies land. After the bidding stage reaches the upper limit of the premium rate, when land is determined by lottery and other methods, the more "vest", the higher the hit rate will naturally be.
In May, Gemdale, Xuhui, etc. registered multiple subsidiaries in Suzhou within a short period of time. The Suzhou Bureau of Natural Resources and Planning issued an urgent notice requesting that the bidder’s direct and absolute controlling subsidiaries shall not participate in the bidding of the same commercial, residential or residential land.
"The first batch of centralized land supply market is hot, mainly because the pace of land supply in some key cities slowed down or stagnated in the first quarter, and the housing companies with more funds at the beginning of the year were more willing to maintain the first batch of replenishment at the scale of the year." Chen Wenjing, deputy research director of the Index Business Unit, told China News Weekly that leading real estate companies are actively acquiring land, and bidding for high-quality land has reached the upper limit.
In addition, competition for construction and self-sufficiency in some cities has also led to a certain degree of inhibition of the willingness of small and medium-sized real estate companies to acquire land.
After the first round of centralized land supply ended, in early August, the second batch of centralized land supply in Shenzhen, Tianjin, Shenyang, Qingdao and other places was suspended. The Ministry of Natural Resources held a meeting on August 10 to adjust the rules and the upper limit of the premium rate for residential land must not exceed 15%, the actual land price shall not be increased by means of bidding, construction, etc.
In fact, at the beginning of the centralized land supply in 22 cities, the Ministry of Natural Resources also encouraged various regions to explore land price stabilization measures, such as land price restriction, bidding for construction, and bidding for self-sustainment.
In the first round of centralized land supply, each city set different premium rate caps. For example, the highest premium rate in Shanghai was 10%, and Chongqing and Wuhan did not set premium rate caps, and most cities turned to bidding for self-holding and bidding after bidding reached the premium limit. Construction, invisibly pushed up the actual premium rate of land, squeezing the profits of real estate enterprises.
For example, in the first round of centralized land supply in Hangzhou, 41 plots were auctioned for self-holding transactions, accounting for 72% of the total land transfer, and the highest self-holding ratio reached 40%.
"The company has low financing costs and great brand influence. Under the lean and efficient management of the company's team, it strives to achieve a net profit level of 1% to 2%." Binjiang Group Chairman Qi Jinxing responded to the company's Hangzhou centralized land supply plot This was the answer when profit margins.
With the general adjustment of the rules, the situation of the second round of centralized land supply reversed and the situation was generally cold.
In most cities, due to the unsatisfactory registration of real estate companies, it is decided to terminate or postpone the transfer of part of the land before the auction starts.
For example, Beijing originally planned to sell 41 plots, but the 26 plots were postponed to the next round of centralized land supply. The reason given was “to further implement the goal of stabilizing land prices, housing prices, and expectations, and maintaining the stability of the land market. , Optimizing the transfer conditions".
The lack of enthusiasm of real estate enterprises to participate directly led to a decline in the transaction floor price of residential land in more than half of the cities compared with the first batch. The number of land transactions at the reserve price increased, and the proportion of land at the upper limit of the bidding decreased significantly.
Comparing the two rounds of centralized land supply in Guangzhou, the cooling can be clearly seen.
At the end of September, 25 of the 48 land parcels listed in the second round of centralized land supply in Guangzhou were unsold. Among the 23 land transactions, 18 were sold at the reserve price and only 5 were sold at a premium, with an average premium rate of only 1.5%.
In the first round of centralized land supply, only 6 plots were unsold and 18 were sold at a premium.
"The cooling effect in some cities has exceeded expectations." Chen Wenjing believes that the introduction of new rules for land auctions in key cities has put forward higher requirements for product design and cost control of real estate companies, squeezing the profit margins of real estate companies to a certain extent, and lowering the expectations of real estate companies for acquiring land. .
In fact, the request to abolish self-sufficiency and bidding construction is also to protect the profit space of real estate enterprises, but six cities including Guangzhou and Shenzhen still retain the link of "competitive self-sufficiency".
"From the perspective of actual implementation, many cities have not implemented it. Because local governments are unwilling to lose land prices, they have to maximize the value of land through construction." Li Yujia, chief researcher of the Guangdong Housing Policy Research Center, told China News Weekly.
The bundling restrictions in some cities are indeed quite stringent. For example, some plots in Changsha involve free construction, the introduction of medical and technology industries, etc., 16 plots in the urban area have been withdrawn due to no registration, and two plots have been unsold and unsold. The proportion of land with withdrawals exceeds 60%.
Hangzhou is also a typical example. Although the self-holding and bidding construction links have been cancelled and the lottery will be transferred to the lottery after the price limit is reached in the bidding link, 10 "competitive quality" plots will be launched at the same time, and the premium rate shall not be higher than 5%, and the price will be averaged in the future. Existing home sales are required, which means that the return of funds from real estate companies is slow, and eventually all the 10 plots of land will be sold.
Real estate company's capital shortage is the main cause of "lying flat"
The stringent transfer conditions of the second round of centralized land supply were not the only reason, or even the main reason, for the cold land market.
"Under the policy control of'three lines and four gears' and banks''two red lines', the funds of real estate enterprises have tightened as a whole, and sales return has become a key element in maintaining operating fundamentals. In hot cities,'small profits and land grabs', although projects Its own profit margins are relatively narrow, but due to strong market demand at the time, sales and payment are more secure." Liu Shui, head of research in the Corporate Business Department of the Zhongzhi Research Institute, said to China News Weekly that the second round of centralized land supply was met. The important background for the cold is market adjustments and increased funding pressures for real estate companies. At the same time, "the second batch of land supply policies, such as the strict review of land purchases' own funds and the increase in the margin ratio, have suppressed the willingness of real estate companies to acquire land."
"Establishing a land purchase fund source review system" is the content required by the "8·10 New Land Auction Regulations". Among the 22 cities, except for Xiamen, Changchun, and Wuxi that have completed the second round of centralized land supply before August 10, the remaining Cities have increased the review requirements for the self-owned funds of real estate companies to purchase land.
For example, Shenzhen proposed the establishment of a "commitment before review" working mechanism this time. The bidders need to commit to 5 "not belonging" of the source of funds for the purchase of land. From the recent announcement of the third batch of centralized land supply listings issued by Wuxi, it can be It can be seen that cities that have not followed up with this requirement are also adding new housing companies' own funds for land purchase review and development qualification requirements.
"The capital chain of real estate companies is tight. Most cities require land acquisition with their own funds and stipulate the illegal and banned auction period. This is the main reason why the second round of centralized land supply was cold." Li Yujia also said that in the past, real estate companies relied on land acquisition. Financing, or "front financing", financing channels include trusts, private equity, fund subsidiaries, etc.
Once strictly required to obtain land with self-owned funds is equivalent to a big change in the rules of the land market, or even a subversive change, which makes real estate companies very uncomfortable.
"In fact, the policy has always required real estate companies to acquire land with their own funds, but the review in the second half of this year is more stringent." For the next land valued at 100 million yuan, the registered capital of the project company may be only 10 million yuan, and it is only responsible for development, and the land purchase money comes entirely from the group company.
"Now it is strictly required that the registered capital of the project company is greater than the land payment before it can be counted as its own funds, which in a disguised form reduces the liquidity of funds for real estate enterprises."
"Under normal circumstances, the project company obtains the land purchase money from the group company in the form of shareholder loans, and then mortgages the land for financing from the trust." A source from the financing department of a real estate company told China News Weekly that some trust project manuals described the use of funds. This includes "repaying shareholder loans", "you can't explicitly talk about land allocation, but you can talk about repaying shareholders' loans, and real estate companies use this financing to acquire land, in disguised form they are financing land."
The high turnover model supported by land reserves is indeed the mainstream of the development of real estate enterprises in the past few years.
"In the past few years, we basically relied on the high-leverage and high-turnover model. The more extreme real estate companies develop, the faster they develop." According to a person from the management of a real estate company, "For example, a real estate company has 2 billion yuan in funds without any leverage. , It takes 1.5 billion yuan to buy a piece of land, and the remaining 500 million yuan is used for construction costs. Even if the profit of 8%~10% is relatively high for the real estate company, it may be that the houses are sold out after 3 years, and the efficiency is 2.2 billion yuan. very low".
"But if you invest 1.5 billion yuan in three pieces of land, the remaining funding gap depends on financing, and three projects are promoted at one time. It is also three years later, each piece of land can bring 200 million yuan in profits, and then in this way Repeated investment, faster and faster." He said, "The real estate circle joked that some real estate companies almost get a piece of land a day."
In addition to strictly reviewing the sources of funds for land purchases, some cities have raised the threshold for participation in the auction, especially the margin ratio, which undoubtedly puts forward higher requirements on the capital chain of real estate companies.
Cities such as Hangzhou, Suzhou and Shenzhen all raised their margin ratios for the second centralized land supply. Hangzhou cancelled the first batch of 50 million margin underpinning mechanism, and the margin ratio was restored to 20%.
Moreover, the second batch of land supply in Beijing, Hangzhou, Guangzhou, Wuhan and other cities has launched some large-scale plots. Under the fixed margin ratio, the threshold for participation in the auction of these plots is inherently high. For example, the large-scale plots in the second batch of Beijing plots The proportion has risen, and the deposit for 6 plots exceeds 1 billion yuan.
"A relatively large impact of centralized land supply on real estate companies is reflected in the requirements for capital reserves, especially if real estate companies want to participate in the auction of popular cities or land parcels at a similar time period, they will undoubtedly need a large amount of capital reserves." The aforementioned real estate investment department said.
Centralized land supply itself puts forward higher requirements on the fund mobilization ability of real estate companies. Liu Shui said that compared with the smooth land acquisition rhythm throughout the year, centralized land supply increases short-term cash flow pressure.
Lin Zhaoyuan, chairman of Yuexiu Real Estate, once said frankly at this year’s performance meeting, “We must strengthen research on any piece of land. In the past, we may take one piece of land at a time. There is relatively little pressure. Now there is pressure on manpower and funds.”
"One of the intentions of centralized land supply is to increase the pressure on the capital chain of real estate enterprises, but the effect is not obvious from the first round of centralized land supply, and it is no longer a major contradiction whether to strictly investigate land purchases with self-owned funds, because Real estate financing channels are basically exhausted, regardless of whether they are formal or not." Deng Haozhi, director of the National Real Estate Managers Alliance, analyzed to China News Weekly that at present, private housing companies are generally under capital shortage, and real estate companies that can have the funds to buy land at present Extremely rare.
This has nothing to do with whether the land is of high quality, whether the price is cost-effective or not, but whether the company has the ability to participate.
Yu Liang, chairman of Vanke's board of directors, said before that cash has become more precious, and Vanke has higher requirements on investment standards, and only takes particularly good projects.
Will the third round of soil auction downturn continue?
Private real estate companies are unable to participate in the local auction, and central enterprises and state-owned enterprises have become the protagonists of the second round of centralized land supply, which is an unexpected "by-product".
According to statistics from the Crane Real Estate Research Center, state-owned enterprises in cities such as Guangzhou, Shenzhen, and Chengdu can account for more than 80% of land parcels.
Taking Guangzhou as an example, municipal enterprises such as Guangzhou Nantou and Nansha Construction Group were very active in the second round of centralized land transfers in Guangzhou.
Deng Haozhi believes that in the general bidding, auction and listing market, this type of company rarely appears, and usually only sells when the market is very down to boost market confidence.
"At present, it may be local affiliated enterprises that are willing to buy land."
Local state-owned enterprises may enter the market to "support the market" or continue during the third round of centralized land supply. Wuxi is the first city in China to end the third round of centralized land supply, and many government-affiliated companies have taken land.
However, Deng Haozhi said that if the real estate companies' living conditions do not improve, this kind of support to the market is of little significance.
On the one hand, the income from land transfer is just "left hand to right hand", and it does not effectively increase income; on the other hand, it cannot change the expectations of ordinary real estate companies on the market, let alone change their capital status, which can only be regarded as useless.
Judging from the cities that have already put up the third round of centralized land supply, the number of land parcels and the amount of land have declined compared with the second round.
In the second round of centralized land supply, Guangzhou, which listed 48 plots but failed to sell 25 plots, launched a new round of centralized land plots on November 2nd. Only 17 plots were launched, including 7 second-round plots. Lots shot.
The total starting price dropped from about 100 billion yuan in the previous two rounds to more than 43 billion yuan.
"The government is definitely worried that if there are a large number of unsold auctions in the third round, it will send negative signals, and the market will not be able to withstand the large number of plots. Even some real estate companies with financial strength are afraid to take land, worrying about buying land at this time. Real estate companies will naturally have a demand for replenishment, but that is based on the long-term perspective. Short-term real estate companies are facing the problem of defending the capital chain.” Deng Haozhi said that Zengcheng District, which was heavily auctioned in the previous round, will only be sold this time. Out of a plot.
The amount of land supply is decreasing, and the bidding threshold is generally lowered. The intention to encourage enterprises to acquire land is obvious.
Guangzhou has cancelled the housing price limit requirements in Huangpu and Nansha districts. In the second round of centralized land supply, these two districts had tried to limit housing prices, and finally three land parcels were sold out.
Liu Shui predicts that the third batch of land supply in 22 cities will be optimized in three aspects: First, the margin ratio of some cities may be improved, and the supply of small and medium-sized plots will increase.
Second, in order to complete the annual rental housing supply plan, the third batch of leased land in some cities may maintain a certain volume, but conditions such as "competition and self-sufficiency" may be optimized.
Third, the third batch of land parcels in some cities may optimize pilot rules, reduce bundling restrictions, and gradually promote the implementation of quality-related requirements.
Some cities have loosened the threshold for participation in the third round of centralized land supply. For example, Suzhou has also lowered the margin and down payment ratios, cancelled the market guide price of land, all margin ratios have been reduced to 30%, and the first payment ratio has been reduced to 50%.
"In the short term, the land transfer rules will not be adjusted. After all, this is a long-term mechanism. The market cannot start to give up when the market is a little cold." Li Yujia believes that the local government may adjust the transfer rules, such as taking out some high-quality land, such as reducing supporting facilities. The proportion of construction.
"In the future, under the mode of centralized land supply, it is unlikely that the hot scenes of land auctions in the past will occur. Some land must be sold well, some tepid, and some will pass. This will be the norm." .
According to data from the Zhongzhi Research Institute, 22 key cities will account for nearly 40% of the country’s commercial housing sales and homeland transfer fees in 2020, and 22 cities’ land markets are undoubtedly important to the country’s land market.
According to the urban operating land premium rate monitored by the Crane Research Center, the average premium rate of operating land in 300 cities across the country jumped sharply in April this year due to the pull-up effect of the first round of centralized land supply. To 25.4%, a new high since 2020, but by September, this data was only 4.2%.
Affected by this, the land transfer fees of various places have been directly affected.
In the third quarter of this year, 160 million square meters of residential land in 300 cities nationwide were sold, a year-on-year decrease of 46.9%. The land transfer fee was 862.3 billion yuan, a year-on-year decrease of 36.6%.
On October 11, when the second round of centralized land supply was halfway through, a report by the international rating agency Moody's showed that three-quarters of the land in cities that had already undergone the second round of centralized land supply did not Any premium.
The overall growth rate of local government land transfer fees in 2021 will fall from more than 10% in the first half of the year to less than 10%.
Land transfer revenue accounts for about one-third of China's local government revenue. In a report released on November 11, Moody's predicted that provinces with heavy debt burdens and more dependent on land transfers, such as Guizhou, will face greater financial pressure.
Obviously, policies are frequently blowing warm winds, not only focusing on the real estate market, but also balancing local land finances.
However, some people in the industry interviewed are still pessimistic about how much the adjustment of some rules can play.
The Middle Index Research Institute predicts that under the optimization of the third batch of land auction rules and transfer conditions, real estate companies are expected to improve marginally, and the overall unsold and withdrawal conditions may improve slightly, but the market's divergence continues.
China News Weekly, Issue 42 of 2021
Statement: The publication of the "China News Weekly" manuscript is authorized in writing