With their own situation, integrated management of cash flows
Editor’s note: This article is from the micro-channel public number “Dingzu Yu assessment of the property market” (ID: dzypls), Author: CRIC research center.
“
Since the end of February, the new policy for centralized land supply in 22 key cities has aroused the attention of the industry. As of March 3, six cities including Zhengzhou, Tianjin, Qingdao, Jinan, Shenzhen and Ningbo have responded to follow up, and the future is increasing. More cities may formally implement and implement a centralized land supply policy.
The centralized land supply in 22 cities is beneficial to all participating entities, but the concentration of the real estate industry continues to increase. Under the background of the differentiation of real estate enterprises, for large-scale real estate enterprises, they have advantages in various aspects such as funds and can participate more Land transfer, cooperation opportunities will also increase, and the overall competitiveness of small and medium-sized real estate companies in terms of land acquisition, financing, and strategic layout is obviously not as good as that of large-scale real estate companies, which means that the future development track of small and medium-sized real estate companies is narrowing.
With the implementation of centralized land supply policies in major cities, opportunities for small and medium-sized real estate companies will focus on sub-optimal plots. Some deep-farming small and medium-sized real estate companies can focus on regions to focus their efforts. In addition, further deepen the cooperation model and diversify the pressure on funds , It has little impact on small and medium-sized real estate companies in core cities other than 22 cities, but the key to such real estate companies is to continue to consolidate their advantages in deep cultivation, while preventing the impact of external shocks.
“
01
Small and medium-sized real estate companies may miss popular land
From the perspective of current corporate strategy and market performance, it will be a general trend for real estate investment to return to high-energy cities with good fundamentals. The 22 cities with centralized land supply, mainly first-tier cities and key second-tier cities, have become large-scale cities. The main battlefield of real estate companies, small and medium-sized real estate companies due to capital constraints, their own land acquisition capabilities are relatively weak, and the focus of investment continues to sink.
Under the centralized land supply model, the land auction market information disclosure is more open and transparent, and multiple plots can be comprehensively evaluated and compared. Large-scale real estate companies will focus more on the competition of high-quality plots, and the future will not rule out further strengthening of “land grabbing” “expected. Under such circumstances, it is more difficult for small and medium-sized real estate companies to obtain land. In the future, they will consider switching from popular plots to sub-optimal plots to seek opportunities.
Small and medium-sized real estate companies must do a good job of value evaluation when participating in the bidding of sub-optimal plots. The comparison results of plots directly affect the realization of investment goals. Therefore, the profitability and development of sub-optimal plots must be within the scope of the enterprise .
Actually, 22 key cities have different market conditions, so there are some differences in the expectations of land grabbing. From the perspective of the cycle of commercial housing deactivation and land digestion in various cities, cities such as Zhengzhou, Fuzhou, Changchun, Shenyang and other cities have too much supply, and there is a lot of pressure to deactivate, and the market has a strong wait-and-see sentiment.
In this city with greater pressure to dissipate, the pressure of competition is relatively weak after the New Deal. Such deep-growing real estate companiesThe advantage is that they have more accurate judgments on the value of land parcels and can focus on capital to focus their efforts. In the future, key investment strategies are needed to deepen the city’s high-quality land parcels, and continue to consolidate the advantages of core cities, which will be more beneficial to corporate development.
Picture: 22 cities’ commercial housing detoxification cycle and land digestion cycle
Note: The horizontal axis is the period of commercial housing removal (months), and the vertical axis is the period of land digestion (years)
Data source: CRIC
02
The cooperation model has deepened but the logic has changed
In the face of high land acquisition thresholds and high costs in first- and second-tier cities, some real estate companies have reduced their independent land acquisition and development, and opened up the market in a cooperative mode, such as Landsea, Joy City, Financial Street and other real estate companies.
Among them, Landsea is the most typical one. In the development of projects in first- and second-tier cities, small stock trading and agent construction are the main models, and the average equity of project reserves is maintained at about 30%. Another example is Joy City. Its projects are mainly located in key cities such as Beijing, Shanghai, Chengdu and Nanjing, which overlap with 22 cities. However, from the perspective of project rights and interests, Joy City is still dominated by cooperation.
Table: Distribution of Major Projects in Joy City
Note: According to the 2020 interim report, the land bank details are sorted out
Data source: CRIC
With the implementation of the centralized land supply policy, the cooperation model of small and medium-sized real estate enterprises will be further deepened, but the cooperation logic has changed. Prior to this, the purpose of real estate cooperation in acquiring land was mainly to share cost pressures and use experience advantages to seek rapid market expansion.
Under the centralized land supply model, on the one hand, competition in 22 cities has intensified, and the demand for liquid funds of city companies during the land transfer period has increased, which is an important factor driving cooperation. Under the centralized land supply model, the waiting period for replenishment is prolonged and the uncertainty in bidding is also increasing. Real estate companies are facing higher opportunities for cost.In order to successfully obtain target plots, some large-scale real estate companies will be more inclined to seek cooperation under cost pressure. Therefore, based on their own strategic needs, small and medium-sized real estate enterprises with certain financial capabilities, although they do not have the ability to independently acquire land, can open up the market through “grouping”.
On the other hand, the qualification to participate in the auction may become an important bargaining chip for small and medium-sized real estate companies to seek cooperation. At present, the detailed rules for centralized land supply in 22 cities have not yet been issued. However, in terms of market competition and policy regulation, there are expectations that real estate companies may participate in auctions and qualifications. This means that, assuming that the company has sufficient funds during the urban land transfer period, it may only be able to bid for a few target plots due to the number of bids, qualifications, etc., and abandon some value plots. Some large-scale real estate companies may In the form of cooperation, we can obtain more high-quality land parcels with the help of the qualifications of small and medium-sized real estate companies to participate in the auction.
In general, the new policy of centralized land supply has made it more difficult for small and medium-sized real estate companies to acquire land in 22 cities. However, under the expectation of financial pressure and qualification restrictions, cooperation will increase, and it will also bring small and medium-sized real estate companies to the first and second tier cities. Here are some opportunities.
03
The impact of non-22 urban real estate companies in core cities is limited
The impact of the New Deal for Centralized Land Supply on real estate companies mainly depends on the weight of 22 cities in the strategic layout of enterprises. For real estate companies that involve 22 cities in multiple core cities, the impact will obviously be greater.
But at present, a large number of medium-sized real estate companies have sunk into weak second-tier and third- and fourth-tier cities. The main core cities are not in 22 cities, or only a few cities, so the impact is more limited, such as Junfa Real Estate, Agile Holdings, Large Tang Real Estate and so on. Taking Junfa as an example, Junfa has been cultivating the Yunnan region and Kunming as the core city. From the perspective of land bank structure, Kunming’s land bank accounted for 90% by the end of the first half of 2020. In addition, the land bank includes three projects in Shanghai. All are cooperative projects.
This type of real estate enterprises have obvious local and deep-farming characteristics. Although the 22-city centralized land supply policy has little direct impact on them, enterprises can continue to deepen their advantages and consolidate their advantages, but it does not rule out that they will be affected by the transfer of investment by some real estate enterprises. Due to intensified competition in 22 cities, some large-scale real estate companies and strategic small and medium-sized real estate companies in first- and second-tier cities with weaker competitiveness may spill over to cities around 22 cities and seek high-quality land because they cannot obtain land. Then these core cities are not Small and medium-sized real estate companies in 22 cities may be squeezed from outside.
With the disappearance of land dividends and capital dividends, and the superposition of various policy controls, the new environment will test the strategy of real estate companies. However, the overall competitiveness of small and medium-sized real estate companies is weak, and they need to be more cautious in responding to market changes. Given the large increase in supply and limited capital, it is particularly important for small and medium-sized real estate companies to coordinate their cash flow management based on their own circumstances, and make arrangements for funding.
Under the policy of centralized land supply, it is more difficult for small and medium-sized real estate companies to invest in 22 cities, or they may completely abandon the hot spots in hot citiesHowever, due to the expected existence of the number of auction participation and qualification restrictions, small and medium-sized real estate companies should make good use of their qualification as a bargaining chip to deepen cooperation with large-scale real estate companies to obtain key urban projects. For small and medium-sized real estate companies whose core cities are not in 22 cities, it is the key to continue to consolidate their advantages in deep cultivation, but also to prevent external shocks.
Table: Specific progress on “centralized land supply” in some cities
Information source: CRIC