On March 17, the A-share real estate sector performed brightly, with 13 real estate stocks including Special Development Services, Sunshine City, World Union Bank, Tianbao Infrastructure, I Love My Home, Jiakai City, Suning Universal, and Newtown Holdings all reaching their daily limit.
As of yesterday’s close, the real estate sector of Hong Kong stocks rose by about 10%, and the mainland property stocks rose as a whole. Sunac China rose 59%, CIFI Holdings rose nearly 33%, Long Light Group rose more than 42%, Country Garden rose more than 28%, Shimao Group rose more than 32%, China Evergrande rose more than 17%, and Vanke A rose more than 7%.
Industry insiders said that the sharp rise in the real estate sector yesterday was related to the intensive voice of many ministries and commissions on March 16, but the investment in the real estate sector still needs to be rational.
Multiple ministries and commissions voiced intensively on real estate
On March 16, the Financial Stability and Development Committee of the State Council pointed out at a special meeting, “Regarding real estate companies, it is necessary to study in a timely manner. And put forward a powerful and effective response plan to prevent and defuse risks, and propose supporting measures for the transformation to a new development model.”
Immediately, the People’s Bank of China stated that it will adhere to seeking progress while maintaining stability, and prevent and defuse real estate market risks. The China Banking and Insurance Regulatory Commission said that institutions are encouraged to carry out M&A loans in a stable and orderly manner, with a focus on supporting high-quality housing companies to merge and acquire high-quality projects of difficult housing companies. The China Securities Regulatory Commission said that it will actively cooperate to resolve the risks of real estate enterprises. The foreign exchange bureau stated that it will cooperate with relevant departments to promote the healthy and stable development of the real estate market and the platform economy. The Ministry of Finance said that it does not have the conditions to expand the pilot cities for property tax reform this year.
In general, many ministries and commissions have made intensive voices, one is to emphasize the prevention and resolution of real estate market risks;
How to prevent and defuse risks attracts attention
“The meeting of the Financial Committee raised the development of real estate enterprises as a problem, which means that the importance of real estate enterprise problems has increased. “Zhuge Housing Search Data Research Center said that the content of the meeting’s statement released a positive signal to real estate companies.
“It is expected that measures to prevent and defuse the risks of real estate enterprises will be introduced in the later stage.” Liu Shui, research director of the Enterprise Division of the China Index Research Institute, told the “Securities Daily” reporter that on the one hand , is to focus on “prevention”, inThe release of demand and the easing of financing have been adjusted, so that the sales and financing of real estate enterprises are smooth, the cash flow is improved, and the risk of real estate enterprises is prevented from recurring; Accelerate the clearing of risks and speed up the resolution of current risks. The China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission will increase financing for mergers and acquisitions such as loans and issuance of mergers and acquisitions bonds, and give greater support to mergers and acquisitions.
According to the statistics of the Middle Finger Research Institute, up to now, the financing quota for real estate mergers and acquisitions through various channels has released more than 150 billion yuan. In addition, three national financial asset management companies have taken action, and the “action goals” are all to resolve risks in the real estate industry.
Where is the new development model heading?
The meeting of the Finance Committee pointed out “proposing supporting measures for the transition to a new development model”. Previously, the Central Economic Work Conference at the end of 2021 clearly stated that the real estate industry should “explore new development models”. This year’s government work report also clearly pointed out that “exploring new development models, insisting on both renting and purchasing, and accelerating the development of the long-term rental market”.
“Considering the current real estate adjustment period, the ‘high debt, high leverage, high turnover’ real estate development and operation model formed in the past is unsustainable.” Liu Shui said, Therefore, in the future, the low-debt and low-leverage business model of real estate companies will be encouraged and become an important direction for the new development model.
In this regard, Zhuge Housing Data Research Center believes that the new development model mainly includes urban renewal, rental housing, and asset-light development. The current domestic housing model is still dominated by commercial housing, and the future market supply entities should be more diversified, especially the development of rental housing will be vigorously supported, including the improvement of supporting measures for rental housing. Real estate companies should also actively move closer to this model.
Regarding the new development model of real estate companies, Pan Hao, a senior analyst at Shell Research Institute, told the “Securities Daily” reporter that the solution proposed in recent years to “prominent housing problems in big cities” , requiring more participation from housing companies in affordable rental housing, housing needs of new citizens, urban renewal, and renovation of old communities, not only in development and construction, but also in operation and management. This is a challenge for real estate companies to add more “operations” after the original “land purchase-construction-sale-delivery”, so as to obtain long-term benefits from asset management and asset operation. This process also needs the support of “slow” funds, so that the cost of capital can be moderately reduced, so that real estate companies have the conditions to earn “slow” money, abandon the logic of “funds – land – more funds – more land”, and move towards a virtuous circle.