The era of China's real estate "skyrocketing" has come to an end, and 2023 will still be a cold year for China's real estate industry. The decline in market demand, lack of confidence, the decline in housing prices, the explosion of real estate companies, and the development of policies will run through the real estate industry in 2023.
The cold wind of the real estate industry is also blowing to the capital market. Since the beginning of this year, the stock price of real estate stocks has collectively suffered a waterloo. According to Futubull data, among the 150 listed companies in the Hong Kong real estate sector, there are as many as 141 companies' stock prices since the beginning of this year**, of which 3 have fallen by more than 90% and 30 have fallen in the range of 70%-80%.
The number of real estate companies with a market value of 100 billion yuan has declined further this year, and now includes the A-share Vanke A (000002SZ) and Poly Development (600048SH) and other 100 billion market value real estate companies are left. Among the 7 real estate companies with a market value of 100 billion yuan, there are 3 local real estate developers in Hong Kong, namely Sun Hung Kai Properties (00016.).HK), Cheung Kong Group (01113HK) and Henderson Land (00012hk)。
Frozen real estate
After a period of large-scale and rapid development characterized by "high debt, high leverage, and high turnover", uncertainty risks including the impact of the new crown epidemic, geopolitics, and the Federal Reserve's interest rate hike have surged, and the balance sheets of all walks of life and residents have undergone drastic changes, and the real estate industry has also faced major changes in market supply and demand. This change has led to a significant divergence in land auctions, sales, customers, confidence and debt, a trend that will be particularly prominent in the property market in 2023. Therefore, real estate companies have ushered in unprecedented challenges in this year.
In terms of development trends, the real estate industry is gradually transforming from the "incremental era" of rapid growth to the era of "simultaneous increase and storage". In 2023, the market pattern has undergone fundamental changes due to factors such as slowing growth, increasing financing pressure and structural adjustments.
As far as the first end is concerned, with the decline in the willingness and ability of important property market participants, including residents, to take risks, the dual pressure of "weak sales" and "debt risk" is tilted towards real estate companies, and liquidity risks are also coming, and the market has also seen a shortage of supply capacity and willingness to supply in stages. The overall weakness of the supply side has led to a lack of momentum in data such as real estate development investment and new housing starts.
According to data from the Bureau of Statistics, since the second half of 2021, the year-on-year growth rate of China's real estate development investment has entered a negative growth stage. From January to November this year, the national real estate development investment amount was 104 trillion yuan, down 9 percent year-on-year4%。Among them, the willingness of the top 100 real estate companies to acquire land is relatively sluggish.
According to data from the CRIC Research Center, from January to November, the investment amount of the top 100 real estate companies in land fell by 13% year-on-year. As of the end of November, nearly half of the top 100 real estate companies in sales have not acquired land.
In addition, the poor financing channels also make it difficult for real estate companies to cook without rice.
Since the beginning of this year, in order to prevent risks and promote real estate enterprises to restore their self-hematopoietic ability, the policy has continued to strengthen the review of refinancing housing-related business. From January to November, China's real estate development enterprises have 117 trillion yuan, down 134%。
The decline in the area of new housing starts was even greater, from January to November, the area of new housing starts nationwide was 8700 million square meters, down 212%, the enthusiasm of enterprises to start investment is still weak as a whole.
As far as the demand side is concerned, the demand of China's real estate industry has continued to be sluggish this year, and market confidence is still bottoming out.
From January to November, the sales area of commercial housing was 10100 million square meters, down 80%, and the sales of commercial housing were 105 trillion yuan, down 5 percent year-on-year2%, the year-on-year decline continued to expand.
Judging from the sales area of commercial housing and the trend of sales growth, the effect of China's real estate policy has not yet fully emerged. On the whole, the fundamentals of the real estate market in 2023 will be weak, and there will be a lack of momentum at both ends of supply and demand, and the policy efforts in the second half of the year will achieve positive results or come in the future.
Which real estate companies' capital chains have collapsed?
Under the guidance of policies such as no speculation in housing and three red lines, the business model of high turnover, high leverage and high debt in China's real estate industry has gradually come to an end, the "highlight moment" of real estate no longer appears, and the fate of real estate companies is also changing.
In 2023, with the in-depth adjustment of the real estate industry, the decline in market demand will be further amplified, and the blood recovery and hematopoietic capacity of some real estate companies will also be unbalanced. This situation has led to a major test of the solvency of real estate companies. Since the explosion of China Evergrande, more and more real estate companies have faced debt defaults and even fallen into the whirlpool of bankruptcy.
According to the statistics of the people's court's announcement website, after searching with "real estate" as the keyword, and excluding the list of duplicate distribution enterprises and non-real estate enterprises, it is found that more than 220 real estate enterprises were involved in the relevant bankruptcy documents issued during the year.
Most of these real estate bankruptcies are small and medium-sized real estate companies in third- and fourth-tier cities, but there are also some well-known companies that are well-known and ranked in the top 100. These bankrupt small and medium-sized real estate enterprises often face the problems of limited financing channels and large short-term debts, so they are more likely to fall into a capital chain crisis when the sales market is sluggish.
There are not a few real estate companies that have defaulted on their debts, and many large real estate companies are also struggling to deal with debt difficulties. According to Finet, many of the top 100 real estate companies have fallen into debt default since this year, including Sino-Ocean Group (03377HK), China Aoyuan (03883HK), China Central Real Estate (00832HK) and many other real estate companies have defaulted on their debts for the first time.
These defaulted real estate companies have difficulties in the development of new projects, coupled with the downward demand in the market, these shocks have led to downward pressure on the sales side of real estate companies, from January to November this year, the cumulative sales of most real estate companies fell by more than 30% year-on-year.
In view of the risk of debt default of some real estate companies, the financial management department has issued a series of support policies, but the risk clearance still needs a process, most of the real estate companies are still in the whirlpool of debt default, only a small number of real estate companies have a turnaround in debt default, such as Sunac China (01918HK) recently announced the successful restructuring of its overseas debt, becoming the first large-scale real estate company to complete all the processes of onshore and offshore debt restructuring, which also gives hope to many large real estate companies. In addition, China Aoyuan's US$4.2 billion restructuring plan may also be approved.
On the performance side, due to the impact of multiple factors, the operating performance of many listed real estate companies has suffered a waterloo.
According to Flush iFinD data, 42 of the 105 listed companies in the Hong Kong real estate sector incurred losses in the first half of this year. Enterprises with large losses are mainly large real estate companies with problems in the capital chain, such as China Evergrande (03333.).HK) lost more than 33 billion yuan in the first half of the year, and Sino-Ocean Group and Sunac China lost 183 billion yuan respectively700 million and 153700 million yuan.
In addition to the decline in performance at the operating level, these large real estate companies are mainly due to the provision for impairment of property projects.
It is worth noting that many of these companies have increased their revenue and net profit in the first half of this year, but some of them have achieved this through "meat cutting", such as selling land and equity. There are also some real estate companies in order to achieve the goal of repayment, embarked on the road of exchanging volume for price sales, and this is also one of the ways to alleviate the current financial problems.
When will the bottom of the housing market come?
Whether the real estate market can develop healthily, the stability and reasonable guidance of the policy will be crucial. Different from the cold of the first class, the policy side continues to release positive signals, and these signals have a strong meaning of "supporting the bottom".
Recently, the high-level meeting set the tone for the real estate industry and put forward the strategy of "first establishing and then breaking". According to the general view in the industry, promoting the stable and healthy operation of the market is an important prerequisite for the subsequent series of reform and innovation in the real estate field.
On the demand and financing side of the real estate industry, the policy has been significantly strengthened recently. On the demand side, the housing purchase policies of first-tier cities in China have been greatly adjusted, which is expected to drive second- and third-tier cities to follow up and adjust. Some cities in China have also improved the policy toolbox in terms of optimizing the identification standards for ordinary housing, optimizing the supervision of pre-sale funds, increasing housing purchase subsidies, and reducing intermediary rates, so as to promote the release of demand for rigid and improved housing.
In terms of financing, the main contradiction in the current real estate market is the credit risk of real estate developers, and the policy points out that it is necessary to resolve real estate risks prudently and meet the reasonable financing needs of real estate enterprises with different ownership systems without discrimination. Recently, many domestic banks have met the financing needs of real estate enterprises, alleviating some of the serial credit panic of private real estate enterprises and insuring real estate enterprises.
For the question of whether China's real estate has been at the bottom, Gao Shanwen, chief economist of Anxin, recently believed, "At present, from almost all angles, it is an indisputable fact that the real estate market is overshooting." ”
Gao Shanwen said: "Next, to observe whether the overshoot real estate market has 'bottomed', we need to pay close attention to two major conditions: on the one hand, whether the liquidity crisis of the real estate industry has been blocked, and the intuitive indicator is that the financing cash flow of real estate enterprises can stop 'bleeding' and restore financing cash flow under normal market-oriented conditions." On the other hand, there is the fading of the 'scarring effect', which requires residents to gradually regain their willingness to hold risky assets. ”
In terms of the first condition, the real estate liquidity risk is expected to improve significantly in the first half of next year, and with more and more policy support, it is believed that the financing of real estate enterprises can return to normal. However, in terms of the second condition, although the 'scarring effect' has begun to subside since the third quarter of this year, it remains to be seen when it will be completely eliminated. However, although it is not ruled out that there will be a recurrence in the future, the direction can be optimistic. Gao Shanwen said.
It is expected that in 2023, the year-on-year decline in the area of new construction and real estate development investment will still be large, and in 2024, with the further development of investment stabilization, the "three major projects" will be accelerated, and the decline in real estate development investment is expected to gradually narrow.
Finet believes that from a short-term perspective, after the continuous adjustment of the industry, the investment logic of the property market has changed in the past, the investment demand has been squeezed out, the real estate market is gradually returning to its residential attributes, and the industry is expected to gradually return to equilibrium at the level of rigid demandIn the long run, short-term pressure will not change the long-term stable and healthy growth logic of the property market. In the context of the urbanization rate still has room for increment, the family size is showing a trend of miniaturization, and the demand for housing quality is increasing, the scale of rigid demand and improved demand will continue to support the real estate industry to achieve balanced development at the level of rigid demand.
When the night finally dawns, keep the clouds open and see the moon.
Author: Far away