Specific performance: second-hand premium, house lottery
The performance of price limit is reflected in the obvious second-hand premium. Due to the existence of new housing price limit, the phenomenon of second-hand housing premium is more common. For example, the selling price of yanheng Binjiang garden new house in Shangcheng District of Hangzhou is about 70000, and the average selling price of second-hand houses around is about 88000, and the second-hand premium rate is more than 24%. The highest selling prices of commercial housing in Shenzhen and Beijing are also significantly different from those of the surrounding second-hand buildings. The opening prices of many new buildings are lower than those of the dilapidated second-hand houses nearby. But this is actually unreasonable. For the same location and supporting facilities, although the project cost of the new project will be reduced to a certain extent due to the impact of price limit, the quality of the blank house will not be greatly different. If it is not for the huge difference in decoration standards, the new building should enjoy the same price as the second-hand house.
The phenomenon of house lottery is frequent, and limit price and strike new has gradually become the norm. It is precisely because of the obvious second-hand premium rate, the selling price of new houses is significantly lower than that of the surrounding second-hand houses. The mentality of buy is to earn makes investors who did not buy new houses also participate in the purchase of real estate in advance. Too many buyers lead to the lottery mechanism, such as Hangzhou, Shenzhen, Nanjing, Chengdu, Quanzhou, Nanning and other cities, many projects have won the lottery The rate is often a single digit, and limit price and strike new has gradually become the norm.
Different types of price limits
Price limit can be divided into two types: hard limit and soft limit. The hard price limit is to stipulate the selling permission price of commercial housing when land is transferred. For example, Nanjing citys No.07 transfer announcement in 2020 involves the transfer of eight pieces of residential land, which is the first batch of plots in Nanjing to limit the price of house price and compete for land price. The announcement clearly sets the sales price limit of the blank house, and the maximum price shall not exceed 110% of the limit price of the blank house. For the land sold in Ningbo this year, the highest average selling price (including decoration), the highest selling unit price (including decoration) and the highest selling unit price of parking spaces are stipulated in Ningbo, which is more detailed and strict.
The so-called soft limit price means that there is no regulation on the price of commercial housing sales license in the process of land transfer, but in fact there are certain restrictions on the application of pre-sale permit. Due to the need to determine the price of commercial housing when applying for pre-sale permit, if it is too high, it may not be approved. The developer needs to adjust the new house price according to the surrounding second-hand house price, forming a tacit agreement of soft limit price without explicit provisions. For example, Hangzhou, the No. 23 plot of land transferred in 2018, namely Yanlord Riverside Park mentioned above, strictly follows the price limit policy in the implementation process, but there is no clear provision in the land transfer document to limit the sales price. Since July 2019, with the emergence of double limit land in Hangzhou, the price limit mode has changed from the original soft price limit to the hard price limit, which completely eliminates the original possible relaxation expectation in the implementation process due to no explicit provisions.
Practice of price limit in different regions
Price limit is a recessive policy, so the actual implementation scale is more important. Generally speaking, the current price limit policy is still being implemented, but some side effects have also been noticed, so the implementation level has been liberalized. For example, Beijing has sold some land with unlimited price, and has issued relevant documents to deepen the reform of release, management and service, and optimize some specific provisions on the implementation level of pre-sale permit. Hangzhous restriction policy is still more detailed, which stipulates the average sales price of rough products and decoration price, while Ningbo also has clear regulations on the sales unit price of parking spaces on this basis.
Price limit policy reshapes real estate development process
The existence of land value-added tax has made it of little significance for enterprises to hoard land, so it is more reasonable to speed up the development. The price limit completely blocks the possible profit model of real estate development enterprises to trade time for space. Even if the market price rises, the price of the enterprise is determined (unless the game policy is relaxed).
In this case, enterprises can only increase profits by shortening the payment collection time or controlling the cost of product development.
This also makes the business focus of development enterprises change significantly. In price limiting cities, product quality and premium rate are no longer important. Because regardless of the quality, the price results are consistent, which has led to the decline in the quality of real estate in recent years. CCTV 315 party exposed the quality problems of some large-scale development enterprises after the completion and acceptance of their houses - but we have reason to believe that this is not the problem of one or two companies, but may be a common problem in the industry. However, for news reports, the exposure of two big companies can attract more attention and alert the society. Capital cost competition is more important when enterprises get land, because there is no longer too much suspense in the calculation of price, and it is more difficult to overtake on the curve in the core city.
Changing regional energy level preference
If there is no price limit (even if there are restrictions on purchase and loan), the advantages of first tier cities relative to second tier and third tier cities are particularly obvious. In the first tier cities, even if the land price is too high, they can also unravel through the way of continuous waiting, and there is no doubt that the sales certainty of the first tier cities is stronger.
But price limits have changed that. In the first tier cities, housing prices are limited, and competition for land prices has greatly reduced the vitality of the development model. In the core cities, the projects with small profits or even losses have increased significantly. In contrast, some second and third tier cities have become the profit centers of development enterprises by virtue of more flexible pricing environment.
Of course, the overheated second tier cities will also face the problem of price limit. Enterprises have been facing the trade-off between price limit and market capacity. If there is no price limit, it is often wrong for enterprises to sink. However, in the price limit environment, sinking or focusing has become a problem that needs to be analyzed concretely.
Occupy second hand and increase short-term demand
Although the starting point of price limit is to calm down the market, sometimes it will increase market demand. In some cities, due to
Under the price limit policy, the discount between the price of new houses and that of second-hand houses can reach 30%, which makes the buyers who did not buy new houses also participate in the lottery of new houses, which leads to the first-hand houses crowding out the second-hand demand. According to the annual report of the provident fund in 2019, the proportion of individual housing loans granted by provident fund decreased from 36.98% in 2018 to 31.87%, while the proportion used for new housing increased by nearly 6%, which confirmed the transformation of demand.
Price limit reshapes the upstream and downstream of real estate
Policy driven completion peak
It is remarkable that after 2016, although Chinas new housing construction area has been on the rise, the growth rate of completed area has stopped. Development enterprises do collectively lengthen the development cycle. According to the data of 40000 residential areas, the average period from opening to delivery in 2015 has increased from 18 months in 2015 to 23 months in the fourth quarter of 2019. The construction technology is not enough to make significant changes in these short years. We believe that the main reason for the one-time extension of the development cycle is the price limit.
Usually, the developer will promise a reasonable delivery period, because the reasonable delivery period can match the reasonable price. Once the delivery deadline is too late, it may lead to a decline in the enthusiasm of consumers. However, in the limited price environment, due to the restriction of the selling price itself, the enterprise will choose to deliver the house at the latest (but sell the earliest) within the scope allowed by law, which can maximize the sales return and delay the outflow of construction and installation.
Of course, the development cycle cannot be extended indefinitely. After the development cycle is extended to the limit allowed by law, the completion peak appears. This is the case in 2020-2021. According to the guidance of enterprises on the area to be completed in 2020, the planned area to be completed in 2020 will increase by 31.5% compared with the planned amount in 2019 and 32.8% higher than the actual completed area in 2019. It can be said that the delivery peak after 2019 is an objective result of price limit. This has also brought about some cyclical fluctuations in the completion related industrial chain.
The property management industry also has a peak of revenue growth due to the emergence of the peak delivery after 2019.
Slightly increase development investment
The price limit makes the new house replace the second-hand house, so the real estate development investment can be slightly increased, which has a positive effect on the total demand for relevant raw materials.
Bad money drives out good money
As the product premium itself no longer exists, it also makes the upgrading of products and raw materials unnecessary. Under the premise of meeting the requirements of laws and regulations, enterprises will choose some cheaper supply as far as possible. This has affected the total demand of some industries (such as the fine decoration and repair of public buildings), and may also affect the survival of the fittest in some industries. Quality companies can not show their advantages (such as waterproof materials).
Not good for housing agents
Due to the price limit of new houses, the new market basically needs lottery numbers, and the necessity of brokerage services for new house transactions has also decreased significantly. Developers often use their own sales team directly to sell in the sales office. The demand for second-hand housing transactions has also been affected to some extent. In Beijing and Hangzhou markets where the price limit policy is relatively strict, the number of second-hand housing transactions has continued to decline steadily after 2016-2017, and the transaction area of second-hand housing has also significantly shrunk. In price limited areas, the activity of the housing brokerage industry has been affected to a certain extent.
The industry chain may change with the weakening of price limit
Under the background of housing speculation, real estate policies are expected to remain stable. Some regions, such as Shenzhen and Nanjing, have overheated markets, and some restrictive policies will appear in these regions. However, todays restrictive policies are mainly demand limiting policies and rarely use price limiting policies.
In other places, price limits have been loosened. For example, Hengyang City decided to suspend the implementation of the notice on standardizing the sales price behavior of new commercial housing in urban areas from January 1, 2019 due to the stability of local sales prices and the return of rational real estate market. Another example is that on March 5, 2020, Dongguan issued the notice on further optimizing the management of the sales price declaration of newly built commercial housing. When it is allowed to apply again, the price of pre-sale permit should be slightly adjusted, with an increase of no more than 5% and an unlimited reduction. More regions do not need explicit policies. Price limit policy itself is not an explicit policy, and most places do not need to issue a document to cancel or adjust. At the same time, in some cities, second-hand housing prices continue to decline, and the difference between the first and second-hand housing prices has narrowed or even disappeared, which means that the price limit policy has been relaxed.
Changsha issued the Interim Measures on price control of commodity housing in Changsha at the end of 2017, which adjusted the price limit to profit limit. On December 11, 2019, the notice on clarifying the composition of commodity housing price supervised by the cost law in our city was issued, which expanded the scope of restriction from the original price limiting housing to all commercial housing. The calculation method of house price is formulated in detail in the two documents. The price of commodity housing = cost + profit + tax, and the profit is 6-8% of the cost. Although there will still be a limit on the average price of sales, the price limit has become more relaxed because it is based on the cost of profits.
Of course, all localities will make some revisions and patch the price limit, which objectively indicates that the price limit may exist for a long time. The purpose of price limit relaxation is not to stimulate the market, but to avoid excessive widening of the price difference between the primary and secondary markets due to the increasingly obvious side effects of the policy.
The profit space of enterprises is still limited, but the significance of improving quality is reappearing. The completion period will be shortened appropriately, and the development quality and project quality may be improved. At the same time, the re marketization of new house prices can avoid chaos such as lottery buying and power rent-seeking. The reduction or even disappearance of the difference between the first and second-hand house prices will squeeze the demand of investors, make the effective demand better show and be met, and reduce the distortion degree of market transaction data. The recovery of the occupied second-hand housing demand will be conducive to the active housing brokerage industry, but also conducive to easing the mismatch between supply and demand to a certain extent.
The gradual loosening of price limit itself is also conducive to the recovery of enterprises enthusiasm for land acquisition. Under the limited price environment, the profit space of enterprises is limited, and the possibility of loss is not small. Although enterprises may increase construction and investment, they will control the scale of land acquisition. Only by gradually loosening the price limit can enterprises see a greater profit.
Affected by the epidemic situation in February and March this year, the land construction area and total transaction price decreased compared with last year. Subsequently, with the gradual recovery of the epidemic situation and the relaxation of local policies (including the cancellation or adjustment of the price limit policy), the land market trading volume increased significantly from March to June. While the market is active, the premium rate is also stable and healthy.
Grasp the underestimation and high sales volume, optimistic about the industry leader
We believe that the price limit policy will continue to weaken the margin, which is conducive to maintaining a more stable profit expectation of the industry. At the same time, the current valuation of property stocks is cheap, and will enter the peak of selling again after July. We are optimistic about industry leaders and recommend Poly Real estate, Longhu group, Xuhui holding group, Shimao Group, Jindi group, Vanke A, rongchuang China, Binjiang group and joy city.
Source: Wall Street news editor: Yang Qian_ NF4425