Since the central economic work conference at the end of 2016 proposed no speculation on housing and housing, the speculators left the market, and the high price bonus of developers was forced to cut. With the outbreak of the epidemic in 2020, the economy is facing a crisis. However, the determination of the central government to control the leverage ratio of real estate will not be reduced, which makes the real estate industry realize that the extensive and rapid growth lasting for nearly 20 years has gone completely. It is no longer a slogan to ask for benefits from management, but the reality that they will be eliminated if they have to do or not.
Almost every developer is forced to change from a new mode of making money and being forced to make a large amount of money.
Another change of times
Before 2002, Chinas real estate industry was still in the stage of land dividend. During this period, any real estate developer who has the ability to get cheap land may make extra profits.
At that time, the real estate market was just beginning, and the urbanization construction was also in the initial stage. A large number of real estate enterprises were established in this period. The demand of urban construction was highly consistent with the rapid rise of the industry. For developers, getting land means half the money in their pocket.
After 2002, Chinas real estate continued to maintain the trend of both supply and demand. On May 9 of this year, the Ministry of land and resources issued Order No. 11 provisions on the transfer of state-owned land use right through bidding, auction and listing. So far, the land transfer mode that has been followed for many years has been terminated, commercial, tourism, commercial residential and other business land are put into the market, and real estate officially enters the era of leverage bonus As long as the real estate tycoons get the money, they can take the land from the open market and build buildings.
Real estate development is a capital intensive industry. The bidding, auction and listing system makes Chinas real estate market a hot spot for global capital. During this period, rongchuang, Biguiyuan, Evergrande, Taihe, Fuli and other real estate companies successfully achieved scale expansion by using capital leverage, with sales leaping from 10 billion to 100 billion.
Bidding, auction and listing provides the local finance with economic construction funds, which makes the old city high-rise buildings stand. However, in the past 20 years, the house price and land price have also been increased, resulting in the high debt ratio of the whole real estate industry.
In order to curb the excessive housing prices and corporate leverage, the central government strengthened the regulation of real estate in 2017, and financial institutions began to tighten the credit of real estate companies in 2018. First tier cities have also entered a three-year shock decline or slow rise trend. However, some real estate companies still believe that the governments fiscal revenue and economic growth can not be separated from the real estate, and the financial dividend of real estate will continue.
The turning point will come in 2020. This year, the whole Chinese real estate industry has seen the determination of the government to control house prices and deleverage. According to incomplete statistics by Caijing reporter, as of October 31, 2020, 453 real estate enterprises across the country have issued bankruptcy announcements, with an average of 1.5 real estate enterprises being liquidated every day.
Affected by the epidemic situation at the beginning of the year, construction sites were shut down and sales offices were closed, which made it difficult for real estate enterprises to go. At the same time, developers are waiting for the governments rescue policy, hoping to return to the right track, continue to finance, expand the scale, and take land to build houses.
Since 2020, the monetary policy has indeed been loosened, and the liquidity of 1.75 trillion yuan has been released through three times of RRR reduction.
According to the statistics of Shell Research Institute, in the third quarter of this year, the scale of bonds issued by real estate enterprises set a new record. 307 bonds were issued at home and abroad, and the financing scale was about 324.7 billion yuan, up 14% year-on-year.
Every real estate enterprise wants to get money in the policy window period. However, in August this year, the Ministry of housing and urban rural development and the central bank clarified the financial Prudential Management System of the real estate industry, and enhanced the marketization, regularization and transparency of the financing of real estate enterprises.
After the overall tone has been laid, the standards and detailed rules will follow. The three red lines are like a tight hoop curse, which makes the real estate enterprises have to rein in their desire to borrow the new and repay the old, while controlling the asset liability ratio, net debt ratio and cash short-term debt above the passing line.
The three red lines refer to: 1. The asset liability ratio after excluding advance collection is greater than 70%; 2. The net debt ratio is greater than 100%; 3. The cash short debt ratio is less than one time. According to the number of touch lines, real estate enterprises are divided into four grades: red, orange, yellow and green. If they do not touch the line, the annual growth rate of interest bearing liabilities will not exceed 15%. Every time one line is touched, the upper limit of annual growth rate will be reduced by 5%. If all of them step on the line, the scale of interest bearing liabilities will not be increased.
Yu Liang, chairman of Vanke, believes that the three red lines have brought an end to the era of real estate financial dividend. Over the past two years, Huaxia Xingfu, which has a high leverage ratio, has already split half of its shares to Ping An group. However, the share price of Taihe, which has no clear bid, has dropped nearly 80% from its peak.
Under the regulation and control, the cost of land acquisition of real estate enterprises went up all the way, and the price reduction and sale further reduced the profit space.
Behind the change of policy and financing environment, the supply-demand relationship of real estate market has also changed quietly. With the growth of residents income slowing down and more than half of the urbanization process, real estate is transforming from the sellers market to the buyers market.
From land dividends, financial dividends to management dividends, the real estate era has changed twice. The era of no worries about selling houses and making big money by selling houses is gone. Quality, service, cost control and cash flow management become the hard indicators to determine the success or failure of real estate enterprises. Management dividends are beginning to show signs.
From 2019, the performance of major real estate companies will convey a message to investors: invest prudently and ask for dividends from management. But slogans are not persuasive. If management is good or not, numbers will speak.
In the new era, it is no longer profitable for developers to continue to sell their houses at low prices. They can only squeeze out more dividends from management, which not only helps enterprises to repay debts and deleverage, but also expand financing channels and get low-cost funds.
The financing interest rates of top 30 private real estate enterprises are listed in Table 2. Among them, Longhu has the lowest interest rate, with the interest rate of 4.50%; China Evergrande has the highest interest rate of 9.14%. Compared with Zhongliang real estate, sunshine city, Fuli real estate and Xincheng, Binjiang group and world trade group have lower financing costs.
Table 1: comparison of the sum of management and sales expense rates of real estate enterprises
Table 2: financing interest rates of some Chinese real estate companies selling top 30
Details and methodology determine success or failure
In the future, there will be more extensive real estate enterprises to be eliminated, and developers with rich and cheap land reserves still have more room for trial and error. But if they can not build a new competitiveness, they will be eliminated sooner or later.
Based on Vankes experience, Yu Liang thinks that there are three main points in the competitiveness of the management bonus era: first, the strategy is correct; second, the suitable person is matched; third, the organization is simplified; third, the operation is refined.
Whether its Vanke property, wanwei logistics, or Wanyi technology, Vanke has been developing diversified services and formats around its main business; the same is true for country garden, which includes construction robots, agricultural green ecology, etc.
Another important principle is the respect and understanding of talents.
Country garden introduced doctoral students in 2014, and the general managers of key areas have the indicators of mentoring and mentoring. Country garden hopes that after these talents infiltrate into the organization, they can systematically transform the extensive management before country garden.
Yu Liang found that a junior college student is more attentive than an undergraduate because he has a stronger sense of achievement and more energetic in his work.
In the past two years, country garden has gradually transformed its internal functional departments into subsidiaries, such as independent accounting of financial and legal departments. In the past, when a regional company invested in buying land, the legal department reviewed the bidding, auction and listing, and the wages of the two people were the same. But obviously, the latter is more difficult. Now, after the subsidiary company, the division of work types is more detailed, the performance can be quantified, and the salary standard is more reasonable. To really get management dividend, the reform of real estate enterprises is far more than this. For example, how many of the most important land acquisition links were taken blindly at the beginning, and then the rate of return on investment was appalling. However, the general manager of the region took turns and the mess was handed over to the next one. Whether the investment assessment of a piece of land can follow others depends on the return on investment, the share of group funds and the profit efficiency of funds? Some leading enterprises have begun to set new investment assessment standards. Fine management can not be achieved overnight, but details and methodology determine the success or failure. In 2021, in addition to continuing to reduce leverage, tapping management dividends will take more time for developers. The central government once again sets the tone of the real estate market to tighten the regulation and control of the string: Farewell to the rise but not the fall of the real estate prices in one city fall 46.9% from the highest point in the northern 22 cities housing prices over 10000: more than half of the top ten cities in Beijing, Tianjin and Hebei fall. Source: Chen Hequn, editor in charge of financial magazine_ NB12679
In the past two years, country garden has gradually transformed its internal functional departments into subsidiaries, such as independent accounting of financial and legal departments. In the past, when a regional company invested in buying land, the legal department reviewed the bidding, auction and listing, and the wages of the two people were the same. But obviously, the latter is more difficult. Now, after the subsidiary company, the division of work types is more detailed, the performance can be quantified, and the salary standard is more reasonable.
To really get management dividend, the reform of real estate enterprises is far more than this. For example, how many of the most important land acquisition links were taken blindly at the beginning, and then the rate of return on investment was appalling. However, the general manager of the region took turns and the mess was handed over to the next one.
Whether the investment assessment of a piece of land can follow others depends on the return on investment, the share of group funds and the profit efficiency of funds? Some leading enterprises have begun to set new investment assessment standards.
Fine management can not be achieved overnight, but details and methodology determine the success or failure. In 2021, in addition to continuing to reduce leverage, tapping management dividends will take more time for developers.