More Than Half Of The First Batch Of Centralized Land Supply Did Not Make Money? The Second Batch Of Release Of Profit Space And "Lottery"

At the end of August, Hangzhou officially released the second batch of centralized land transfer announcements.

According to the announcement, the second batch of land has 31 plots of about 2873 mu, with a total floor area of about 4.66 million square meters and a total starting price of about 62.9 billion yuan, and is planned to be transferred from October 12 to 13. At the same time, Chengdu and Nanjing also revised the rules for the second centralized land supply and auction. The three cities have one thing in common, that is, the premium rate ceiling of the auction is below 15%, and most of the plots in Chengdu are 9% - 11%. After the premium rate reaches the peak, Nanjing will adopt the "lottery+pre-sale condition improvement", and increase the pre-sale condition of commercial residential buildings to 50% of the completed investment in residential buildings.

In fact, according to the regulations of the Ministry of Natural Resources, when the premium rate of the plot reaches the upper limit, the bidder can be determined in three ways. Nanjing and Hangzhou chose offline lottery. In addition, the three cities have different degrees of strict control over cooperative development, bidding qualification and other aspects, but Hangzhou has slightly reduced the starting price of some plots (especially competitive quality plots).

Compared with Nanjing and other cities, Hangzhou still has room for regulation. For example, Nanjing not only stipulates that all plots must compete for quality, but also stipulates that the land cannot be listed within 6 months after acquisition.

"Each house has different estimates, at least 20% in the past and 15% now, which is 5 points more than the original." A real estate enterprise in Hangzhou believes that the second centralized land supply has left a profit space for developers. Another real estate enterprise related person who made a big move in the first centralized land supply in Hangzhou revealed to the 21st Century Economic News reporter that he was also interested in participating in the second centralized land supply, but he had to try his luck. The real estate enterprises have a consensus that in Hangzhou's first centralized land supply, Rongxin's 14.32 billion purchase of seven pieces of land will not reappear unless the developers dare to take risks and have enough family resources to compete for high-quality land plots.

In addition to the first tier cities, Nanjing, Suzhou, Chengdu, Tianjin, Shenyang, Qingdao, Jinan and other cities that have been officially announced to adjust the second centralized land supply have the common ground of significantly reducing the cost and threshold of land acquisition.

However, during the centralized release of the recent interim report performance, the management of each real estate enterprise expressed a clear view at the performance meeting, and treated the second centralized land supply cautiously.

The rules of the local auction game changed: most of the first round of centralized land supply did not make money?

As soon as the new regulations on the second round of centralized land supply were issued in Hangzhou, insiders believed that it was equivalent to the government's "price limit" on land. Check the source of funds, strictly control the participation of Majia companies and other means have appeared in the land market regulation for many times. Real estate enterprises are getting more and more similar to ordinary people buying houses, and now they have to decide through lottery (after reaching the ceiling premium).

Although the new land auction rules have reduced the premium rate and the starting price of some plots has been slightly lowered, the profits of real estate enterprises are still very limited. Especially for high-quality plots, even if the starting price of land is taken, it may also face losses in the future. In addition, the time cost and risk coefficient of existing house sales are still large; The red line of 40% investment sales ratio has also blocked some real estate enterprises, which are not even qualified to "get on the bus".

This also shows that the qualification requirements of land auction for real estate enterprises are getting higher and higher. However, according to the information released by the performance conference of the 2021 midterm report, many leading real estate enterprises believe that in the first round of centralized land supply, except for some special cities, most of the land prices in 22 cities have increased to varying degrees. A leading real estate enterprise disclosed at an investor conference that the company had studied that nearly 60% of the first batch of land for centralized land supply were unprofitable, and even there were many of them that might be loss making. This may be the reason why the land price has been reduced after the adjustment of the new land auction rules.

For example, for the 10 competitive quality plots in Hangzhou's second pilot project of centralized land supply, although the starting price of some plots has been lowered, it is still difficult to balance the accounts due to the sale of existing houses. Developers are not afraid of low net profit margin (1% is acceptable), but most afraid of no payment collection and no cash flow. In the context of reducing leverage, financing costs become unbearable. Some real estate enterprises calculated that even if they win the competitive quality land at zero premium, they will also face losses.

In fact, the adjustment of Hangzhou's second centralized land supply was also somewhat lower than expected by industry insiders. For example, the higher demand for increasing the scale of land supply did not appear; The expected reduction in the starting price did not occur in a large area. Since September, Hangzhou is experiencing a wave of red tide, and there will be a batch of real estate projects with extremely low winning rate. Real estate enterprises will soon reap cash flow. At this time, the second batch of centralized land supply in Hangzhou and other places was set after the National Day; After more than a month, the real estate enterprises just have money to get land.

Chen Hongni, executive director and chief executive of Xiangsheng Holding Group, which started in Zhuji, Zhejiang Province, pointed out that 22 key cities had completed the first round of centralized land supply from April to June in the first half of this year. Xiangsheng actively participated and obtained some high-quality land, especially in Zhejiang Province. At the same time, in the face of policy changes in the second half of the year, Xiangsheng will actively study the rationality of the policy itself and the land project itself, and then make corresponding plans.

Lin Zhong, Chairman of Xuhui, has a new discovery: after the first centralized land supply, the cooperation of the whole industry has been strengthened. Therefore, he made a decision. After the second batch of centralized land supply policies have been optimized, he should continue to improve Xuhui's consolidation model and increase the equity ratio in all joint operation projects. In the next three or four years, Linzhong hopes to increase Xuhui's consolidation ratio and equity ratio to about 70%.

Diversified land investment: low expectations of real estate enterprises

Previously, in the first round of centralized land supply, many leading real estate enterprises rarely took land. In the face of the second round of centralized land supply, they also insisted on their own pace of land acquisition. For example, Shimao. At the China Daily Performance Meeting on August 30, Xu Shitan, Vice Chairman of the Board of Directors and President of Shimao Holdings, said that Shimao had also won a lot of land outside 22 cities.

It is revealed that through cooperation in land acquisition, Shimao will acquire more than 20 billion rights and interests of land in the first half of 2021. In July and August, the land price will be adjusted, and Shimao will add 10 billion investment. In other words, since 2021, Shimao has invested about 30 billion yuan in land.

Vanke has always been at the forefront of the industry in its prediction of the land market. Zhu Jiusheng, president of Vanke, pointed out that the supply side of the land market does show some diversified characteristics, for example, there are various channels. First, dual concentration is a new way, and then you may also notice that project level M&A is also a way.

One fact is that Vanke's M&A at the project level has accounted for nearly 40% of the total development business investment in the past three years.

More and more leading real estate enterprises are investing in land acquisition, and Shimao has developed a unique path. Xu Shitan believes that the current regulation does not encourage speculation and irrational; We encourage autonomy and prudent investment. "Of course, the second round of land supply has limited the premium rate, but there are also some new management methods that we are actively studying. If we see good opportunities in the second half of the year, because our cash is OK, we can also invest cautiously, but it is certainly impossible to auction some expensive land." Xu Shitan said.

Throughout the country, the land transaction area in the first half of this year fell by 11% year on year, and the volume of land was shrinking and the price was rising. The profit space of real estate enterprises was compressed. The reporter of 21st Century Business Herald learned from the data of China Daily that from the investment performance of real estate enterprises in the first half of the year, many real estate enterprises actively developed diversified land acquisition models.

For example, Jinke's 2021 midterm report disclosed that in the first half of the year, the proportion of projects acquired through public market bidding, auction and listing also declined to 43%, and the proportion of projects acquired through "real estate+commerce", "real estate+industry" acquisition, mergers and acquisitions, primary and secondary linkage and other ways increased significantly to 57%.

It is worth noting that even the Zhongliang Real Estate, which is not particularly dependent on the city of centralized land supply, has sold several plots in Chengdu, Suzhou and other places in the first round of centralized land supply. You Sijia, the chief financial officer of Zhongliang, revealed that, for projects in cities with centralized land supply, Zhongliang may not do consolidation due to price restrictions, but he said that he would observe some progress of current policies in the future, and would act if they met expectations.

Chen Jun, Chairman of the Board of Directors and Chief Executive Officer of Greenland Hong Kong, pointed out that the regulation adjustment of the second centralized land supply shows that the pressure has been transmitted at different levels: from financial institutions to real estate enterprises, and from real estate enterprises to local governments. Consumers' expectations are also changing. From the perspective of the real estate industry itself, in fact, from the perspective of the overall economic environment, the whole society's purchasing power is undergoing significant changes in the process of regulating medical care, education and capital in a large area. In his opinion, will the overall regulation idea be further deepened, or will it be eased after the acceptance crisis of many enterprises? At present, it is still to be observed, which has also set a good problem for the industry. Therefore, for the overall investment in the second half of this year, Greenland Hong Kong will not complete the plan, but will choose appropriate investment opportunities according to the market adjustment.

As the owner of small and medium-sized real estate enterprises, Lin Rongbin, chairman of the board of directors of Sansheng Holdings, also believes that the purpose of centralized land supply is to limit the land price, but the effect is not good from the first time, so the second time of centralized land supply just pressed the pause button; Now the second batch of land supply has undergone a lot of policy changes, and it is more inclined to leave a certain space for the real estate in terms of quality and various aspects, which is a good thing for the real estate industry as a whole. According to its disclosure, the land acquisition of Sansheng Real Estate follows the investment logic of "4-3-3", that is, 40% is land acquisition, 30% is mergers and acquisitions, and 30% is the investment direction of bidding, auction and listing, including 850000 square meters in the first half of this year basically achieved through land acquisition.