Three key issues in real estate
"China's real estate market, under the influence of a series of policies, has been continuously adjusting for three years and has begun to bottom out," said Ni Hong, Minister of Housing and Urban-Rural Development, at a press conference held by the State Council Information Office on October 17. She expressed full confidence in the market's stabilization after the central government set the tone at the end of September to "promote the stabilization of the real estate market."
Since the central government's decision to "promote the stabilization of the real estate market" at the end of September, favorable policies for the real estate market have been frequently introduced, and various supporting measures have been continuously improved. The press conference held today continued to reveal that through methods such as monetized resettlement, an additional 1 million units of urban village transformation and dilapidated housing renovation will be implemented; the credit scale for "white list" projects will be increased to 4 trillion yuan; and local governments will be supported in using special bonds to repurchase existing land.
How will the "package" of significant policies affect the real estate market? Industry experts have provided multiple interpretations.
The demand driven by the renovation of 1 million urban villages
To promote the "stabilization" of the real estate market, the Ministry of Housing and Urban-Rural Development, together with the Ministry of Finance, Ministry of Natural Resources, People's Bank of China, and the Financial Regulatory Authority, has guided localities to act quickly, implement existing policies, introduce new policies, and launch a "combination punch" to promote market stabilization. The "combination punch" can be summarized as four cancellations, four reductions, and two increases.
Advertisement
One of the "two increases" is the addition of urban village transformation and dilapidated housing renovation. Ni Hong announced that an additional 1 million units of urban village transformation and dilapidated housing renovation will be implemented through monetized resettlement housing methods, mainly adopting monetary resettlement methods.
According to relevant surveys, there are 1.7 million urban villages that need to be transformed in 35 major cities across the country. Looking at other cities in the country, this number will be even larger, and other cities also have the demand for transformation. The proposal to add an additional 1 million units this time mainly targets projects that are relatively mature and can be advanced with increased policy support, while adopting monetary resettlement methods, which is beneficial for the public to choose suitable houses according to their own wishes and needs.
In the process of stabilizing real estate development in 2014, the棚改 work was an important tool for the real estate market to quickly emerge from a downturn. At that time, after proposing to actively promote the monetization of 棚改 resettlement, the inventory reduction wave in third and fourth-tier cities quickly began. At that time, due to the timeliness and convenience of monetary compensation, the promotion of monetized 棚改 resettlement directly activated the commercial housing sales link, and solved the problem of high real estate inventory and economic downturn in a phased manner.
Now, the "urban village" transformation proposed again will have what kind of chain reaction on the industry, which has also attracted industry attention.
Yan Yuejin, deputy dean of the Shanghai Yiju Real Estate Research Institute, believes that this is a new mission given to the "urban village" after the three major real estate projects. At the same time, this time it clearly mentioned the method of monetized resettlement, which is very similar to the 2014 model, and it is expected that the "urban village" transformation work will become an important driving force for digesting housing inventory.Tongce Research Institute's Research Director Song Hongwei also believes that the "urban village" and dilapidated housing renovation policies have a significant impact on core cities. The scale of renovation mentioned this time is relatively large, and the policy clearly adopts monetary resettlement, which will directly drive up the transaction volume of the core city's real estate market. An increase in volume will accelerate the stabilization of prices, and only with an increase in volume can prices stabilize.
According to previous research by Tongce Research Institute, 60% of the monetary compensation for relocation and resettlement in Shanghai will re-enter the real estate market. Based on this proportion, it is possible to drive the demand for 600,000 new purchased housing units, which has a positive effect on the stabilization of core cities.
It is worth mentioning that in 2018, the State Council's executive meeting proposed to quickly cancel the preferential policy of monetary resettlement for cities and counties with insufficient commodity housing inventory and high pressure on housing prices. Since then, the resettlement of urban village renovations has emphasized physical resettlement. How will the current monetary resettlement method be promoted?
Yan Yuejin predicts that this time it will be promoted by issuing cash and housing vouchers. According to the current situation in various places, the possibility of housing vouchers is greater, which is also completely in line with the recent work philosophy of "digesting stock and optimizing increment."
Li Yujia, the chief researcher of the Housing Policy Research Center of the Guangdong Provincial Urban and Rural Planning Institute, said that this 1 million units of monetary resettlement are expected to be拆迁 households holding cash or housing vouchers to choose houses on the market, which is conducive to promoting the renovation of "urban villages" and also conducive to digesting inventory. It is expected that the follow-up will fully activate the stock until the inventory pressure is relieved, thereby guiding market expectations.
In addition, 1 million units are not the final scale of renovation. Ni Hong mentioned that the survey shows that there are 1.7 million urban villages that need to be renovated in only 35 large and medium-sized cities across the country. Looking at other cities in the country, this amount will still be very large, and it can also be said that other cities also have the demand for renovation. At the same time, there are 500,000 dilapidated houses in cities across the country that need to be renovated. The additional implementation of 1 million units proposed this time mainly targets projects that are ripe for conditions and can be advanced by increasing policy efforts.
Yan Yuejin believes that this also means that the subsequent "urban village" renovation needs to be advanced and accelerated, and the work rhythm is expected to significantly speed up, which will also become a market opportunity that needs special attention in the new round of development.
Song Hongwei estimates that this policy will be implemented in steps, and the current announced volume is implementable. The current 1 million units are the indicators of 35 cities, and there are 299 prefecture-level cities behind.
The industry believes that this move provides greater momentum and support for the current inventory digestion, has a positive effect on better and faster solving the work of living and better digesting the inventory of houses, and has a positive significance for the further optimization of the real estate supply and demand relationship.
The "white list" credit scale will exceed 4 trillion.In the current real estate market, ensuring the delivery of homes is not only an important task for safeguarding people's livelihoods but also conducive to boosting confidence in the real estate market and preventing and resolving various risks.
In order to win the battle for the delivery of commodity housing projects, in August, the Ministry of Housing and Urban-Rural Development, together with the Financial Regulatory Authority, organized a comprehensive investigation of all commodity housing projects under construction that have been sold but not yet delivered. They identified 3.96 million homes that should be delivered by the end of this year according to contract agreements as the target task for the battle.
At a press conference held by the State Council Information Office on October 17, Minister of Housing and Urban-Rural Development Ni Hong once again elaborated on the approach to this task. He stated that for the battle for the delivery of homes, one hand should grasp the "white list" to solve the problem of project construction funds; the other hand should grasp the progress of the project, and according to market-oriented and rule-of-law principles, "one building, one policy," and promote it in a classified manner to strive for the early delivery of homes.
"For projects that are insolvent, it is proposed to accelerate bankruptcy reorganization or liquidation according to the principles of rule of law and marketization, to effectively protect the legitimate rights and interests of homebuyers. For illegal and irregular behaviors that harm the interests of homebuyers, resolute investigations will be carried out, and they will not be allowed to escape or slip through the net." Ni Hong said that it is necessary to not only build houses but also to build good houses, and to deliver qualified houses to homebuyers as soon as possible.
To assist in the implementation of the home delivery task, as early as January of this year, the Ministry of Housing and Urban-Rural Development held a meeting to deploy the urban real estate financing coordination mechanism, deeply implementing the spirit of the central economic work会议精神, and the "white list" related to real estate project financing and home delivery began to take effect.
So far, how has this work progressed? At the press conference held by the State Council Information Office on October 17, Deputy Director of the National Financial Regulatory Authority Xiao Yuanqi said that as of October 16, the loan amount approved by commercial banks for the real estate "white list" project has reached 2.23 trillion yuan, and it is expected that by the end of 2024, the loan amount approved for the "white list" project will double, exceeding 4 trillion yuan.
He also said that at the beginning of this year, the Financial Regulatory Authority and the Ministry of Housing and Urban-Rural Development guided the establishment of the urban real estate financing coordination mechanism, including all compliant real estate projects in the "white list," and promoted financial institutions to increase their support for financing of real estate project white list projects. Next, all commodity housing project loans will be included in the "white list," to achieve full coverage, full lending, and meet the reasonable financing needs of the project.
At the same time, it is necessary to optimize the disbursement method of loan funds to achieve "as early as possible." In the future, commercial banks and real estate project companies, in consultation, can advance the entire loan to the project fund supervision account opened by the real estate company.
Xiao Yuanqi cited a real case, saying that there is a residential project in Zhuhai, Guangdong, which had sold some houses in the early stage, but later, for various reasons, the project was in a state of suspension. After the establishment of the urban financing coordination mechanism, multiple levels including provincial and municipal levels established corresponding financing coordination mechanisms, making the project meet the standards for inclusion in the "white list." A state-owned large bank added a loan of 600 million yuan to the project, and the project was quickly resumed and completed, becoming a popular real estate project.
"The white list system is an important tool in the current real estate home delivery work. For real estate companies, the white list system is directly related to solving fund pressure. The expansion of the white list system this time ensures the comprehensive advancement of real estate home delivery work, which will increase the momentum for subsequent home purchase confidence and can promote the healthy development of the real estate market in a sustainable manner, stopping the decline and stabilizing." Yan Yuejin, Deputy Dean of the Shanghai Yiju Real Estate Research Institute, said.Li Yujia, the chief researcher at the Housing Policy Research Center of the Guangdong Provincial Urban and Rural Planning Institute, stated that the financing docking mechanism has been in place for nearly two years. The previous issue was that projects on the whitelist had large credit limits, but the scale of approval and financing was small. The newly released scale has more than doubled, which means that not only should the coverage of the "whitelist" be expanded, but also the bottlenecks from "whitelist" to "financing landing" should be thoroughly unblocked. Efforts should be increased to repair problematic projects, ensuring that compliant projects "should enter, enter" and "should lend, lend", providing a solid foundation for ensuring the delivery of houses, thereby thoroughly restoring residents' confidence.
Special bonds focus on real estate blockage issues
How to revitalize existing resources and accelerate the promotion of market supply and demand balance is the current focus of real estate work.
Recently, the Ministry of Finance pointed out that considering the relatively large amount of idle undeveloped land across various regions, local governments are supported to use special bonds to repurchase eligible idle existing land. Regions that really need it can also use it for new land reserve projects. At the same time, support is provided to use special bonds to purchase existing commercial housing as affordable housing, which has attracted great attention from the market.
At today's press conference, Song Qi Chao, the assistant minister of finance, said that these two policies focus on the blockage issues in the real estate market. They are not only important measures to promote the market to stop falling and stabilize, but also important contents to expand the scope of special bond support and use as project capital. It is conducive to promoting the balance of land market supply and demand, easing the debt pressure of local governments and real estate companies, and also conducive to increasing the source of affordable housing and improving the welfare of people's livelihood.
Song Qi Chao introduced that in specific operations, regarding the use of special bonds for land reserves, it mainly supports various regions to combine actual situations, reasonably determine the purchase price with the owner enterprises of existing land, properly handle the debt and debt relationships involved in the repurchase of existing land, reasonably determine the content and scope of special bond projects, arrange bond issuance and expenditure in a timely manner, and improve the efficiency of land resource utilization and the efficiency of bond fund use.
At the same time, support for special bonds to purchase existing commercial housing as affordable housing, this policy is mainly independently decided and voluntarily implemented by localities, following the principle of rule of law, and operating in a market-oriented manner. On the basis of ensuring the balance of project financing benefits, localities can arrange special bonds to purchase existing commercial housing as affordable housing. This policy will work with other related support policies to further expand the channels of local funding sources.
Song Qi Chao said that next, the Ministry of Finance will work with relevant departments to clarify the details and requirements of the policy as soon as possible and promote the policy to be implemented as soon as possible.
Historically, the main issuance stage of land reserve special bonds was from July 2017 to September 2019, originating from the "Local Government Land Reserve Special Bond Management Method (Trial)" jointly issued by the Ministry of Finance and the former Ministry of Land and Resources in May 2017. It refers to the local government's issuance of special bonds for land reserve, which are repaid by the state-owned land use right transfer income or state-owned land revenue fund income corresponding to the project and included in the government fund budget management.
According to Tianfeng Securities, from 2017 to 2019, the annual issuance scale of land reserve special bonds was about 242.5 billion yuan, 590.5 billion yuan, and 676.5 billion yuan, respectively. During the issuance period of land reserve special bonds, land reserve became a key investment field for special bonds, accounting for about 35%.Afterwards, due to the excessive use of special-purpose bonds in the two major areas of shantytown renovation and land reserve, in order to guide the investment of special-purpose bonds into the infrastructure field, in September 2019, the State Council announced that funds from special-purpose bonds should not be used for land reserves and real estate-related fields, debt replacement, and industrial projects that can be fully commercially operated.
However, in recent years, with the in-depth adjustment of the real estate industry, the original constraints on land reserve special-purpose bonds have changed.
Since the second quarter of this year, the growth rate of real estate investment has always fluctuated around -10%, and at the same time, the growth rate of commercial housing sales area within the year has always fluctuated around -20%, indicating that the land market continues to be sluggish. At the same time, local governments and their subordinate platforms are involved in land acquisition and land reserve, which involves capital sedimentation. Under the pressure of large debts, the shortage of funds may also affect the heat of the land market and the progress of land reserve.
The industry believes that under the current market background, it is necessary to increase the use of land reserve special-purpose bonds, which helps to stabilize the real estate market. The role of special-purpose bond issuance as a supplement to funds, as clearly stated by the Ministry of Finance at this press conference, "can not only adjust the supply and demand relationship of the land market, reduce idle land, and enhance the control ability of land supply, but also help to alleviate the liquidity and debt pressure of local governments and real estate companies."
According to the calculation of Tianfeng Securities, if the general inventory is reduced to less than 20 months through the active inventory reduction on the supply side, the land reserve area needs to reach about 550 million square meters, and the funds required for land reserve are about 27 trillion yuan. However, Tianfeng Securities pointed out that the land reserve special-purpose bonds should not be overestimated. The improvement of land transfer fees or government fund budget revenue still needs the real estate itself to stop falling and stabilize. The key link lies in the demand side.