Market Warming, Soil Storage Strategy Differentiation, Housing Prices Bend Overtaking Turning Point Coming?

After the outbreak, the real estate industry has undergone subtle changes: the land market is showing signs of warming. Recently, the premium rate and the floor price have been rising everywhere. Meanwhile, housing companies are adjusting the layout of cities and projects.

Signs of a rebound in the land market. Song Wenhui photo

Is the property market recovering? More than one industry pointed out that the property market window period has emerged, it is worth noting that the land floor price is showing an upward trend, such as the May 7th Hangzhou earth pat, Jianhua and ocean competing Xiang Fu plot, the cost is higher than the surrounding projects, but the price limit rose 4000 yuan / square meter, roughly calculated the project profit margin of 6.4%, whether it can be realized. But this wave of land market heat may lead to changes in market expectations.

Can housing prices borrow this wave of market warming to overtake corners? Hundreds of millions of scale housing companies are already in action. According to Kerri data, the number of 100 housing companies in the 1-4 months went up to 0.35, up 0.7 from the end of 3, rising to the average in 2019. And the ranks of the housing enterprises will have different degrees of uplink, of which TOP21-30 Housing enterprises take the most significant increase in sales, the echelon of Binjiang, dragon and light are relatively active. In addition, Hengda, Biguiyuan, Greentown and other large housing enterprises take frequent action, and sales scale and these housing prices have a clear gap between the birth, take the rhythm coincides with the market cycle.

On May 13th and 14, Xiangsheng real estate took 2 billion 460 million yuan and 1 billion 455 million yuan successively in Ningbo and Hefei, and in May to date, including two plots in Zhuji, Xiang has already taken four plots, with a total investment of 4 billion 942 million yuan. It is understood that in 1-4 months, the value of new land increased by 19 billion 830 million, an increase of 133.29% over the same period last year.

Just in 2019, the realization of the scale of 100 billion sales is not a listed housing company, but it can also be seen. After a period of "dormancy", the housing enterprises' pace of investment and expansion quickening, and they prefer to go to the core cities with high rate of conversion. Data show that this year, half of the sale of TOP50 Housing enterprises took more than 5 billion yuan per month.

Zhang Hongwei, chief analyst of the same policy research institute, believes that the housing enterprises take this time to actively take account of the high turnover mode, which can be sold at the end of the year to increase the total sales volume this year. Due to the impact of epidemic situation, housing enterprises this year is obviously appealing for compensation performance. For funds facing good housing enterprises, there is still time to take place. Price competition is not so intense. At this time, it has increased the possibility of overtaking corners and improving market position.

Decline in overall solvency

After the outbreak, local governments are also open to the land market. Take Shanghai as an example, in April 21st, the Shanghai land market held the first land promotion meeting, involving four districts in Pudong, Jiading, Baoshan and Jingan, and introduced 64 land, plus 14 land on the front line, with a planned area of over 4 million square meters. In April 22nd, Shanghai formally issued the notice of Shanghai Municipality on expanding some policies and measures for effective investment and stabilizing economic development, speeding up the transfer of operating land, appropriately increasing annual land supply, and accelerating the arrangement and use of land revenue. In May 15th, second land promotion meetings were held in Shanghai. Fengxian new town plans to launch a land with a planned area of Over 770 thousand square meters.

But the biggest problem facing housing companies is cash flow. According to Yang Yulei, senior analyst at Shanghai chain home market research department, the growth rate of real estate development investment has further recovered, and the decline has narrowed by 4.4 percentage points compared with the previous value. With the resumption of domestic production and resumption of production, new construction and land purchase have been restored. The decline in new construction has narrowed by 8.8 percentage points compared with the previous value, but the construction growth rate has hardly changed compared with the previous value. It is expected that with the improvement of the new construction, the construction growth rate will also accelerate. At the same time, the growth rate of commercial housing sales has gradually improved. The area of commercial housing sales has narrowed by 7 percentage points lower than the previous value, and sales have narrowed by 6.1 percentage points compared with the previous value. The sale area of commercial housing in April was narrowed by 12 percentage points compared with the previous value, and there is still room for further repair in May. However, the drop in funds for real estate companies has also narrowed, narrowing by 3.4 percentage points compared with the previous value, including 18.9% down payment and pre payment, and a 5.4% drop in personal mortgage loans.

Data in April showed that sales were blocked, which led to greater operating pressure and financial pressure on housing companies. As Zhang Hongwei said, funds and land storage are the key factors for housing enterprises to achieve overtaking in corners. Through the 2019 annual report data, it is easy to see that housing enterprises are short of debt repayment risk this year. The comprehensive policy research institute and the billion Han think tank data show that by the end of 2019, the 60 short listed companies had an average cash short debt ratio of 1.49, relatively good. Among them, the cash short debt ratio is more than 1 of the enterprises, accounting for 44, accounting for more than 70%; cash short debt ratio is lower than 1 of 16, accounting for less than 30%.

On the whole, housing companies with larger sales scale have higher cash short debts, such as Longhu and China shipping, which have stronger short-term solvency. Longhu ranks first in 4.38 times, followed by Yuexiu real estate and ocean group. The cash short debt ratio is more than 3 times, 4.23 and 3.61 respectively, and the short-term debt repayment pressure is small. But there are also some housing companies with a cash short debt ratio of less than 1, such as Jinmao, Fuli, Hengda and Taihe. The cash short debt ratio is 0.93, 0.62, 0.61 and 0.25 respectively, and monetary funds can not fully cover short-term interest bearing liabilities.

In addition, the advantages of large housing enterprises in the financing side will enable them to better control the debt structure and control the short-term debt ratio in a reasonable period, so as to stabilize the short-term debt repayment pressure. However, some restricted funds can not be used in the money reserve of Housing enterprises. If the restricted funds are too high, the short-term debt paying ability of Housing enterprises will be pressure.

There are two reasons for the drop in cash short debt ratio: monetary funds are facing slower growth pressure and small growth in short-term debt of housing companies.

Therefore, it is an effective way to optimize the financial structure for the housing enterprises to accelerate the sales withdrawal and actively participate in the land acquisition. In 2019, the total sales value of the top 100 housing enterprises reached 42 trillion, of which 10 of the total housing stocks accounted for 18 trillion, accounting for more than 40% of the total value of the total. But in the market band adjustment period, housing companies' investment strategies have also undergone subtle changes. Many housing companies consciously increase their cash reserves and focus on controlling the scale of interest bearing liabilities. The outbreak of the epidemic in 2020 led to difficulties in the sale of Housing enterprises. In the first quarter, the cumulative sales of TOP200 Housing enterprises fell year-on-year, which further restricted the growth of cash withdrawal. Whether the latter could be compensated depends on the sales performance.

It is not difficult to explain this round of land market warming. It is worth noting that under the scale advantage, in order to improve quality and efficiency, the logic of investment in head housing companies is quietly changing. One obvious change is that the way of increasing housing prices begins to differentiate. Big housing enterprises such as Rong Chong and Shimao still continue to actively take M & A and seek low-cost expansion. Adjust the structure, adjust the performance, adjust the layout, and actively expand the channels to increase the reserves, such as green space, Huarun. The total value of Huarun land has soared, rising from 20 at the end of 2017 to 12 in 2019, and nearly doubled in the past two years. Green space is determined by the strategy of High Speed Rail New Town, the core line of high-quality layout is three or four lines, and the value of land storage is up by 50% over the same period. Judging from the total depletion period of the total storage, leading housing enterprises are gradually out of the "crazy hoarding" of the vicious circle, the average cycle of decline for two consecutive years, from the end of 2017 to 4.81 years to the end of 2019 3.98 years.

Increase in stock return pressure

In the industry, the short-term debt repayment pressure of Housing enterprises is attributed to the rising inventory of Housing enterprises. Therefore, in this round of land leasing, housing enterprises choose to make up the warehouse through the city and adjust their positions.

Guoxin Securities, a research report pointed out that enterprises want to scale growth and increase profits, it is difficult to achieve by reducing costs, can only increase inventory investment; Housing enterprises stock investment is often intertemporal, that is, this year's inventory investment will affect the subsequent 2 to 3 years of profit scale, long-term growth depends to a large extent on the current inventory investment.

Guoxin Securities analysts believe that the real reason for the improvement of free cash flow in most housing enterprises in 2019 is the reduction of inventory reinvestment after cash withdrawal, which is a manifestation of the willingness of Housing enterprises to expand. This also means that most housing enterprises will naturally slow down in the next 1 to 3 years.

TOP10 housing prices in 2019, the new soil storage situation, the first tier cities in China Sea new soil storage largest, accounting for 21%, in addition, the sea in the three or four tier cities with better economic development has a slight increase in the proportion of land. In the second tier cities, the largest amount of soil storage was created in the second tier cities, accounting for 77% of the total. Baoli development and green space increased more soil reserves in the three or four line cities in the past year, and Huarun mainly located in strong three line cities.

In fact, many large housing enterprises, especially one hundred billion scale housing enterprises, have realized the inventory problem. According to incomplete statistics, the 4 storage enterprises of Biguiyuan, Rong Chong, greenbelt and Huarun have risen to varying degrees, with green space showing remarkable performance. In 2019, under the background of the nationwide downtowns, the proportion of green space against market expansion, especially in the second tier core cities, was increased. In the large-scale projects such as Dong Jia Du and Tianjin trade port in Shanghai, the total storage and removal cycle increased from 5.2 in the 3.45 years in late 2018.

Take Xiangsheng as an example, it differs from the logic of Biguiyuan and Hengda in the three or four line cities. It has added 7 plots in 3-5 months this year, which are located in cities like Hangzhou, Wenzhou and Ningbo, all of which belong to the fast recovery area after the epidemic.

Just like Zhang Hongwei's analysis, from the perspective of Xiangsheng's entry into the city, it is mainly matched with high turnover speed. On the one hand, there is a large-scale demand for Xiangsheng. On the other hand, it is also a way to reduce the pressure of funds by speeding up the repayment of money through high turnover. In recent years, Hangzhou has invested about 4000000000 yuan to invest in the city, and the second tier cities such as deep ploughing layout. This is the structure optimization of cities and projects after the scale of 100 billion scale: the slow turnover speed of a second tier city but the profit can be made; while the profit of the three or four line cities can bear pressure, but it can promote the scale growth. Zhang Hongwei pointed out that, as a Zhejiang enterprise, there is no lack of market sensitivity, and the demand for listing also promotes its leverage and opportunities to do some local storage actions.

According to incomplete statistics, since 2019, Xiangsheng has won 19 projects in the second tier and second tier cities of Ji'nan, Ningbo, Shaoxing, Wenzhou, Wuhu, Jiaxing and Taizhou. From the perspective of soil storage structure, the proportion of soil reserves in the second tier cities has exceeded 75%.

In order to avoid the "quantity" plots, the strategy adopted by Xiangsheng is to improve the quality of the land and tend to take about 100 thousand square meters of small land so as to raise the turnover rate of assets. For example, in May 12th, the price of Xiangsheng was about 652 million yuan, which was priced at 101 yuan in the west side of Hengda Yulong house in Zhuji, Shaoxing, with a premium rate of about 18.1%. The plot area is about 72 thousand and 400 square meters, and the floor price is about 5000 yuan / square meter. Reference Hengda Yuet long government average price 12 thousand and 500 yuan / square metre in May, Xiangsheng plot sales profit expected to have at least 20%.

From the recent trend of Xiangsheng, we can see that the window period of the Yangtze River Delta region has arrived, and housing prices are concentrated in this area, which is also a reflection of the coexistence of market risks and opportunities. After the baptism of the special stage of the epidemic, most enterprises began to re-examine the urban development cycle, and the urban advantages of resources and population gathering will be further enlarged. The second tier cities in the Yangtze River Delta and the eastern coastal areas will be more resuscitation in the rapid recovery of the property market, favorable policies and high-quality plots.

On the one hand, there are many strong two or three line cities in Yangtze River Delta, and the market recovery is accelerated. On the other hand, the premium rates of hot cities such as Hangzhou, Ningbo, Nantong and Suzhou have increased rapidly. In May 7th, Hangzhou sold 5 plots of the results, the premium rate is above 20%, of which Binjiang and silver city respectively captured the top two caps. According to media estimates, the average sales profit of Hangzhou's homestead is 5.3% this year, and the average sales profit margin of these 5 sites is only 4.49%, which is 0.81 percentage points lower.

The industry speculated that housing companies with cash in hand and short term solvency would dare to bet on this round of land storage. Whether we can turn the corner to overtake, we can see that these housing companies have the ability to create products and the changes in the local market.

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