Real Estate Market Regulation And Competition: Rising House Prices In Third And Fourth Tier Cities

On the first day of the National Day holiday, Xuzhou and Shaoxing respectively introduced measures to control the property market, indicating the determination of the local government to strictly control house prices.

On the evening of October 9, the official website of Xuzhou Municipal Bureau of housing and urban rural development issued the notice on further promoting the healthy development of urban real estate market. Xuzhou gave guidance and policies from the supply of homestead, price management of record, decoration behavior and price supervision, real estate financial policy, sales restriction and other aspects. Among them, "the record price shall not be adjusted within one year" is considered as a clear letter of tightening regulation number.

At the same time, the office of the coordination group for sustainable and healthy development of Shaoxing real estate market issued the notice on further promoting the smooth operation of the real estate market, which also tightened the sales price of commercial housing: for those who have obtained the pre-sale license or have gone through the sales record of existing houses, they shall disclose all the houses to be sold and the price of each house in one time within ten days, which shall not be higher than the declaration The price is sold to the outside world. In other words, the project promotion price shall not be higher than the first opening price.

Lu Wenxi, an analyst of Zhongyuan Real estate market in Shanghai, pointed out that the two cities did not use the increase of restrictions on purchase and loan, and the means were mild, and there were preventive regulation and control of the market to prevent speculation. This round of property market warming, the Yangtze River Delta, Dawan district market rose significantly, therefore, the two regions of regulatory policies are also more intensive, especially in the Yangtze River Delta region.

Lu Wenxi further pointed out that Dawan district is mainly Foshan, Dongguan, Zhuhai and Shenzhen; there are more small cities with strong economic level in the Yangtze River Delta region, and some third and fourth tier cities are not weaker than the first and second tier cities. Therefore, the rising trend of housing prices in the Yangtze River Delta starts from the first and second tier cities to the third and fourth tier cities. "It's a little bit like pressing the gourd to float." Lu Wenxi also believes that the effect of urban agglomeration dominated by Shanghai is prominent, and Shanghai's demand spillover leads to the overall heat of the Yangtze River Delta being higher than that of the Pearl River Delta region.

After the National Day holiday, Xuzhou and Shaoxing have introduced measures to control the property market. Picture green

Strictly control the rising of house prices

In contrast, since the second half of 2020, Shenzhen and Dongguan have successively ushered in the "most stringent restrictions on purchase", strengthening regulation and control, driving some of the limited market potential demand or spillover to other cities in the bay area. However, the regulation of Xuzhou and Shaoxing in the Yangtze River Delta after the festival shows that the speed of regulation in the Yangtze River Delta is faster than that in the Pearl River Delta.

In fact, Xuzhou's housing price growth is not so obvious, but the premium rate of land price transaction has gradually increased since this year, which is also the main reason why industry insiders think that Xuzhou's regulatory policies focus on risk prevention.

According to the data provided by Shanghai Zhongyuan, from September 2019 to August 2020, the number of trading units in Xuzhou fluctuated slightly, with the number of trading units falling from more than 8680 to 6584 sets; however, the transaction price fluctuated little and remained at about 10000 yuan / m2.

But Shaoxing's housing prices have risen significantly. From October 2019 to September 2020, the number of units sold in Shaoxing increased from 1331 to 1615, while the housing price in Shaoxing increased from 17375 yuan / m2 to 21391 yuan / m2. Shaoxing's house price has increased by 23% a year. However, in the regulation policies formulated by most cities, the requirements on housing price increase are more and more strict. For example, Suzhou announced in May 2019 that the housing price increase in that year should not exceed 5%.

According to the average price of residential land in 100 cities in the third quarter of this year, the average price of residential land in Shaoxing reached 7526 yuan / m2, which is not only higher than the provincial capital cities such as Dalian, Taiyuan and Nanning, but also nearly 400 yuan / m2 higher than Nantong, a city with significant advantages and incentives such as airports.

According to the founder of a real estate enterprise in Zhejiang Province, Shaoxing's house price has increased by more than 5% in the past year, which is higher than the price increase stipulated by the government. Therefore, regulation and control are inevitable. Among them, the conduction effect of land price on house price is obvious.

Ding Yao, an analyst at Tongce Research Institute, points out that, on the one hand, Shaoxing is affected by internal and external factors such as the Asian Games, Ronghang and large-scale demolition, which has resulted in a high market demand in recent two years; on the other hand, due to the strict regulation and control of Hangzhou, the profit space has been compressed, and real estate enterprises have gradually turned their investment focus to Shaoxing and other surrounding Hangzhou areas. In the past two years, especially in the hot areas such as Jinghu new area, a large number of brand real estate enterprises have been attracted to take land, which has led to the rise of housing prices and the overall heat of the city.

In terms of land price, Shaoxing's land auction has been booming in recent two years, and the land price in Jinghu new area has been constantly refreshed. Ding Yao, an analyst at Tongce Research Institute, points out that the number of real estate enterprises in the industry communicating with us in Shaoxing market is also increasing. After this year's epidemic, the floor price of "Yuecheng yuanzhenyuan pharmaceutical factory plot" was as high as 14754 yuan / square meter, which set a new high in Shaoxing at one stroke. Finally, the floor price of 21569 yuan / square meter became a new high in Shaoxing, which ignited the market. Ding Yao pointed out that although Shaoxing has issued a new deal of land auction in July, adopting the measures of competing for construction and controlling the premium rate within 35% to control the land auction heat, we can see that the land sold since then has not obviously turned cold. For example, on September 15, the transaction floor price of "plot 3, east of Dayue Road, Jinghu New District" is still higher than the surrounding land.

Compared with Dawan District, East China, as one of the first areas to recover the heat after the epidemic, is more active in urban land market. The transaction volume and price of homestead in most cities increased significantly year-on-year. The premium rate of homestead transaction in many cities from January to September increased significantly, and the land market competition was fierce. Nanjing, Changzhou and other cities with high prices frequently come out, so Nanjing has issued a new policy of "limiting house prices and competing for land prices". In the same period of time, the cumulative transaction scale of residential land in Guangzhou, Shenzhen, Xiamen, Dongguan and other major cities increased significantly from January to September, mainly due to the shortage of housing market. The government hopes to curb the overheating of the market by increasing land promotion. For example, Dongguan, as the Shenzhen market is squeezed by the new policies, part of the demand flows from the core cities to Dongguan, Huizhou and other deep-seated cities. As a result, Dongguan's property market heat ushers in a new wave of rise, and leads to the introduction of "Dongguan nine rules". However, Dongguan's new regulatory policies mainly restrict the purchase side, and the land market is still hot.

Shaoxing, which has successively issued regulatory policies

In terms of housing prices, from the perspective of the 100 city housing price index, Shaoxing has maintained a year-on-year positive growth for nearly four years. Since 2019, the highest monthly year-on-year increase has exceeded 20%, and this year's January to August is also basically above 15%. In the past three years, the index's month on month growth rate was only slightly negative in February, the most serious epidemic in this year. It can be said that Shaoxing housing prices have been rising for many years.

According to the monitoring of Tongce Research Institute, in November 2019, the average price of commercial residential buildings in Shaoxing City broke through 20000 yuan / square meter for the first time, and in August this year, it reached a historical peak of 23300 yuan / square meter.

In the rise of the Yangtze River Delta urban agglomeration, we can see a lot of new shadow. Taking Shaoxing as an example, the land price of Jinghu new area, which is positioned as the core of Shaoxing central city and ecological green heart, has been steadily rising in recent two years. In recent years, urban major functional facilities projects have been accelerated to gather. More than 3900 mu of operating land has been transferred. The development and construction of about 14 square kilometers area has begun to take shape, and a core block of modern city is being formed.

Since 2018, the land of Jinghu new area has been transferred rapidly, and the rapidly rising urban core area is raising the "flour price" again and again. In August 2020, the floor price of a plot taken by Rong'an real estate exceeds 13000 yuan / m2, which refreshes the ceiling of floor price in this area. In 2019, real estate enterprises will increase the investment in Jinghu new area, and the premium rate of land plot will gradually go up. In May 2020, Shimao won a plot at a premium of 57.43%.

Shaoxing government has also paid attention to this phenomenon. In July, a new deal was introduced, which will be implemented from July 8, 2020. There are two main points in the New Deal: one is to control the price rise of residential land; the other is to implement the "land price limit for competitive construction", with a maximum premium of no more than 35%. Among them, it is clearly stipulated that "the annual increase of residential land price in Jinghu New Area shall not exceed 10%".

Since this year, the Yuecheng District, where Jinghu new district is located, has sold a total of 15 plots, with a higher overall transfer price. Among them, a plot with the highest floor price of 21500 yuan / m2 was won by Shaoxing Jinyue Real Estate Co., Ltd.; next to the plot is the plot with floor price of about 19000 yuan / m2 won by Xiangsheng.

In July, the new deal did not significantly cool the property market. On October 9, Shaoxing issued a new regulation and control policy again. Ding Yao believes that, in addition to clarifying "land price limit and competing for construction", it is also a big move for housing prices. The "double filing" is adopted, and the housing pricing needs to refer to the surrounding similar housing resources or "land price + cost" factors. Meanwhile, the price increase of Shaoxing is forced to be suppressed by "the price of the price to be put on record shall not be higher than the first record price". In addition, strict management of phased sales, to prevent developers from hoarding sales.

It can be predicted that through the forced price intervention, Shaoxing's house price rise will be strictly controlled. Key areas such as Jinghu new area may maintain a high level of consolidation in a certain period of time, while some areas with insufficient supporting facilities and large increase in the early stage may face the risk of price reduction.

The industry insiders pointed out that after the "three red lines", the real estate enterprises will rely more on the capital inflow brought by the project payment. The price reduction and promotion of the low flow projects with poor quality in the third and fourth tier cities will increase, while the price of the high-quality projects in the core first and second tier cities and the strong third tier cities will be more firm due to the impact of the demand recovery, which will become the short-term profit source of the real estate enterprises.

It is worth noting that in Dawan district or hot cities in the Yangtze River Delta, not every project is sold smoothly or appreciated. For example, in Xuzhou, it is very difficult for a state-owned enterprise to eliminate the local development projects; in Huizhou, a cultural and tourism project developed by a quasi 100 billion real estate enterprise has been falling since last year's tight control.

In addition, the research results from Tongce research institute show that the financing scale of the top 40 real estate enterprises fell again on a month on month basis in August, and it is expected that there will be a significant contraction in the fourth quarter, which will inevitably lead to cautious land acquisition.

After the "three red lines" this year, "cash short debt ratio", as one of the three indicators, will force real estate enterprises to pay more attention to cash flow. Therefore, it is urgent for some real estate enterprises to speed up sales collection, improve debt repayment ratio and ensure cash flow. Taking HUAFA shares as an example, the return on net assets of minority shareholders in 2019 and the first half of 2020 are 1.16% and 2.44% respectively, and the return on net assets attributable to the parent company is 7.0% and 6.4%, respectively. The latter is much higher than the former, and the problem of real debt is prominent. Perpetual bonds are recorded as "assets" in its financial statements, which lowers HUAFA's debt ratio. However, the higher perpetual debt increases the financial cost and swallows the net profit.

From the perspective of property market regulation, Ding Yao predicted that the property market policy would remain stable in 2020, and it would be difficult to significantly ease the policy. Considering the impact of the epidemic situation, it is expected that the policy will turn loose as early as the first quarter of 2021. At this time, the real estate market turnover will gradually enter the upward phase. The transaction price is expected to rise rapidly in the second half of 2021.

?