Real estate industry 2022: hesitation, hesitation and some good news

The 2022 Spring Festival holiday has passed, and most real estate people have returned to work and started moving bricks in earnest. For everyone, the past year has been a huge change.

In the past year, industry policies have continued to tighten, and financing and liabilities have become the biggest obstacles that have crushed many star real estate companies; this year, real estate professionals have been in dire straits, with nearly a hundred people even receiving notices of resignation on the same day. This year, real estate companies tried their best to sell their houses to save themselves, and the "work-for-housing" scheme spread across the world and was quickly banned.

Looking back at the past is to better prepare for the future. After experiencing a deep reshuffle, more and more signs of recovery are emerging, indicating good news for the industry.

Spring seems not far away.

01 Industry: Financing Difficulties and Self-Rescue for Real Estate Companies

Since the introduction of the three red lines and loan concentration policies in 2020, financing for real estate companies and supply and demand will continue to tighten in 2021.

In January and March 2021, policy supervision on real estate financing compliance continued to strengthen, and Shanghai, Beijing, Shenzhen and other places strictly investigated the illegal entry of operating loans into the market; in April, the Shanghai Stock Exchange and the Shenzhen Stock Exchange simultaneously issued guidelines to strictly Control urban investment companies and qualified companies to issue corporate bonds; in June, it was reported that the People's Bank of China has included the commercial bill data of real estate companies in the "Three Red Lines" pilot project within the scope of monitoring. At that time, some real estate company insiders revealed to Real Estate Pi that relevant real estate companies were required to report commercial invoice data every month.

Under the continued tightening of policies in the first three quarters, some real estate companies have successively experienced debt defaults. Since September 2021, Evergrande has encountered debt shocks many times, and real estate companies have fallen off the debt altar; late at night on September 20, 2021, Xinli Holdings' share price suddenly plummeted 87%. Later in the night of September 30, Xinli Holdings announced that many financings were overdue, and the 149 million shares held by Chairman Zhang Yuanlin were also forced to be liquidated; in early October 2021, Fantasia Holdings announced that there was a A US$206 million note was overdue and defaulted; in early November 2021, news of Kaisa’s financial products exploding and falling into a liquidity crisis flooded the screen; starting in mid-November, China Aoyuan began to seek solutions for the extension of three domestic debts; in December, Sunshine City University's shareholder Sunshine Group suffered a substantial breach of contract; on the evening of December 27, China Fortune Land Development disclosed its debt restructuring plan.

The general trend of the industry has been transmitted to the marketing side, and financial stability and guaranteed delivery have become selling points. For example, the Ezhou Longfor Yuguang City project carried the slogan "Longfor Group, Financially Stable" in its promotion. New Beacon's project in Hanyang District of Wuhan directly adopted the slogan "If Evergrande stops work, we will not stop work."

Behind the dramatic selling point of "guaranteed delivery", it is revealed that since the second half of the year, some companies have frequently stopped work and even experienced thunderstorms due to financial problems. For ordinary home buyers, after emptying six wallets, once the project is unfinished, the losses will be huge and unbearable.

In addition to various publicity stunts, "work-to-work housing" also appears frequently. However, what is different from the previous ones is that most of these heavily launched public housing projects are price reduction sales measures that real estate companies have to implement in order to cope with the "price limit order". Real estate companies have an urgent need for repayment.

02 Real estate people: The helplessness behind the change of generals

“On November 29, 2021, I was informed that I had encountered an unprecedented dilemma and could not continue to perform the labor contract. Promise to compensate for one month's salary." Gu Nan (pseudonym) had been lying at home for more than a month until he decided to record his unemployment diary on the public platform.

Gu Nan is the deputy investment manager of a real estate company in Dongguan. Since losing his job, Gu Nan began to submit resumes frequently. In addition to the real estate industry, he has also invested in many positions related to BD functions in the same industry. “I interviewed for NIO’s business development job last week, but I failed. I have recently applied to Didi, Li Auto, Xpeng, etc., but there was no reply. The general direction is to look for opportunities in other industries, and to find those supported by national policies. Sunrise Industry".

It has gradually become a common occurrence in the industry for real estate professionals to be dismissed. Behind this lies the sadness and helplessness of real estate developers struggling to save themselves.

On January 16 this year, Zhongliang, a representative of medium-sized real estate companies, said that due to organizational structure adjustments, the holding group headquarters functions will be integrated with the real estate group headquarters, and more than 300 employees will be laid off or transferred.

However, the group headquarters requires all employees to attend work as normal on January 17, and employees who are unable to attend must report in advance. In other words, these more than 300 employees will have to choose to transfer or resign on the day they are notified.

Although the company later clarified that it had actually laid off only more than 100 people, and that the company would provide N+1 severance compensation in accordance with the law, the fact that so many people lost their jobs in one day still made the entire industry sigh.

In addition to lower-level employees, middle-level and even upper-level executives also face considerable challenges. Real Estate Pi has learned that some executives are not who they seem to be. An executive with a so-called annual salary of 7.5 million yuan was given a performance rating of 0 by his boss because he failed to meet the annual target. In fact, he could only receive half of the salary, which was 3.5 million yuan.

According to incomplete statistics from the media, nearly 800 senior executives will undergo personnel changes throughout 2021, including more than 300 senior executives who resigned (resigned, retired, dismissed, retired).

03 Outlook: Policy ice-breaking, turning point is coming

For real estate companies, 2021 can be said to be the most memorable year. After experiencing hesitations, setbacks and despair at the bottom, the signs of recovery on the policy side in 2022 have also given real estate people a glimmer of new hope. Among them, high-quality real estate companies will usher in the opportunity to take the lead in development.

In early December 2021, the China Banking and Insurance Regulatory Commission stated that at this stage, real estate development loans and merger and acquisition loans will be reasonably issued based on different situations in various places. In addition, there is news that the China Securities Regulatory Commission and the National Association of Financial Market Institutional Investors will support the issuance of bonds by high-quality real estate companies, and the funds can be used for mergers and acquisitions of insurance company projects.

In early January 2022, a person from a real estate company revealed to the media that banks have informed some large-scale high-quality real estate companies that for debt-bearing acquisitions of risky enterprise projects, related merger and acquisition loans will no longer be included in the "three red lines" "Relevant indicators.

On January 6, the debt-based M&A loan policy was implemented. On January 12, China Merchants Shekou took the lead in completing the registration of its first merger and acquisition notes, becoming the “first crab-eating” real estate company this year.

On January 27, at the Sino-Ocean Group investor meeting, the management of Sino-Ocean Group revealed that after M&A loans were not included in the "three red lines", the regulatory agencies and the Dealers Association under the People's Bank of China encouraged high-quality Real estate companies provide special loans for mergers and acquisitions, and Sino-Ocean is also on the invited whitelist. The company is also trying and preparing, but it must be based on overall strategic considerations and will not make mergers and acquisitions for the sake of mergers and acquisitions. On the same day, Vanke issued the first tranche of 3 billion yuan of medium-term notes this year, which is intended to be used for the construction of commercial housing projects. The issuance interest rate is 2.95%, and the entity and debt ratings are both AAA.

In addition to the easing of policies on the financing side, the issuance of housing loans, especially second-hand housing loans, has begun to accelerate. According to authoritative media reports, in early January 2022, the cycle from transfer to loan will be about one week. In the second half of 2021, when lending is difficult, this link will be extended to more than three months.

In terms of land, with the relaxation of the rules for land auctions in the third round of centralized land supply in Hangzhou, the popularity of land auctions has bucked the trend under the rules of lowering land prices and increasing housing prices.

After winter has passed, spring will eventually arrive, but the logic of the real estate industry has undergone earth-shaking changes. The past model of real estate expansion relying on high leverage is no longer feasible, and the industry has increasingly evolved into an industry with fixed profits and a bias towards basic manufacturing. Small but beautiful companies that are deeply involved in the region may escape this round of historical reshuffle, and state-owned enterprises and high-quality private enterprises will be able to obtain more policy preferences.

In 2022, the dawn of spring appears.