Recently, with the theme of “from chain recession to virtuous circle”, Shell Research Institute released the real estate market outlook report in 2022 (hereinafter referred to as the report).
The report first reviews the trend of the real estate market in 2021. From the transaction data, the downward trend of the market in 2021 is obvious: the transaction scale of second-hand houses, the year-on-year growth rate of new house sales, the growth rate of real estate development investment and the land transaction scale all hit a new low in recent years. In half a year, various data fell rapidly from historical highs to lows, and the rhythm imbalance became the most obvious feature of the market in 2021.
Shell Research Institute believes that the core variables affecting the market trend in 2022 are policy environment, market supply and credit supply. When looking forward to 2022, the report predicts that the market trading volume will be bottomed in the first quarter and the transaction price will stop falling in the second quarter. From the time series of the whole year, the market will show a trend of first low and then high in 2022. With the adjustment and correction of policies and the “reset” of credit lines in the new year, the market is expected to go through the repair stage and return to a stable state, and then transition to a “virtuous circle”.
In addition, the report also reviews, analyzes and prospects the real estate policy, land market, enterprises and housing rental market in 2021 in the form of special topics.
five characteristics of market downturn in 2021
The real estate market in 2021 is full of ups and downs: in the first half of the year, the market enthusiasm was high, the Ministry of housing and urban rural development interviewed cities, and all localities continued to strengthen regulation and control; In the second half of the year, the market suddenly turned into a downturn and the industry risk was exposed. Through data analysis, Shell Research Institute summarizes the five characteristics of the real estate market in 2021.
First, the transaction data of second-hand houses have reached a new low in recent years.
Since 2017, China’s second-hand housing transaction scale (Gmv) has always maintained an increasing trend, but this year, the second-hand housing transaction scale has decreased year-on-year for the first time. It is estimated that the transaction amount of second-hand houses in China will be about 7.0 trillion yuan in 2021, a year-on-year decrease of about 6%; The number of second-hand housing transactions was about 3.93 million, a year-on-year decrease of about 9%; The transaction area was about 360 million square meters, a year-on-year decrease of 9%. In 2021, the average transaction price of second-hand houses nationwide was 19000 yuan / Ping, up 3% year-on-year, down 6 percentage points from last year. Looking at the long-term cycle, the transaction area of second-hand houses in China in 2021 reached the lowest value since 2015.
Second, in 2021, the new housing and land markets will also be cooled in an all-round way, forming a whole chain cooling.
Among them, the year-on-year growth rate of new house sales area and sales amount is the lowest since 2015. According to the data of the National Bureau of statistics, it is estimated that the sales area of new commercial houses in China will be about 1.57 billion square meters in 2021, with a year-on-year increase of 1.5%; The sales amount of new commercial housing in China was about 16.4 trillion, a year-on-year increase of about 5.9%.
The growth rate of investment in real estate development fell to a historical low since 2017. According to the data of the National Bureau of statistics, the completed investment in the development of new commercial housing in China from January to November 2021 was 10.36 trillion yuan, a year-on-year increase of 8.1%. From January to November 2021, the new construction area of new commercial housing in China was 1.35 billion square meters, a year-on-year decrease of 8.4%.
The land transaction scale has decreased significantly year-on-year for the first time since 2019. From January to November 2021, the cumulative turnover of residential land in 351 cities in China was 4.98 trillion yuan, a year-on-year decrease of 11.15%; The cumulative transaction planning construction area was 13.43 trillion square meters, a year-on-year decrease of 30.12%.
Third, the market dropped rapidly from a historical high to a historical low during the year, and the rhythm imbalance has become the most obvious feature of the real estate market in 2021.
From March to September, the second-hand housing market fell from the peak to the bottom within half a year, and the trading volume shrank by more than 60%. In March, the number of second-hand housing transactions in shell 50 city hit a record high since 2019, the trading volume continued to decline since April, and reached the lowest value in a single month since 2019 (except for epidemic situation, Spring Festival and other special time points).
From June to October, the trading volume of new houses increased from the highest in the same period since 2016 to the lowest in the same period. In the first half of the year, the sales area of newly-built commercial houses in China maintained an increase. In June, it reached the highest level in the same period since 2016. In July, the sales area turned negative year-on-year. From August, the single month scale was lower than that in 2019, and to November, the single month scale was the lowest since 2016.
In less than half a year, the land market has experienced from land grabbing to unprecedented large-scale flow shooting. In the first centralized land supply in the second quarter, real estate enterprises took land actively, with an average transaction rate of 95% and a premium rate of 15.0%. By the time of the second batch of centralized land supply, the enthusiasm of real estate enterprises to acquire land was comprehensively reduced, and there was a large-scale flow auction. The average transaction rate was reduced to 69% and the comprehensive premium rate was reduced to 4.0%.
Fourth, the differentiation of the real estate market has deepened in the downward trend, the credit stratification of the market has become more prominent, and the differentiation of cities, regions and products is expanding.
In this round of market downturn, the price correction of just needed houses is greater, and the differentiation between just needed market and improved market is increased. Shell second-hand housing data show that since the second half of the year, the decline in the price of low total price housing is greater than that of high total price housing, the cumulative decline in the price of small house type housing is significantly greater than that of large house type housing, and the older the building age, the greater the decline in the price of the house. The reason is that in the environment of credit tightening, the rigid demand customers with higher dependence on credit are more affected.
Regionally, the cyclical characteristics of “weak in the South and strong in the north” in the market of the five urban agglomerations this year are more obvious, and the transaction growth rate shows the characteristics of decreasing from north to south. Urban markets with different energy levels also have periodic characteristics, and the performance of first tier cities is weaker than that of key second tier cities.
Fifth, different from the previous market downturn, the rapid cooling of the market this year is closely related to the credit of real estate enterprises, which starts from real estate enterprises and further affects real estate enterprises.
With the “three lines and four grades” controlling the growth rate of interest bearing liabilities of real estate enterprises and the concentration management of real estate loans, the development loans of real estate enterprises were further tightened, resulting in a significant decline in the financing scale of real estate enterprises. With the tightening of financing, real estate enterprises rely more on sales collection. The tightening of credit has made it more difficult for home buyers to make loans, and the sales of real estate enterprises have further slowed down. In addition, many places tightened the supervision of pre-sale funds, making the cash flow available for operation worse, further leading to frequent credit defaults of real estate enterprises.
Debt default superimposed on asset impairment expectations led to a decline in the credit of real estate enterprises, triggering intensive downgrades of real estate enterprises by rating agencies. At the same time, due to the inhibition of market liquidity, it is difficult for venture real estate enterprises to save themselves by selling assets. This year, the real estate enterprises with thunderstorms have ranged from the top 50 to 100 billion real estate enterprises, and then to the leading real estate enterprises.
On the whole, the market fluctuation in 2021 broke the superstition that “house prices will not fall and real estate will always yield high”, and also broke the belief that real estate enterprises are “big but not falling”. The real estate market will gradually bid farewell to the past development model of high growth, high leverage and high risk.
lowering the lever too fast leads to chain cooling
The analysis of Shell Research Institute found that the market experienced a “roller coaster” decline caused by chain cooling during the year. The transmission process is as follows: in March, the shell second-hand housing boom index first callback, the second-hand housing turnover continued to decline in April, the second-hand housing price nearly stopped rising since June, followed by the decline of the shell new housing belt index, the new housing turnover began to fall since July, the land auction rate rose sharply, and the new housing price fell since August.
The report believes that the direct reason for the chain reaction in the market this year is the superposition of multiple financial tightening policies and too fast leverage reduction. Different from the historical cycle, this round of real estate deleveraging is omni-directional. Credit control and tightening measures have been taken simultaneously for banks, real estate enterprises and residents, and direct intervention policies such as loan concentration control and second-hand housing guide price have been adopted. In less than a year, the long-term mechanism of real estate finance has been fully implemented, and a number of policies have been implemented, resulting in a credit crisis in the market.
For this year, the mismatch between credit supply and market rhythm led to too rapid deleveraging of the market. According to rough estimates, the market was hot in the first quarter, and the residential sector added 1.98 trillion in medium and long-term loans, a record high in a single quarter. If the amount of medium and long-term loans issued by residents in the whole year is equivalent to that of last year, about 6 trillion, and the consumption of credit lines in the first half of the year accounted for 57% of the whole year, exceeding the range of 47% – 50% in the past three years. The amount of credit in the first half of the year largely occupied the credit resources in the second half of the year. In the third quarter, the new medium and long-term loans of the residential sector was only 1.29 trillion, a new low in the same period since 2016.
What is different from history is that due to the inhibition of market liquidity, it is difficult for venture real estate enterprises to save themselves by selling assets. In the previous regulation and control, the price control is mainly concentrated in the new housing market, and the pricing of real estate enterprises is controlled by setting the record price. This round of regulation has increased the control of second-hand housing market prices. In addition to reducing the loan ratio of buyers, the guiding price of second-hand housing makes the market wait-and-see in the short term and the circulation of the whole market difficult.
Concerns about housing circulation further worsen the pessimistic expectations of home buyers. At the same time, home buyers face the risks of falling house prices, delayed delivery, decline in house quality and even uncompleted completion, and their willingness to buy houses is reduced. The increase of debt default and the expectation of asset impairment aggravate banks’ risk aversion towards real estate, promote banks to be more cautious in active lending, and in turn aggravate the credit crunch. Expectations and behaviors of all parties resonated, and the whole market fell into an unprecedented negative cycle of “transaction blocking – expectation deterioration”.
outlook for 2022: the market trend is low before and high after
The shell Research Institute believes that the core variables affecting the market trend in 2022 are the policy environment, market supply and credit supply.
Since the fourth quarter, senior management has released stability maintenance signals, and the policy environment has been conducive to market recovery. After a series of adjustments, the excessively tight financing policy in the early stage has been corrected, and the financing environment of real estate enterprises has been improved. Since November, the financing scale of real estate enterprises has rebounded, and many matured domestic and foreign bonds of many real estate enterprises have been successfully extended. At the same time, the transactions of equity and assets of real estate enterprises are active, and the short-term liquidity of real estate enterprises has been repaired. Overall, the system risk of real estate enterprises is controllable and the market supply can be guaranteed.
The report predicts that the market trend in 2022 will be low before high. It is expected that the trading volume in the first quarter can be bottomed and the transaction price in the second quarter can stop falling. In the market chain, it will take the lead in starting from the second-hand housing market to drive the market chain repair; From the perspective of house buyers, the market just needs to take the lead in repairing. Regionally, Shenzhen Guanhui market took the lead in repairing the bottom. In terms of city level division, the first and second tier cities took the lead in repairing, and the downward pressure on the third and fourth tier cities is still great.
On the whole, the report is optimistic about the market next year. It believes that the real estate market will be gradually repaired in 2022, which will take time. The repair process may fluctuate briefly, but it will eventually return to a stable equilibrium.
attachment: 2021 real estate market review series
policy review in 2021:
from comprehensive control to moderate correction, the “real estate is not fried” remains unchanged
In 2021, the national commercial housing turnover showed a trend of first high and then low, and the policy was adjusted with the market heat and phased problems.
In the first quarter, in order to squeeze out the illegal funds in the real estate market, many places issued policies to strictly investigate the sources of funds in the real estate market and stabilize the increase of market volume and price. At the same time, many places put forward the “reference price of second-hand housing” for the first time to guide price expectations and curb investment demand.
As the trading volume and price of commercial housing continued to operate at a high level in the first half of the year, the regulatory policies in the second quarter mainly started from the aspects of purchase restriction, price restriction and sales restriction, mostly for the implementation and upgrading of policies in cities interviewed by the Ministry of housing and urban rural development in the early stage, so as to strengthen the positioning of “housing without speculation”.
Since the third quarter, with the continuous fermentation of problems such as the rupture of the capital chain of real estate enterprises, ensuring the delivery of houses on time and according to quality has attracted extensive attention. The regulation policies during this period mainly focused on the issuance standards of pre-sale certificates and the supervision of pre-sale funds, which not only protected the legitimate rights and interests of buyers, but also made the real estate enterprises with diversified financing channels and good credit more conducive to the survival of the market.
In the fourth quarter, the market expectation of house purchase declined rapidly, and the willingness of real estate enterprises to acquire land further weakened. In order to ensure that reasonable capital needs were met, the financing and regulation policies were moderately corrected, and the credit environment was improved.
Shell Research Institute predicts that in the future, with the gradual transmission of various favorable factors, the market is expected to recover smoothly and the industry will move towards a virtuous circle.
Land review in 2021:
the market opened high and went low, with the lowest turnover in three years
From January to November 2021, the cumulative turnover of residential land in 351 cities in China was 4.98 trillion yuan, a year-on-year decrease of 11.15%; The cumulative transaction planning construction area was 13.43 trillion square meters, a year-on-year decrease of 30.12%. From the monthly data, July can be regarded as a watershed for the land market from enthusiasm to rationality. In the first half of the year, the cumulative turnover increased by 10.3% year-on-year. With the implementation of the new regulations on land auction in August, combined with the influence of three-tier and four gear regulation and loan concentration management, the parcel premium rate and transaction rate decreased significantly from August.
From January to November, the cumulative turnover and area of first tier cities increased by 12.4% and 17.4% year-on-year respectively, the second tier cities decreased by 6.6% and 23.3% year-on-year respectively, and the third and fourth tier cities decreased by 24.8% and 34.5% year-on-year. From the perspective of parcel transaction rate, the monthly transaction rate of the first and second tier cities is always 10-20 percentage points higher than that of the third and fourth tier cities. In the case of market downturn, the differentiation of different line level cities is obvious. The higher the city level is, the higher the robustness is.
Centralized land supply is a major change in the land market this year. As of December 12, 12 cities have completed three batches of centralized land supply in the whole year. Looking back on the performance of centralized land supply in various cities this year, it can be described as “hot first and cold later”. The land transaction rate and comprehensive premium rate of the first batch were the highest in the year. The centralized land supply of the second batch was significantly upgraded in terms of rules. The overall premium rate decreased from 16.1% of the first batch to 3.4% of the second batch, and the overall transaction rate decreased from 94.4% of the first batch to 69.1%. The land auction rules of the three batches were “strict and wide” on the basis of the second batch, and the transaction rate of the parcel increased from 68.8% of the second batch to 79.4% of the third batch.
From the perspective of land acquisition by real estate enterprises, it shows that under the condition of low competitive pressure, it is more conducive for stable real estate enterprises to obtain land resources with higher cost performance.
enterprise review in 2021:
the outbreak of credit crisis is inevitable, and real estate enterprises need to make subversive changes
In the second half of this year, the industry credit crisis broke out, and the real estate enterprises encountered a dark moment, which is the most concerned hot event in the real estate industry in 2021. The shell Research Institute believes that this round of credit crisis of real estate enterprises is the inevitable result of the high debt model and sudden slowdown of turnover of real estate enterprises.
In the past decade, with the rapid development of the real estate industry, real estate enterprises have become increasingly dependent on high debt, laying potential hidden dangers for the outbreak of the crisis. Since the central government put forward the positioning of “housing without speculation” at the end of 2016, China’s real estate industry has entered a period of adjustment, and some real estate enterprises with poor risk resistance have successively exposed problems. Between 2019 and 2020, the two top 100 real estate enterprises had a crisis, and the sales scale of RMB 100 billion failed to become a barrier for them to resist risks.
Compared with the past, the strictness of this round of regulation and control policies in 2021 is unprecedented. It is a dual regulation on the capital demand side and the capital supply side, and a multi-dimensional regulation from a single financial channel to relevant financial channels. The superimposed implementation of multi-channel policies, combined with the downward cycle of industry development, and the combination of various factors accelerated the exposure of real estate enterprises’ credit crisis.
With the positive signals continuously released by the government to boost market confidence and the self rescue actions carried out by real estate enterprises in various ways, the industry expectation that has fallen to the freezing point has been repaired for the first time. The report believes that after this round of industry risks are cleared, the business logic of real estate enterprises will continue to change, and then the real estate industry will enter a new round of stable development cycle.
The shell Research Institute predicts that the recovery path of the real estate market is: policy → finance → expectation → market → real estate enterprises. It is expected that the financing amount of real estate enterprises will resume in the first quarter of next year, so as to improve industry expectations. The new housing market will gradually pick up in the second quarter, and the capital liquidity of real estate enterprises will be substantially alleviated.
The report also believes that the rapid development cycle of the real estate industry over the past 20 years is no longer, and the mode of high debt and high turnover has come to an end. Combined with market trends and industry development, real estate enterprises need to make subversive changes from two aspects of business model and business structure in the future.
lease market reviewed in 2021:
the leasing market has obviously warmed up vs leasing enterprises are ready to go
Although the rental market has recovered significantly in 2021, the overall rent is still 9% lower than before the epidemic, of which more than 60% of the cities have lower rents than before the epidemic, and the transaction cycle of tourists is still higher than before the epidemic.
In terms of rent level, the average monthly rent of 40 key cities in China this year was 38.8 yuan / m2, a slight increase of 1.3% year-on-year, and still decreased by 8.8% compared with 2019; Among them, the rent of more than 80% of cities increased slightly year-on-year, and the rent of more than 60% of cities is still lower than the level before the epidemic.
According to the data of Shell Research Institute, the transaction cycle of houses in 40 national key cities in 2021 was 50.1 days, a year-on-year decrease of 2.4 days and an increase of 9.9 days compared with 2019; The transaction cycle of customer sources was 9.7 days, basically unchanged year-on-year, and extended by 1.9 days compared with 2019.
According to the data, in 2021, more than 40% of the houses with a lease transaction age of 21 years or more in the first tier cities accounted for. Among the 40 key cities in China, the average age of leased houses in Shanghai, Beijing and Tianjin is the highest, which has been more than 20 years. As most of the high age rental houses have convenient transportation and complete supporting facilities, the average monthly rent is more stable after the impact of the epidemic. Compared with before the epidemic, the average monthly rent of rental houses with 16-20 years, 21 years and above in cities of all levels increased slightly.
Due to the relatively high house price income or the purchase and loan restriction policies in some cities, the house purchase plan of urban residents was postponed. The average purchase age of first tier cities and most new first tier cities is higher, and the lease term of tenants may exceed 10 years. According to the data of Shell Research Institute, the average age of house purchase in first tier cities this year is 36-38 years, which is 2-3 years later than that in 2018. The average age of house purchase in most new first tier cities is 33-36 years, which is up to 3 years later than that in 2018. Due to the delay of house purchase plan, the number of family rental groups increased, and the proportion of large family transactions in 40 key cities in China increased by 3 percentage points.
Compared with before the epidemic, the market also showed a small decline in the average monthly rent of small family houses, the average monthly rent of subway houses was more than 30% higher than that of non subway houses, and the average monthly rent of hardbound houses was more than 30% higher than that of simple decoration and rough houses.
In addition, the report of Shell Research Institute also takes stock of the outstanding changes in the number, distribution, financing and mode of leasing enterprises in 2021, and predicts the future industry trend.
In 2021, the number and scale of housing rental enterprises have reached about 20000, reaching a record high. More than 80% of them were established in 2020 and 2021. In terms of regional distribution, more than 60% of leasing enterprises are distributed in the Yangtze River Delta, southeast coast and Bohai rim, and the top 5 cities are Guangzhou, Chongqing, Shanghai, Suzhou and Tianjin.
After the concentrated mine explosion last year, it is more difficult for leasing enterprises to finance. Therefore, leasing enterprises have differentiated in their business model. Enterprises with weak financial strength begin to shift from charter to asset light mode, and enterprises with strong financial strength turn from charter to self-sustaining mode, thus turning to asset heavy operation. The shell Research Institute believes that the development of the rental market will become mature, and the institutionalized proportion of rental houses will continue to increase. In addition, the report also predicts that leasing REITs products will be launched next year, which will effectively solve the exit problem of heavy asset model, and leasing enterprises will usher in model innovation again. (CIS)
(Securities Times)
