Introduction to the report / core points
In 2022, we need to focus on the potential pulling effect of urban renewal on real estate investment. The scope of urban renewal includes the transformation of “three districts and one village”, that is, the transformation of old communities, old factories, old blocks and villages in the city, which drives the investment scale to be much larger than the transformation of single old communities in the past. The 14th five year plan establishes quantitative indicators for urban renewal in the five-year plan for the first time, which will be the key development direction in the future. At present, only two provinces and six cities have announced that the investment scale during the 14th Five Year Plan period has been nearly 5 trillion yuan (including estimated value), and the national investment scale may further exceed expectations in the future (the national proportion of population and GDP corresponding to two provinces and six cities are around 16%), including regional development Smart cities and eco cities are potential areas that exceed expectations. At present, a large number of real estate enterprises have actively participated in the transformation of old factory areas, urban areas and villages in the city, which is expected to play a more than expected pulling role in real estate investment. Real estate investment will exceed expectations and help achieve the 5.5% growth target. In terms of equity assets, it is expected to grow steadily, and the performance of relevant sectors will run through Q1; In terms of interest rate bonds, it is expected that the yield of 10-year Treasury bonds will further rise to 3.2% at the end of Q1 and the beginning of Q2.
Urban renewal is the key content of the 14th five year plan. The coverage of “three districts and one village” is much larger than the transformation of old residential areas. We pointed out in the early report “building first and then breaking through, manufacturing breakthrough” that the policy investment represented by urban renewal and affordable housing investment will be an important driving factor to drive the real estate investment in 2022 beyond expectations. At present, the market has fully expected the construction of affordable rental housing, but there is still insufficient understanding of the potential investment scale of urban renewal.
Xi Jinping General Secretary once published an article in Qiushi magazine, pointing out: “we should improve the urbanization strategy, take people’s life safety and health as the basic goal of urban development, better promote people-centered urbanization, and make the city healthier, safer and more livable”. Urban renewal is one of the important components of the task of “new urbanization”.
From the specific definition, in April 2021, the national development and Reform Commission issued the key tasks for the development of new urbanization and urban-rural integration in 2021. The document made it clear that the main content of urban renewal is: “promote the transformation of ‘three districts and one village’ with old communities, old factories, old blocks and villages in the city in the old urban area”. According to the definition, it is not difficult to find that the coverage and driven investment scale of urban renewal are much larger than that of single old community transformation in the past.
From the perspective of planning objectives, the 14th five year plan sets quantitative indicators for urban renewal in the five-year plan for the first time, requiring “to complete the transformation of 219000 old urban communities built before the end of 2000, basically complete the transformation of old factories in big cities, transform a number of large old street areas, and transform a number of urban villages according to local conditions”.
Old residential areas are one of the directions of urban renewal. It is estimated that during the 14th Five Year Plan period, the average annual investment of 800 billion yuan will be leveraged. The transformation of old residential areas is one of the important directions of urban renewal. During the 14th Five Year Plan period, it is necessary to complete the transformation of 219000 old urban residential areas built before the end of 2000. According to the government’s report on the transformation of the old residential areas by the end of 2019, the transformation of the old residential areas will be 10000, and the transformation of the old residential areas by 2020 will be ignored (excluding 35000 by the end of 2019 and 2020, respectively). According to this calculation, only 105000 residential areas remain to be started in 20222025, and the inventory of old residential areas to be started is not much. The subsequent driving effect of the decline of starting kinetic energy on investment needs to focus on the derivative investment in the construction process. In terms of investment scale, various ministries and commissions have disclosed relevant data on the transformation of old residential areas in China on different occasions. The number of old residential areas to be transformed in China is about 219000, involving more than 42 million households, with a construction area of about 4 billion square meters. It is estimated that the total investment will reach 4 trillion yuan. If the transformation period is five years, the annual new investment will be more than 800 billion yuan.
The transformation of old factory areas and urban villages can also drive real estate investment. At present, some provinces have announced high investment plans. From the perspective of investors, a large number of real estate enterprises have actively participated in the transformation of old factory areas, urban areas and urban villages, which is expected to form an additional pull on real estate investment. According to the statistics of the central index, at present, a large number of real estate enterprises have been deployed in the field of urban renewal. Guangdong Province has the most obvious first mover advantage in urban renewal. Taking Shenzhen as an example, a total of 21 real estate enterprises have participated in Shenzhen Urban Renewal investment, of which state-owned enterprises account for about 1 / 3, and private enterprises also have high enthusiasm for participation.
According to our statistics, at present, some provinces or provincial capital cities have announced clear quantitative targets for urban renewal investment, and provincial plans include Liaoning, Henan, etc; Provincial capitals and municipalities directly under the central government include Shenzhen, Guangzhou, Chengdu, Wuhan, Nanchang and Qingdao. The planned scale of urban renewal investment in the above-mentioned regions alone during the 14th Five Year Plan period has reached 4.7 trillion yuan. Considering that the GDP of the above-mentioned regions accounts for only 16% of the country and the population accounts for only 16% of the country, the scale of investment across the country may further exceed expectations. It should be noted that although the Ministry of housing and urban rural development has only selected 21 cities for urban renewal pilot, we believe that the selection intention of the pilot cities is to explore the operation system of urban renewal with typical cities as the starting point, which does not mean that urban renewal is only carried out in 21 cities. For example, Guangdong Province is not a pilot area, but it is actually in the leading state in the field of urban renewal in China; In addition, according to the statistics of the central index, since 2021, more than 30 provinces and cities in China have issued policies related to urban renewal, which is much larger than the pilot cities.
From the perspective of specific fields, regional development, smart city and ecological city are the possible directions of urban renewal, and regional development is the key direction of urban renewal. Regional development refers to the systematic transformation, investment, construction, operation and maintenance of a certain scale and relatively large area on the premise of conforming to national and local planning. When the urban content is involved in the transformation of villages in the city and the transformation of old cities, it belongs to the category of urban renewal. In the work planning, many provinces and cities take the area development as the key direction of urban renewal. For example, Fujian Province proposed to “implement the urban renewal project and focus on promoting the overall transformation and upgrading of old communities, blocks and districts”; Anhui Province proposed to “promote the pilot construction of urban renewal units (areas)”; Chengdu, Sichuan Province has made it clear that “30 new area renewal projects will be launched” in 2022. Qingdao, Shandong Province has proposed “further optimize the industrial layout and improve the urban functions by promoting the redevelopment of inefficient areas” in the urban renewal plan.
Smart city, ecological city and other hot areas in the future will also be the key direction of urban renewal in the future, which has been mentioned in the government work reports of many provinces and cities. Smart city: for example, Shandong Province proposed to “accelerate urban renewal, pay more attention to improving the level of smart, green, balanced and two-way urban development, and build 1200 smart communities”.
Henan province put forward: “using digital technology to empower social governance, build digital twin cities and smart communities, smooth urban transportation and improve the level of intelligence.” In terms of eco city, the work report of Fujian provincial government puts forward: “implement the ecological continuous project and systematically build the coastal and mountainous ecological continuous belt”; Shandong Province proposed: “fully release the value of urban green resources and build an ecological space with beautiful mountains and rivers”.
The fund-raising methods are local financial support, matching of special bonds and supporting the multi-channel financing participation of market institutions. At present, the fund arrangement of urban renewal investment shows relatively diversified characteristics. The fund-raising modes of each city are independently formulated due to the implementation of urban policies, but most cities have presented projects with local financial support and active matching of special bonds The characteristics of multi-level financing of market institutions.
First, local finance will provide support. For example, Beijing, Shanghai and other cities mentioned that the municipal and district governments will arrange financial funds to support the transformation of old areas, the renewal of old houses and the transformation of villages in cities; Second, encourage participation in urban renewal through the issuance of local special bonds. Similar arrangements are made in the urban renewal regulations issued by Shanghai, Chongqing, Shenyang and other places; Third, social capital participates through multi-level financing. The urban renewal regulations of all regions mention that social capital will be actively introduced, and market forces can participate through direct investment, indirect investment and entrusted construction; Fourth, local governments have actively set up urban renewal funds to guide them. At present, the total amount of urban renewal funds released by cities has exceeded 200 billion yuan. From the current actual situation, it does show that many real estate enterprises cooperate with local urban investment to jointly build and participate in urban renewal, showing the characteristics of government support and guidance and active participation of private enterprises, such as initiating the strategic cooperation with Wuhan urban construction to carry out urban renewal in Wuhan, Tianjin TEDA and China Construction Sixth bureau to carry out urban renewal in Tianjin; Vanke cooperates strategically with China Railway Construction port and Waterway Bureau to participate in urban renewal, etc.
In addition, we believe that whether the loan concentration and other credit policies are further adjusted to match the credit demand of urban renewal is also a direction worthy of special attention in the future. First, urban renewal and affordable housing are two important directions of policy investment. At present, the loans related to affordable rental housing are not included in the loan concentration management. If this reform extends to urban renewal in the future, it will release the credit line for relevant investment. In the future, we can pay close attention to the policy changes in this field. Second, as for whether the participation of infrastructure enterprises in urban renewal is included in the loan concentration management, we believe that there is also a certain flexible assessment space under the overall tone of “stable growth”.
In 2022, real estate pays attention to the policy investment represented by urban renewal and the policy dividend under the background of both rent and purchase. In conclusion, we continue to remind real estate investment to focus on two directions: first, the policy investment represented by urban renewal, We believe that Shenzhen New Land Tool Planning &Architectural Design Co.Ltd(300778) renewal areas other than the reconstruction of old factories and old urban areas will drive the real estate investment to exceed expectations in the future. The second is the policy dividend under the background of “simultaneous development of rent and purchase”. In terms of “rent”, the long-term rental housing system dominated by indemnificatory rental housing will become an important supplement to the existing housing system. It is expected to leverage the real estate investment of Hpf Co.Ltd(300350) billion yuan in 2022, contributing about 1.4% – 1.7% to the growth rate of real estate investment. In terms of “purchase”, it is expected that in 2022, the purchase and loan restriction policy will be gradually relaxed in the field of commercial housing, especially in the first and second tier cities, so as to meet the needs of the net inflow of population to urban housing; Reasonable demand for improved housing mortgage will also be effectively met. The relaxation of sales side policies will stimulate demand and help stabilize real estate investment. This trend has been gradually realized in 2022.
We expect that real estate investment will exceed expectations and help achieve the growth target of 5.5%. In this context, equity assets are expected to grow steadily, and the performance of relevant sectors will run through Q1; In terms of interest rate bonds, it is expected that the yield of 10-year Treasury bonds will further rise to 3.2% at the end of Q1 and the beginning of Q2.
Risk tip: the investment in urban renewal is less than expected.
