When the market enters the stage of accelerating liquidation and survival of the fittest, only stable real estate enterprises can really show their business toughness.
In the era of “making money while lying down” of real estate, the disadvantages of scale theory are easy to be covered up. When the market enters the stage of accelerating liquidation and survival of the fittest, only stable real estate enterprises can really show their business toughness.
On January 5, the unaudited operation data released by Country Garden showed that in 2021, the total contract sales amount attributable to shareholders’ equity was about 558 billion yuan, and the corresponding contract sales area was about 66.41 million square meters.
Times finance has learned that there are few listed real estate enterprises that have officially released their operating data, but compared with the lists of several research institutions, it can be seen that in the past year, due to the dual impact of regulatory policies and market downturn, the new housing market is facing unprecedented pressure, the overall sales scale of the top 100 real estate enterprises has declined, and the sales threshold of real estate enterprises of different sizes has a trend of differentiation, The Matthew effect of “the strong is always strong” in the head appears.
It is pointed out that in the future, as the real estate market enters the adjustment period, the pattern of the real estate industry will usher in a new round of reshuffle. With the advantages of brand, financing and operation, high-quality real estate enterprises represented by head real estate enterprises are expected to further seize the share and promote the continuous improvement of market share.
Performance differentiation of real estate enterprises under market pressure
Since the introduction of the “three red lines” in August 2020, the real estate industry has been squeezed by policies in many aspects such as financing, land and sales. According to the data of Zhongyuan Real Estate Research Center, the number of regulation and control of the national real estate market in 2021 was as high as 651, breaking the historical record, with an average of 54 policies per month.
According to Kerui data, under the background of industry deleveraging and market cooling, the sales of top 100 real estate enterprises rarely showed negative growth in 2021, with annual sales of 12.6 trillion yuan, a year-on-year decrease of 3.2%, and sales area of 850 million square meters, a year-on-year decrease of 9%.
However, in terms of breakdown, the sales amount of the top 100 real estate enterprises fluctuated. Due to the tide of price reduction in many cities, the liquidity difficulties of real estate enterprises affect market confidence and other comprehensive reasons, buyers have a strong wait-and-see mood. It is still difficult for some real estate enterprises to exchange price for quantity smoothly. Due to more trust, high-quality real estate enterprises have a stable overall sales performance.
Take country garden as an example. In 2021, it realized a full-scale sales amount of 758.82 billion yuan and a trading amount of 720.86 billion yuan, ranking first. It is the only real estate enterprise with a level of 700 billion yuan and the only real estate enterprise with an equity sales amount of more than 500 billion yuan.
The sales scale of the top 100 real estate enterprises decreased, but the sales threshold of real estate enterprises in different camps showed different trends. The first camp fully demonstrated the business toughness of the head real estate enterprises. Times finance learned that the full caliber sales threshold of the top 10 real estate enterprises reached 290.1 billion yuan, with a year-on-year increase of 4.3%; The threshold of top 20 real estate enterprises was 171.8 billion yuan, a year-on-year increase of 1.8%; The top 30, top 50 and top 100 all declined by 0.8-4.2%.
The warm wind of real estate is blowing frequently. The comprehensive reduction of reserve requirements, the relaxation of credit and the appropriate deregulation of regulation have been implemented one after another. It has become an industry consensus that the policy has bottomed out. However, unlike in the past, the adjusted policies in this round are more inclined to state-owned enterprises, central enterprises and high-quality private enterprises such as poly, China shipping and country garden. Ping An Securities predicted in its research report that as the real estate market enters the adjustment period, the industry pattern will usher in a new round of reshuffle. High quality real estate enterprises are expected to further seize the share by virtue of their advantages in brand, financing and operation, so as to promote the continuous improvement of market share.
Times finance learned that in the second half of 2021, a large number of real estate enterprises’ credit ratings were downgraded by three major international rating agencies, and even some real estate enterprises with state-owned enterprise background were not spared. After consulting several rating reports, times finance and economics learned that the tight financing environment, the peak of maturing debt and the tight cash flow are basically the reasons for the downgrade of the relevant ratings or rating prospects of these real estate enterprises, while country garden and other high-quality real estate enterprises can retain the investment grade rating due to their healthy financial status and strong profit prospects.
In addition, the latest reports of a number of securities institutions in China show that the real estate sector will maintain a “optimistic” rating in the future, while high-quality real estate enterprises are still continuously recommended by many securities institutions.
Business toughness of leading real estate enterprises
Although the regulation has frustrated the confidence of buyers, investors and developers, the real estate sector is still optimistic, which stems from the unchanged fundamentals.
In a recent interview, Wang Menghui, Minister of housing and urban rural development, said that China’s rigid demand for housing and improvement demand are still strong. Among them, the current urbanization rate of China’s permanent population is 63.9%, and the rapid urbanization stage brings a lot of new demand every year, while a large number of residents of old communities built before 2000 have a relatively strong demand for improvement. In addition, with the implementation of the two child and three child policies and the promotion of urban renewal, more housing demand will flow into the real estate market.
The shell Research Institute pointed out that in the future, the market of new houses of about 17 trillion a year will not change significantly in a short time, and the unbalanced development among regions still gives the real estate industry some room for development. Times finance and economics learned that the decline of the real estate market and the tight liquidity of real estate enterprises led to the weakening of land acquisition willingness. In 2021, the land transaction area and amount both fell year-on-year, but the land acquisition priority of core cities and high-quality plots has been further improved. According to Kerui, in 2021, the first and second tier cities absorbed 70% of the investment of the top 100 real estate enterprises, with a year-on-year increase of nearly 10 percentage points. These markets have similar characteristics, namely, a solid economic foundation, prosperous talent attraction and strong purchasing power.
Taking country garden, a leading real estate enterprise, as an example, it has been making investment layout according to the trend of population flow to realize the full coverage of first to sixth tier cities. By the end of June 2021, the equity marketable resources it has obtained in China are about 1.69 trillion yuan, the potential equity marketable resources are about 490 billion yuan, and the total equity marketable resources are about 2.2 trillion yuan. It focuses on the core metropolitan areas and urban agglomerations with dense population and strong economic vitality such as the Yangtze River Delta, the Pearl River Delta and the Bohai Sea. According to the data of China Index Institute, in 2021, the land acquisition amount and area of country garden were 139.7 billion yuan and 40.17 million square meters respectively, ranking first in the industry. The soil storage structure is still mainly focused on the core metropolitan area.
The increase of real estate enterprises’ investment in the core market means that the competition is more intense. Only by improving their competitiveness can they stand out in the fierce competition. In fact, in order to realize differentiated competition, high-quality real estate enterprises such as poly, CNOOC, Vanke, Longhu and country garden have invested more energy and resources in recent years.
Poly put forward the strategy of “real estate ecological development platform”, developed comprehensive services and financial business around real estate, and expected to seek business breakthroughs in the new cycle of real estate; Vanke announced that it will comprehensively accelerate the transformation and development of “paying equal attention to development, operation and service”, and make multiple efforts in property, commerce, long-term rental apartments and logistics; Longhu has six major waterways, and real estate development, commercial operation, long-term apartment rental, intelligent service, house rental and sale and house decoration are in full bloom; While transforming and upgrading to a high-tech comprehensive enterprise, country garden continues the strategic policy of stability and Zhiyuan, and improves the comprehensive competitiveness of the whole cycle from the aspects of investment, operation, marketing, products, finance, organization and management.
“Only by improving competitiveness can we occupy the market, which is a certain thing,” said the management of country garden. Times finance and economics learned that around the management strategy of “one rate and five forces”, country garden proposed to do a good job in efficiency, cost, product, marketing, service and science and technology on the premise of legal compliance and ensuring safety and quality.
Thus, the management level leading the industry is formed, and country garden can fully show its business toughness and flexibility when the market is down.
Since the implementation of the “three red lines” policy, country garden has gradually reduced the debt ratio through asset operation rather than table reduction, so as to achieve the dual purpose of improving the operating level and improving the financial situation. Times finance has learned that according to the standard of three red lines, by the middle of 2021, the only indicator for country garden to step on the line is the asset liability ratio after excluding pre-sale accounts, which has decreased from 80% at the end of 2020 to 77%; Although the other two indicators have already reached the standard, they continue to be optimized. At the end of the period, the net loan ratio of country garden was 49.7%, a decrease of 5.9 percentage points compared with the end of 2020; The cash short debt ratio was 2.1, which was also increased compared with 1.9 times at the end of 2020.
Recently, in the face of the latest changes and challenges in the market, a number of real estate enterprises have concentrated on organizational structure adjustment and strategic streamlining, and its core is to reduce costs and increase efficiency. Stepping into the era of “management bonus”, streamlining the organizational structure and stripping off unnecessary businesses can effectively reduce intermediate links, shorten decision-making time and improve operation efficiency. Country garden has also taken the initiative to implement a series of organizational changes, merging the original 106 regional companies into 65, so as to promote the rational regional layout, ensure the appropriate regional scale, improve the efficiency of resource allocation, maintain organizational activity and avoid rigidity and large company disease.
Times finance and economics learned that since November 2021, the financing of real estate enterprises has entered the recovery channel. With a stable business style and excellent corporate credit, a few high-quality real estate enterprises, including country garden, Vanke, Longhu, poly and China shipping, have taken the lead in obtaining the recognition of government departments and capital market. In the past two months, country garden has successfully issued bonds and ABS, and the application for registration in the inter-bank market has also been accepted, with a total financing amount of more than 6 billion yuan.
(source: times Finance)
