Real estate developers in deep debt crisis seem to see the light. (Image source: Adobe stock)
[Look at China News on November 14, 2021](Look at a comprehensive report by Chinese reporter Li Zhengxin)debtCrisisreal estateThe developers seem to be seeing the lightfinanceGood news, such as the recovery of credit data, boosted the price of stocks and bonds of real estate companies. However, the central bank and other regulatory agencies again expressed their stance, claiming to curb the tendency of real estate financialization to bubble.
The People’s Bank of China has rarely released individual housing loan data for October, which increased by more than 100 billion yuan from the previous month. In addition, there are signs that banks’ real estate loan quotas have further increased in November. Subsequently, the real estate index of China’s stock market soared, real estate stocks surged their daily limits, and the bond prices of real estate developers who had been diving in turn also staged a retaliatory rebound.
However, analysts believe that “housing to live without speculation” is still the main line, and the general direction of the real estate industry’s regulation is difficult to change, but it just lets developers relax. The temporary warming of the policy is only to prevent local risks from evolving into systemic financial risks, because the Xi Jinping administration has repeatedly proposed to “hold firmly the bottom line of preventing systemic financial risks.” Then, after the stock debts of most real estate developers have settled steadily, The ultimate direction of the real estate industry is to reduce leverage as a whole. The rebound trend of real estate stocks remains to be seen, and the movements of financial regulatory authorities are worthy of attention.
On November 13, according to the official media “China Fund News”, the China Banking Regulatory Commission held a meeting and stated that it is necessary to unswervingly prevent and defuse financial risks, balance the relationship between stable growth and risk prevention, and resolutely maintain the bottom line of avoiding systemic financial risks. . And it is necessary to stabilize land prices, house prices, and expectations, curb the tendency of real estate financialization to bubble, improve the long-term mechanism of real estate regulation and control, and promote the stable and healthy development of the real estate industry.
In addition, the central bank also held a meeting to emphasize that it resolutely curbs the monopoly and disorderly expansion of capital in the financial service industry and maintains the stable and healthy development of the real estate market.
According to a report by “Reuters”, a brokerage dealer in South China said that after the policy is launched, the real estate policy should come out in the short-term, but the future industry situation is still very uncertain. National policy.”
The CITIC Securities research team believes that housing mortgage loans are expected to continue to grow after November, and the situation of real estate sales returns will be significantly improved; the sales situation of the entire market may increase in March 2022. However, credit restoration is expected to be time-consuming, and it is difficult for development companies to recover their profitability.
Since China’s official announcement of the “three red lines” for real estate companies on August 20 last year, the cash flow of many developers, including Evergrande Group, has been extremely tight.
The three lines are: 1. The asset-liability ratio of the real estate company after excluding the advance receipts shall not be greater than 70%; 2. The net debt ratio of the real estate company shall not be greater than 100%; 3. The “short-term cash debt ratio” of the real estate company shall be less than 1.
At the same time, according to the three indicators of the status of the line, the relevant departments have given the scope and target of management and control.
Sheng Songcheng, former director of the Investigation and Statistics Department of the People’s Bank of China, told Phoenix Finance that the underlying logic of the real estate market has changed and is no longer the target of investment. The real estate regulation in the first- and second-tier hot cities has been very strict, and it is difficult to invest. Under the guidance of the goal of’stabilizing land prices, stabilizing house prices, and stabilizing expectations’, it is difficult for house prices to rise sharply. For many third- and fourth-tier cities, housing prices are facing downward pressure, so few people will invest again.
The squeeze of social resources such as credit by real estate has affected the economy. Sheng Songcheng said, “my country’s per capita housing area is close to two-thirds of that of the United States, and per capita GDP is only one-sixth of that of the United States.”
The Fed’s latest “Financial Stability Report” mentioned that Chinese regulators are concerned about the real estate industry’s heavy debt and price inflation, so they have taken actions to respond. However, these pressures may lead to sudden corrections in real estate prices, which in turn will impact China’s Financial system.
On November 10, the US “Fortune” magazine website reported that Robert Z. Aliber, an emeritus professor at the University of Chicago Booth School of Business, said: “The Chinese economy is hitting a high wall.”
Alibaba pointed out that there are tens of millions of idle apartments in Chinese cities, and it is estimated that 40 to 60 million apartments may be unoccupied. At the beginning, people bought these apartments for value preservation or investment. Now it may take more than 10 years to eliminate these idle houses. As the birth rate continues to decline and the rural population no longer flows to cities, the population of China’s cities will begin to decline, so it is foreseeable that real estate prices will collapse.
Alibaba predicts that China may fall into an economic recession that lasts for 8 or 10 years.
Editor in charge: Xin He Source: Look at China
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