Real estate recovery can be expected


Real estate recovery can be expected

Lian Ping/Wen

In the first half of the year, the recovery of the real estate market was difficult. Real estate sales showed a positive signal at the beginning of the year and fell again in the second quarter. House prices generally bottomed out, new house prices generally showed signs of stabilization, and second-hand house prices continued to fall. The financial situation of housing enterprises is tight, land acquisition is cautious, and land transactions continue to grow negatively. The special loan of "Baojiaolou" promoted the continuous improvement of the completion end, the investment in new housing construction and Jian ‘an project was slow, and the decline in real estate investment narrowed slightly.

Looking forward to the second half of the year, the real estate market may still face a "headwind" in a short period of time. The Politburo meeting brought a long-lost warm wind to the market. Housing policy will increase support in the second half of the year. The interest rate of individual housing loan policy is expected to remain low, and the market interest rate may be slightly lower. It is estimated that the annual residential sales are still expected to achieve a slight positive growth, the overall house price will gradually stabilize, and the supply and demand structure of the land market will improve. It is expected that more effective positive policies will be introduced in the second half of the year to promote the "second half" of real estate projects and alleviate the debt problem of housing enterprises. It is expected that the decline in real estate investment in the whole year will be narrower than that in the first half of the year.

I. Market Operation Outlook in the Second Half of the Year

1. This round of real estate cycle tends to be weak recovery.

The real estate market did recover in the first half of the year. With the implementation of previous policies and measures, the dark moment of real estate has passed and the recovery channel has been opened. Although the first quarter of the property market is fleeting, the real estate industry still has the momentum of sustainable development. First, the policy is in a relatively supportive stage. The further implementation of the previous property market policy and the continued relaxation of the subsequent property market policy will continue to provide a relatively relaxed policy support environment for the real estate industry. Second, the income of residents is gradually improving. With the economic recovery, the per capita disposable income of urban residents increased by 5.4% in the first half of the year, up 1.4 percentage points from the first quarter. Third, the continuous advancement of new urbanization continues to provide effective demand for the real estate market. In 2022, China’s urbanization rate is 65.2%, and the household registration rate is around 47%, which is far from the average level of 80% in developed economies. In the coming period, China is still in the rapid development stage of new urbanization, and the huge demand potential released in this process will provide strong support for the real estate market. Fourth, the fading of factors such as epidemic disturbance has promoted the rapid release of the backlog of demand.

At present, the purchasing power of residential departments is not as good as similar cycles in the past. In the past two decades, there have been three negative growth in real estate sales area, in 2008, 2014 and 2019. Among them, 2008 was hit by the global financial crisis, when the growth rate of disposable income of urban households was above 14%; The growth rate of disposable income of urban households was around 8%-9% when real estate sales declined in the last two times, but now, after three years of epidemic, the growth rate of disposable income of urban households is only around 5%. The slowdown of residents’ income growth is one of the important factors to curb the expansion of housing demand.

Housing financial support policies are relatively mild. Mortgage interest rate policy, the rate of interest rate reduction is relatively limited. The inflection point of this round of mortgage interest rate began at the end of the third quarter of 2021, and by the end of the second quarter of 2023, the LPR was reduced by 45 basis points, and the personal housing provident fund loan interest rate was reduced by 15 basis points, with a total reduction of 60 basis points. Although this is related to the current management of the overall domestic bank loan interest rate level, it is relatively small compared with the previous 100 and 150 basis points.

Real estate developers actually get less financial support. Although since the third quarter of 2022, commercial banks have gradually improved their loans to housing enterprises under the promotion of the special loan of "guaranteed property" and the policy of "three arrows of finance", considering that the target of policy support is mainly high-quality housing enterprises, the financing difficulties of some small and medium-sized housing enterprises with relatively poor qualifications have not been effectively solved. By the end of the first half of 2023, the off-balance-sheet financing of real estate enterprises continued to decrease, and many other listed real estate enterprises were told by the exchange that there was a risk of delisting, and the private financing capacity was relatively lacking. In the first half of the year, the self-raised funds of real estate enterprises (accounting for 35% of the sources of housing enterprises’ funds in 2022) decreased by more than 20% year-on-year, which was very rare in the past.

Under the background of the real estate support policy of most local governments in China, the central bank, policy banks and state-owned banks have increased the investment in housing financial resources, and launched development loan support plans, rescue funds, rental housing financial loan support tools and so on. Due to the impact of the epidemic and the pressure of long-term debt of real estate enterprises, it has had a great impact on the two important sectors of the real estate market-the residential sector and the real estate enterprises. It is difficult for the real estate market to repair as quickly as in 2009, 2013 and 2016, and the recovery cycle of this round of real estate market is likely to be weaker than the previous recovery cycle.

Based on the comprehensive judgment, it is expected that the real estate market may be in a weak recovery situation in general during the year. With the support of relatively loose housing policy, the situation of further rapid decline in the short term has been alleviated, but compared with previous recovery cycles, there may be many twists and turns in the recovery process, and the poor actual capital turnover of some housing enterprises may lead to the overall real estate construction investment is difficult to improve comprehensively. The expected return of real estate investment comes at a time when the sustained recovery of commercial housing sales and external financial support are needed. The downside risks of investment still exist during the year, and the drag on economic growth still needs attention.

2. The real estate policy is expected to further increase support.

The real estate policy will remain warm in the second half of the year. In July, the Politburo meeting decided to "adapt to the new situation of great changes in the supply and demand of China’s real estate market and adjust and optimize real estate policies in a timely manner". The basic idea of supporting policies is to continue to focus on improving housing sales and activating demand. At the same time, on the basis of the existing conditions, the policy will enhance the ability of high-quality housing enterprises to acquire land and expand, strengthen the investment in the construction of new and guaranteed buildings, and prevent large-scale accidents of housing enterprises as much as possible. Under the policy background of "staying in a house without speculation" and "making policy for the city", all localities will further explore the introduction of policies conducive to the stabilization of the real estate market, so as to gradually realize the goal of "three stabilities" in the real estate market.

On the demand side, the adjustment method is mainly to lower the threshold of buying houses and increase transaction activity. The mortgage interest rate is expected to drop slightly. With the central bank lowering the LPR benchmark interest rate in June, the benchmark mortgage interest rate of commercial banks will be lowered accordingly, and the first and second home mortgage interest rates are expected to fall further. The restrictive housing purchase policy is expected to be further loosened. It is expected that more third-tier cities will follow Yangzhou’s practice in the second half of the year and gradually cancel previous measures such as restricting purchases, loans and sales to promote the recovery of the property market. There may be more cities adopting the second-hand housing transaction mode of "mortgage transfer", moderately lowering the tax rate of second-hand housing transactions and reducing the brokerage service rate. For the first-tier and second-tier housing market with tight supply and demand, it is not excluded to gradually and moderately cancel the restrictive housing purchase policy for some or all urban areas when necessary, and increase the housing purchase subsidy to boost the confidence of the housing transaction market.

On the supply side, the main ways of policy support are to ensure the reasonable financing needs of housing enterprises, do a good job in risk management and control of housing enterprises and optimize the land transaction system. At the end of June, the central bank and the General Administration of Financial Supervision extended the two important financing businesses of real estate enterprises until the end of 2024, and proposed that the next stage will keep the real estate financing reasonable and moderate, increase the financial support of Baojiaolou, and promote the marketization of industry risks. It is expected that relevant departments will speed up the examination and approval of bond financing and equity financing of housing enterprises, meet the reasonable financing needs of the industry (especially for high-quality housing enterprises), promote mergers and acquisitions of the industry, and continuously improve and optimize the assets and liabilities of housing enterprises. It is expected that the credit resources of "Baojiaolou" may increase in the second half of the year, which will accelerate the completion of commercial housing and the sale of existing homes. There is still room for improvement in the land market. It is expected that some big cities will gradually introduce high-quality land and increase the proportion of residential land supply. The rules of land auction may be loosened in terms of reducing the proportion of allocation or self-holding, the proportion of deposit, and the payment period, so as to reduce the funds occupied by real estate enterprises. Conditional cities may moderately increase the premium rate of land auction and increase the enthusiasm of real estate enterprises including private enterprises.

3. Investment confidence in the real estate market still needs to be boosted.

In the second half of the year, the sales of commercial housing may be suppressed first and then stabilized. At present, the foundation for the full recovery of the real estate market is not solid. Demand is mainly concentrated in first-tier cities and surrounding third-tier cities and key second-tier cities, and the housing demand accumulated over the past two years is expected to continue to be released. After the rapid release at the beginning of the year, it may enter a steady state in the remaining months, and the anxiety about the housing market may continue into the third quarter and become the lowest point in the year. In the fourth quarter, with the recovery of residents’ income and the completion of housing, it is expected to push up sales and pick up. The traditional "Golden September and Silver 10" market may be difficult to reproduce, but the high-end market in some big cities still has good appeal. The low base in the fourth quarter of 2022 will also help the growth of real estate sales in the fourth quarter technically. It is estimated that the sales area of commercial housing will increase slightly by about 2%-3% year-on-year, and the sales will turn from negative to positive.

The improvement of sales margin will help more cities to stop falling and stabilize housing prices. The month-on-month trend of commercial housing prices is basically synchronized with the performance of housing sales. It is expected that house prices may decline slightly in the third quarter and return to positive in the fourth quarter. The inventory of commercial housing in most second-and third-tier cities is at a relatively high level, and the process of destocking is relatively tortuous. Combined with the performance of similar cycles, it is estimated that by the end of the year, the price of new houses in China will increase by 1.5% year-on-year, the price of second-hand houses will increase by 0.5% year-on-year, and house prices in many cities will "turn from falling to rising". Housing prices in some big cities are relatively firm, which is due to the low inventory of existing commercial houses and the rising land prices in the past three to four quarters. It is estimated that the price of new houses in first-tier cities will increase by 3% year-on-year, and the price of second-hand houses will increase by 2% year-on-year.

The land market will still focus on big cities and their surrounding areas. Housing enterprises’ own interest expenses and debt repayment pressure are still not small. The main participants in the local auction market are still central enterprises and local state-owned enterprises with relatively stable styles. It is unlikely that private housing enterprises will significantly increase their land reserves during the year, but they may participate selectively in the second half of the year when the capital situation is relatively abundant. It is expected that some big cities will release more high-quality land plots. The central bank has indicated its support attitude towards the development loans of high-quality housing enterprises. Objectively, some high-quality housing enterprises also need to replenish their warehouses. According to estimates, the inventory (land reserve) of listed high-quality real estate enterprises is at a relatively low level. Based on the comprehensive calculation, the ratio of inventory to total assets of the top 30 real estate enterprises listed in A shares and H shares fell to 45.9% by the end of 2022, the second lowest since the epidemic in 2020. It is not difficult to explain why in the first half of 2023, state-owned enterprises such as China Resources, Poly and China Shipping ranked among the top three in terms of land acquisition amount during the year.

Confidence in real estate investment is still insufficient. Considering that the improvement of housing sales and land market is not fully improved, and most housing enterprises are still trapped and the financial situation is tight, the regional real estate investment mainly depends on the eastern coastal areas. From the perspective of the source of funds for housing enterprises, the incremental funds in the second half of the year mainly come from advance receipts, deposits and personal mortgage loans, and its growth rate is expected to improve slightly. The special loan for "Baojiaolou" will continue to provide support for the housing completion section. However, the off-balance-sheet "leverage reduction" behavior of housing enterprises may continue with a high probability, mainly because the balance of Chinese offshore US debt and trust will continue to decrease. With regard to the judgment of construction funds for projects under construction, it is expected that the extension of loans related to large-scale high-quality housing enterprises will be supported by banks, but the possibility of further capital injection by most small and medium-sized developers is low. Based on comprehensive judgment, it is expected that there will still be some downside risks in real estate investment in the second half of the year, and the pressure in the third quarter is relatively high. It is expected to rebound slightly in the fourth quarter, and the accumulated real estate investment in the whole year may fall by 7% year-on-year.

Second, the industry risk analysis

1, the macroeconomic impact of the real estate market downturn.

As a pillar industry of the national economy, real estate connects the two major demands of consumption and investment, and plays an important role in economic growth. According to statistics, real estate economic activities account for nearly 30% of GDP, real estate-related loans account for nearly 40% of bank credit, real estate-related income accounts for 50% of local comprehensive financial resources, and real estate accounts for 60% of urban residents’ assets. According to the model of Zhixin Research Institute, every 1% drop in real estate development investment will drag down the GDP growth rate by about 0.1 percentage points. In the first quarter, the real estate market turned down in the second quarter after a short period of spring. In the first half of the year, the decline in real estate investment dragged down the growth rate of fixed assets investment by 1.6 percentage points and the growth rate of total retail sales of consumer goods by 2.3 percentage points. It directly dragged down the GDP growth rate by about 0.4 percentage points, and indirectly dragged down GDP by about 0.5 percentage points; The negative impact of real estate-related activities on economic growth, especially on stimulating domestic demand, is remarkable. In the first half of the year, the growth rate of total retail sales of enterprises above designated size increased from 1.9% at the end of last year to 6.3%, but the growth rate of sales of products closely related to real estate was still lower than the average. For example, the sales growth rate of building and decoration materials, household appliances and audio-visual equipment, furniture, especially building products has not improved, but has further declined.

The drag of real estate investment on economic growth is expected to narrow slightly in the second half of the year, but it should not be taken lightly. Considering the financial pressure of housing enterprises, the low level of land acquisition and the pressure on the stock of Jian ‘an projects, it is difficult for real estate development investment to improve in the second half of the year. However, under the low cardinal utility in the same period last year, the year-on-year decline of real estate development investment will be narrowed from -7.9% in the first half of the year to -7%, and the drag of real estate on economic growth will also be slightly narrowed. It is estimated that investment in real estate development in the second half of the year may drag down investment in fixed assets by 1.6 percentage points, drag down social zero consumption by 2.1 percentage points, and drag down GDP growth by about 0.7 percentage points. According to the above calculation results, real estate investment may have a greater drag on GDP for the second consecutive year, which is really rare in the economic development of China in the past two decades. During this period, most real estate developers’ continuous reduction of balance sheets may imply the change of their main business objectives, that is, the change from actively expanding balance sheets to actively managing balance sheets. International experience shows that the formation of this trend may last for many years, in other words, the downward drag of real estate investment on the macro economy may continue further.

The land purchase fee may have a negative growth for three consecutive years, and the local government’s debt repayment pressure will increase. From January to June 2023, the land purchase fee was 2.1 trillion yuan, down 2.6% year-on-year; The corresponding local state-owned land transfer income was 1.87 trillion, down 20.9% year-on-year, and the decline may be further expanded in the second half of the year. Due to the continuous decline of land transfer income, the income of local government funds has also declined simultaneously, resulting in a decline in the proportion of these two incomes in the overall local fiscal revenue. By the end of June, 2023, the proportion of land transfer in the narrow sense of national fiscal revenue has dropped to only 13%, which is the lowest level in the past decade. It seems that the decline of land transfer revenue has little impact on national fiscal revenue. However, the decline in the scale and growth rate of land transfer income is actually a huge test for local finance. By the end of June, 2023, the proportion of land transfer revenue to local narrow fiscal revenue dropped to about 20%, and the proportion of local government fund revenue was 87%. In the three years since the introduction of the "Three Red Lines", the local government’s land transfer income has been negative for two consecutive years, and the land transfer income is likely to remain at a low level in the second half of the year, which means that the corresponding government fund expenditure projects have insufficient investment support. At present, the repayment guarantee multiple of local government special debt has been reduced to 3.5 times, and the repayment pressure of local government debt will continue to increase, which may induce urban investment companies in economically underdeveloped areas to face greater repayment pressure in the future, and does not rule out the possibility of local debt repayment delay or debt default.

2. The debt repayment pressure of housing enterprises cannot be ignored.

It is estimated that the outstanding debt of housing enterprises in the second half of the year is 369.2 billion yuan, a decrease of 126.7 billion yuan compared with the first half of the year, which is still no small challenge compared with revenue. Among them, in the third quarter, housing enterprises will usher in the second small peak of debt repayment in the year, which is still a big test for housing enterprises; In the fourth quarter, the debt repayment pressure of housing enterprises may be eased. It should be pointed out that the fluctuation of RMB exchange rate may lead to an increase of 5%-8% in the overall debt service cost of housing enterprises this year compared with last year.

Affected by delisting and debt default, there was a big funding gap in the special loan of "Baojiaolou" during the year. According to the public information of listed real estate enterprises that have been disclosed, in addition to the three companies that have been delisted in the first half of the year, there are currently six listed real estate enterprises in Shanghai and Shenzhen, and nine listed real estate enterprises in Hong Kong have suspended trading for more than 18 months before the end of the year, which may lead to the risk of triggering the exchange to issue a delisting warning letter. In view of the fact that many of the above-mentioned housing enterprises are well-known large and medium-sized housing enterprises, with a large number of projects and cities covered, and most of them have experienced problems such as debt default, project shutdown, significant decline in sales and tight cash flow. If the impact of delisting is superimposed, the difficulty of continuing to promote the task of "guaranteeing the delivery of buildings" may further increase, and it will have a certain impact on the smooth operation of the market. Based on financial calculations, including sales repayment ability, construction and installation costs, accounts payable and other indicators, it is estimated that the funding gap of "Baojiaolou" related to real estate enterprises that have been or are facing delisting risks may reach 400-500 billion yuan during the year.

3. Financial risks of housing enterprises need to be paid attention to.

At present, the interest rate of housing enterprises’ bank loans is higher than their return on investment. Due to factors such as epidemic disturbance, financing difficulties and periodicity, the return on investment of real estate enterprises has suddenly and rapidly declined since the fourth quarter of 2021, and it continues to be lower than the average loan interest rate of financial institutions. In history, only in the middle of 2011, there was a brief "cross" between the return on invested capital and the loan interest rate, but at that time, the return on invested capital of real estate enterprises was still at a relatively high level of more than 8%. According to statistics, the weighted return on investment capital (ROIC) of real estate enterprises listed on the mainland A-share market has rapidly dropped from 6%-8% in 2018-2020 to less than 4%, and it was 3% in the first quarter of 2023. Although the weighted average interest rate of RMB loans of financial institutions has gradually declined in the past three years, the overall loan interest rate has declined by about 100 basis points. By the end of the first quarter of 2023, the weighted average interest rate of loans will be 4.34%. That is to say, from the fourth quarter of 2021, for the relatively high-quality housing enterprises that can get loans from commercial banks, the on-balance-sheet credit cost begins to be higher than the return on investment. Perhaps in the short term, housing enterprises can fill the short-term liquidity gap through bank loans, but in the medium and long term, they will have to shrink credit to curb high costs. Therefore, the input cost is higher than the rate of return, which leads to a sharp contraction in the profits of housing enterprises in the past two years, and even some listed housing enterprises suffer losses, which is also an important reason for the non-performing loans of banking housing enterprises.

In recent years, the balance and non-performing rate of real estate loans of state-owned banks and large and medium-sized joint-stock commercial banks have been "Shuang Sheng". In order to actively respond to the policy call, commercial banks increased their credit support to housing enterprises in 2022, especially in the second half of the year. By the end of 2022, the credit balance of sample commercial banks to housing enterprises reached 6.4 trillion yuan, up 3.8% year-on-year, and the balance growth rate increased by 4.2 percentage points compared with the end of 2021. However, the increase in credit has not effectively reduced the scale and growth rate of non-performing loans of housing enterprises. At the end of 2022, the total non-performing loans of sample commercial banks and housing enterprises reached 268 billion yuan, a year-on-year increase of 68%; The non-performing loan ratio of housing enterprises rose to 4.2%, an increase of 1.6 percentage points from the end of 2021 and an increase of 3.3 percentage points from the end of 2019 before the epidemic. The rising rate of non-performing loans of commercial banks’ housing enterprises is caused by many factors, but the problem of "sequelae" after three years of epidemic is more prominent. By the end of 2022, the proportion of non-performing loans of housing enterprises in the total non-performing loans of commercial banks has risen to about 20%, even exceeding the level of non-performing loans of the four major housing enterprises during the subprime mortgage crisis in the United States from 2007 to 2009, which must be paid enough attention to.

It is very difficult for commercial banks to continuously increase credit support for housing enterprises. Usually, commercial banks have two ways to deal with non-performing loans. First, if the operating conditions of housing enterprises change positively with the improvement of housing sales, commercial banks will seek to solve the problem of non-performing loans by extending the loan period and allowing borrowers to extend their existing loans appropriately. The other is inclined to shrink and reduce the loan business of housing enterprises to reduce the scale of corresponding concern loans, but this may lead more housing enterprises to face more risk of debt default. In view of the large regional differences in the current national real estate market, some housing loans focusing on the real estate market in third-and fourth-tier cities may still be risky in the future.

Third, policy recommendations to maintain the healthy operation of the real estate market

The "July 24" Politburo meeting further strengthened the wording of supporting policies in the real estate field, and proposed "adjusting and optimizing real estate policies in a timely manner to adapt to the new situation in which the relationship between supply and demand in China’s real estate market has undergone major changes". This is of great significance to the real estate market and China’s economic recovery, and the real estate policy needs to be adjusted and optimized according to the actual situation.

At present, the real estate market is gradually turning from a comprehensive downturn to a recovery, but we still can’t underestimate the resistance and hidden risks faced by the recovery of the real estate market. The repair of residents’ balance sheets needs more patience, and the release rhythm of individual housing loans may be longer than before. To fully understand the risks of housing enterprises, real estate developers are facing operational difficulties, the increase of non-performing loans, financing sustainability and other issues that deserve more attention, and the whole is in the process of reducing leverage in the medium and long term. It is expected that some eligible first-tier and key second-tier cities in the second half of the year may cancel or moderately cancel the restrictive housing purchase policy and try to implement "one district, one policy"; The supply side will further increase the supply-side support of housing finance and effectively resolve the financial risks of housing enterprises. In order to better release the market demand and prevent and control the risks of housing enterprises, nine policy suggestions are put forward.

The first suggestion is to guide commercial banks to further provide stable housing credit support for residents. In view of the demand for rigid first suites, eligible cities can appropriately reduce the down payment ratio of mortgage loans, including key second-tier cities and some first-tier cities; Commercial banks can reduce the mortgage interest rate by "adding points"; Increase the relaxation of local provident fund policies, and the maximum amount of provident fund loans can be increased by 50,000-100,000 yuan. We will ensure that 2.3-2.5 trillion yuan of personal mortgage loans will be added throughout the year, which will drive the proportion of personal mortgage loans in commercial banks to increase by 0.2-0.3 percentage points.

The second proposal is to focus on supporting the demand for rigid housing and ensuring the lower purchase cost of the first suite. It is suggested that for cities with relatively low property market, the implementation space of preferential interest rate policy for first-home mortgage should be reserved or the lower limit of interest rate for first-home mortgage should be phased out. In order to reduce the pressure on commercial banks, the central government’s discount loan policy can be introduced to give financial subsidies to the lowered interest rates, and the implementation period is temporarily one year. According to the leverage leverage relationship between personal mortgage loans and housing sales in the past three years, the amount of mortgage loans involved is about 40 billion, and the corresponding amount of housing sales is about 250 billion yuan.

The third proposal is to give preferential loans to buyers who just need and improve their needs in stages. In order to alleviate the initial purchase cost of property buyers, it is suggested to implement a preferential repayment plan for personal mortgage loans and provident fund loans, with a loan interest rate reduced by 20% and a preferential period of two to three years. After the preferential period, commercial banks can negotiate with lenders to allocate this part of the early preferential loans to the rest of the period.

The fourth recommendation is that first-and second-tier cities should moderately loosen the policy of restricting purchases and loans to release demand, expand sales and recover funds. At present, the supply and demand structure of the real estate market has undergone tremendous changes. The public and society generally do not have a strong expectation of rising house prices, and the possibility of a sharp rise in house prices is small. At this time, the conditions for loosening the policy of restricting purchases and loans have been met. It is suggested that eligible cities can apply the policy of "recognizing houses but not loans". The national housing demand is mainly distributed in the first-and second-tier cities and the eastern coastal areas. After more than three years of the epidemic, the per capita disposable income in first-tier cities and second-tier provincial capitals increased by 5.6% annually, and the compound growth rate of primary school students was above 3%, which were significantly higher than the national average. Thanks to the support of industrial structure, social public services and high-quality educational resources, it also provides a good foundation for first-tier and key second-tier cities to bring more rigid and improved housing demand. Historical experience at home and abroad shows that relaxing restrictive measures, effectively increasing housing supply, actively controlling land prices and reasonably guiding market expectations will not lead to excessive rise in housing prices.

The fifth recommendation is to maintain reasonable financing support for high-quality housing enterprises. It is suggested that commercial banks speed up the approval and issuance of development loans and appropriately increase the proportion of development loans in the loan balance to meet the reasonable capital needs of high-quality housing enterprises. Encourage and promote large and medium-sized commercial banks to increase the provision of intentional comprehensive credit lines, and effectively implement the intention agreement signed with housing enterprises. It is suggested that 1.75-2 trillion yuan of bank housing development loans should be added throughout the year, and the proportion of development loans in the total credit stock of the banking system should be gradually increased to 6%-6.5%.

The sixth proposal is to increase the implementation of the targeted easing plan for housing enterprises, and steadily and orderly increase the scale of special loans, M&A loans and refinancing for "Baojiaolou". For high-quality housing enterprises, especially the top-ranked housing enterprises in China and real estate projects with complete documents, we will increase the financial support of banks for the "second half" of real estate project construction, and increase special loans from policy banks, M&A loans and refinancing from commercial banks. During the year, about 700 billion yuan of loans related to "Baojiaolou" were invested, which improved the cash flow pressure of related real estate enterprises and gradually stabilized their business expectations. Encourage financial institutions to carry out M&A loans in a steady and orderly manner, and focus on supporting high-quality housing enterprises to merge and acquire high-quality projects of housing enterprises with difficulties. It is suggested that banks should participate in M&A loans of about 300 billion yuan throughout the year. It is suggested that commercial banks appropriately increase the refinancing plan for housing enterprises and reduce the financing cost of housing enterprises by using lower refinancing interest rates.

Recommendation 7 is to intensify efforts to create a relaxed non-bank financial environment for housing enterprises and creatively use the "second and third arrows of housing financial support policy". Intensify efforts to dispose of non-performing loans in real estate and innovate transitional financial instruments for housing enterprises. Direct financial support can be increased for housing enterprises with relatively good qualifications, including the use of bonds, trusts, REITs, credit default swaps (private CDS) or credit risk mitigation certificates (CRMW). It is suggested to increase the scale of credit bonds issued by real estate enterprises in the mainland to 600-700 billion yuan in 2023, and the credit bonds issued in the first half of the year were only 280.4 billion yuan, down 0.4% year-on-year. For housing enterprises with relatively difficult operation and excellent stock assets, we can consider rationally using local poverty relief funds or introducing asset management company AMC to alleviate the short-term cash flow and debt pressure of this housing distribution enterprise and reduce its liquidity risk and debt default risk. It is suggested to expand the scope of equity financing of housing-related enterprises and related industries (including construction industry or industries closely related to the upstream and downstream of real estate construction), do a good job in restarting equity financing of well-run housing enterprises, and effectively play the direct financing function of the capital market.

Recommendation 8 is to explore the establishment of a national real estate fund to support the disposal of non-performing assets in the industry in the medium and long term. Due to the huge stock assets of real estate developers, in the medium and long term, due to the continuous decline in the return on net assets, the behavior of real estate enterprises to reduce leverage may continue for a long time. At present, there are nearly 10 mainland listed real estate enterprises that have received the delisting process letter from the exchange, with a total long-term loan scale of over 60 billion yuan and a total debt scale of over 100 billion yuan, which is highly likely to become non-performing loans of commercial banks in the future. If we only rely on policy banks and state-owned banks to undertake their non-performing loans, it may only be short-term, so we need policies to start in the medium and long term to prepare for the systematic "burden reduction" of the real estate industry. In order to make forward-looking preparations, it is suggested to study the establishment of a national real estate fund, with an initial scale of about 300 billion yuan, which roughly covers the current scale of non-performing loans of commercial banks and housing enterprises, and continue to inject capital in the following years to systematically and medium-and long-term deal with real estate financial risks.

Recommendation 9 is to effectively increase land supply in first-tier and key second-tier cities in the second half of the year. In the first half of 2023, the land supply area of first-tier cities and second-tier cities decreased by 15% and 19% respectively year-on-year. Insufficient land supply was an important factor that caused insufficient land transactions in the first half of the year. Judging from the land auction in the first half of the year, some big cities sold land at the top price, and the relevant high-quality housing enterprises were very enthusiastic about taking land. However, in view of the limited number of centralized land supply, the total amount of land transactions was relatively small. In the second half of the year, there were two or more times of centralized land supply in many big cities. Local governments should increase the quantity of land supply, improve the quality of land, better meet the land reserve needs of housing enterprises, and increase the market supply in a timely and effective manner.

(The author is the chief economist and dean of the research institute of Zhixin Investment)

Editor in Charge: Fang Fengjiao Editor in Chief: Cheng Kai



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