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Text/Pang Wuji

The move by state-owned assets to purchase existing commercial housing in major cities is accelerating. Recently, Zhuhai, Guangzhou, Shenzhen, Shenyang and other cities have intensively disclosed relevant plans or progress.

The national team's "housing acquisition" is a move by local state-owned enterprises to directly purchase the unsold commercial housing units of developers and use them as affordable housing. On May 17 this year, the real estate sector ushered in an unprecedented policy "combination punch", among which the central bank proposed to set up 300 billion yuan of affordable housing re-loans to support local state-owned enterprises in purchasing unsold commercial housing at reasonable prices for use as allocated or rented affordable housing.

As one of the important measures to reduce inventory, the industry believes that the national team's "housing collection" will not only help raise affordable housing and shorten construction time, but also effectively digest market inventory and promote the stabilization and recovery of the real estate market. However, this direct destocking approach also faces challenges from multiple factors such as capital, price, and demand.

Zhuhai's 10 billion yuan "big move"

Zhuhai City recently disclosed a purchase of existing commercial housing worth more than 10 billion yuan. Zhuhai Huafa Industrial Co., Ltd. announced that it plans to conduct existing commercial housing and supporting parking space transactions with the company's controlling shareholder Zhuhai Huafa Group Co., Ltd. or its subsidiaries, with a total transaction amount of no more than 12 billion yuan.

Huafa Group is the largest comprehensive state-owned enterprise group in Zhuhai, and its actual controller is the Zhuhai State-owned Assets Supervision and Administration Commission. According to the announcement, the acquired stock of commercial housing will be used to increase the supply of affordable housing, talent housing and commercial rental housing, helping Zhuhai to build a new housing structure that combines renting and purchasing.

In addition, Shenzhen, Shenyang, Guangzhou and many other places have recently disclosed plans or progress of local state-owned assets entering the market to purchase existing commercial housing.

According to statistics from the China Real Estate Research Institute, as of the end of July, more than 60 cities across the country have introduced policies for state-owned assets to acquire existing commercial housing for use as affordable housing. Among them are megacities such as Guangzhou, Chongqing, Hangzhou, Zhengzhou, Changsha, and Tianjin, as well as counties or county-level cities such as Lujiang and Jiyuan.

This trend is consistent with the deployment of relevant departments. On June 20, the Ministry of Housing and Urban-Rural Development held a relevant meeting and announced that it would promote cities at the county level and above to vigorously, orderly and effectively carry out the work of purchasing completed stock commercial housing for use as affordable housing. The industry believes that in the second half of this year, the work of purchasing and storing commercial housing will be further accelerated.

"Order by need", clear purpose

The reporter found that since the beginning of this year, most of the state-owned assets have followed the principle of "ordering according to demand" in the acquisition and storage of stock houses. There are roughly three uses for the acquired stock houses:

The first is to use the acquired existing housing stock to increase the supply of rental housing.

Zhuhai, Chongqing, Nanjing and other cities have made it clear that the stock houses they have acquired will be used as rental housing. In February this year, Chongqing Jiayu Company and Chongqing Jianyu Housing Rental Fund acquired 4,207 houses and planned to put them into the rental market; at the end of June, Chongqing's first rental project acquired from stock houses was put into use.

This year, Nanjing has launched two rounds of "old for new" stock housing purchases with Nanjing Anju Construction Group as the main purchaser. Nanjing Anju Construction Group previously revealed that the first batch of pilot purchases will be 2,000 stock housing units, and plans to introduce qualified units for leasing operations.

The second is to incorporate the acquired existing commercial housing into the affordable housing system.

This is the mainstream of local state-owned enterprises after they have “acquired housing”. For example, in Zhengzhou, the local government took the lead in the state-owned platform Chengfa Group to acquire residents’ second-hand housing and then transform it into affordable rental housing.

Shenyang City recently launched a call for existing commercial housing to be used as affordable housing projects, in an effort to speed up the construction of a new "market + security" real estate development model and alleviate housing difficulties faced by new citizens, young people, wage earners and talents introduced into the city.

Fuzhou Anzhu Development Co., Ltd., a state-owned enterprise in Fuzhou, is mainly responsible for the task of converting Fuzhou's stock housing into affordable rental housing. It is understood that the company has previously acquired about 5,000 stock housing units. Recently, Fuzhou Anzhu Development Co., Ltd. has purchased 154 housing units in a package at a price of about 270 million yuan.

On August 7, Shenzhen Anju Group Co., Ltd. issued a solicitation notice for the acquisition of commercial housing for use as affordable housing. The scope of housing solicitation includes residential houses, apartments, dormitories, etc. of commercial housing nature within Shenzhen City (excluding the Shenzhen-Shantou Special Cooperation Zone). Priority will be given to whole buildings or whole units that have not been sold and can be closed for management.

According to statistics from the China Index Academy, more than 10 cities have issued notices to collect commercial housing for use as affordable housing.

More and more places are disclosing the details of the purchase and storage of commercial housing. Yan Yuejin, deputy director of Shanghai E-House Real Estate Research Institute, said that taking Shenzhen as an example, the purchase and storage of commercial housing means the opening of the local affordable housing "purchase instead of construction" model. The operating standards of Shenzhen this time are similar to those of other cities, including building integrity, advantageous location, apartment type matching the requirements of affordable housing, complete supporting facilities, and compliance with the property certificate.

The third is to use the collected existing houses as targeted resettlement housing.

Zengcheng District of Guangzhou City previously issued an "Announcement on the Collection of Eligible Commercial Resettlement Housing Applications for the Guangzhou (Xintang) to Shanwei Railway Project (Xintang Section)". According to the announcement, the railway project intends to purchase market-based commercial housing as the project resettlement housing, and collect eligible residential housing sources (real estate companies) from the public, and then select resettlement housing communities (real estate companies) according to relevant procedures.

Storage also faces challenges

The state-owned assets’ “housing acquisition” is accelerating, but it also faces many challenges.

Huang Yu, executive vice president of China Index Academy, pointed out that the current policy direction of the real estate market "boosting demand + destocking" has been made clear. The "destocking" related policies are conducive to easing the financial pressure on enterprises, while also helping to restore market sentiment and increase the supply of affordable housing.

However, during the implementation process, Huang Yu pointed out that the selection of the target objects for storage and purchase faces certain challenges. The determination of the storage and purchase price is a key issue in achieving the storage and purchase. If the price is too low, the enthusiasm of real estate companies to participate will decrease. If the price is too high, it will be difficult for the government to justify the expenses.

At the same time, the purchase and storage may face the problem of mismatch between supply and demand. From the perspective of urban distribution, in some cities where real estate developers have great inventory pressure and are willing to sell, the demand for allocation-type affordable housing is relatively limited, and the scale of state-owned enterprises' purchase and storage may be small; while in some cities where the demand for allocation-type affordable housing is relatively strong (first-tier and core second-tier cities), the market inventory level may not be high, and real estate developers are relatively less willing to sell existing houses at a discount.

In addition, capital cost is an important factor affecting business sustainability. Currently, state-owned enterprises' acquisition of existing commercial housing is supported by the central bank's 300 billion yuan re-loan for affordable housing, but the annual interest rate of the re-loan is 1.75%. If the floating interest rate of commercial bank loans is taken into account, the capital cost of state-owned enterprises' acquisition is about 3%.

Huang Yu pointed out that if the costs of renovation and operation are taken into account, the actual cost may be higher. Therefore, in the process of converting the stored housing into affordable rental housing, financial subsidies are needed to achieve a balanced income.

Source: National Express

Editor: Zhuge Ruixin

Editor: Wei Xi