The underlying logic of the real estate industry has undergone "three changes"
2024-08-17
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The latest data from the National Bureau of Statistics show that from January to July this year, the sales area of newly built commercial housing nationwide was 541.49 million square meters, a year-on-year decrease of 18.6%, and the decline narrowed by 0.4 percentage points from January to June; the sales of newly built commercial housing was 533.3 billion yuan, a decrease of 24.3%, and the decline narrowed by 0.7 percentage points.Judging from the main data of the real estate sector in July, some indicators have shown signs of improvement, but most are still declining, and the industry is still in a period of transformation. In my opinion, as the era of "scale racing" gradually fades away, the underlying logic of the real estate industry has undergone three fundamental changes.First, housing demand has shifted from "whether there is a house or not" to "how good it is". At present, new changes have taken place in the demand of the real estate market. Data show that the total floor area of household housing in China exceeded 50 billion square meters in 2020. As urban development enters a new stage, people pay more attention to the value of living when buying houses, and more improvement and diversified demands have emerged.For example, the middle class prefers to move to a better school district, larger area, and better quality living environment; the elderly prefer communities with good property services, nearby hospitals, and those that meet the needs of the elderly; and the "new generation" is more willing to follow the principle of "buying a house is buying a life". The fundamental change in housing demand is expected to change the old product logic of "house ratio less than 70% and net height less than 3 meters" and activate new demand.Second, the regulatory policy has shifted from "resolutely curbing the rise in housing prices" to "digesting existing housing and optimizing incremental housing". When the real estate market was overheated, in order to prevent speculators from disrupting the market, the relevant regulatory policy mentioned "resolutely curbing the rise in housing prices". However, since the profound changes in the supply and demand relationship in the real estate market, the focus of regulation has changed accordingly. The Political Bureau of the CPC Central Committee held a meeting on April 30 this year and proposed for the first time "coordinated research on policy measures to digest existing housing and optimize incremental housing".Balancing the digestion of existing resources and the optimization of incremental supply is the key to the stable operation of the real estate market. From the perspective of the focus of local policies, a variety of measures are being implemented, such as unblocking the chain of second-hand housing exchange, state-owned enterprises collecting and storing unsold new houses and converting them into affordable housing, and purchasing idle residential land that has been transferred to revitalize "sleeping assets". Active adjustments on the policy side to adapt to the important changes in supply and demand are expected to solve the inventory problems in the real estate market in many places, ease the pressure on the capital chain of real estate companies, protect the housing rights and interests of low-income groups, and promote market stabilization. At the same time, real estate companies also need to fundamentally realize that they must find new business opportunities and build new business models from the underlying logic of this transformation.Third, the development model has shifted from the "old three highs" to the new development model. When urban development shifts from large-scale incremental construction to a focus on both stock quality improvement and incremental structural adjustment, it means that the era of disorderly expansion of the "old three highs" model relying on "high leverage, high debt, and high turnover" has completely ended, and accelerating the construction of a new development model is the most important fundamental change. In the past, the asset-liability ratio of many real estate companies exceeded the 80% red line for many years, and the development business income accounted for more than 95% of the business structure of most real estate companies. In the "second half" of real estate, the "old three highs" model will no longer be applicable, nor will it be recognized by the real estate market and capital market. The new development model will reshape the valuation of listed real estate companies.Of course, the transformation of the real estate industry also needs to vary from place to place and from company to company. For example, real estate companies should build business layout and operation models based on their own advantages, focusing on urban development planning, characteristic industries, etc., and following the logic of resonating with the economy of cities and even urban agglomerations. Among them, real estate companies should explore new development models in multiple fields such as property services, cultural tourism and health care, "three major projects" and urban-rural integration development, and turn to steady and diversified development.Real estate practitioners must persist in understanding the industry's transformation from a holistic perspective, and push the industry from the "first half" of extensive and rapid growth to a new stage of steady development.Image | Securities Daily
Produced by | Zhou Wenrui
