news

Some time ago, the 2024 Boao Real Estate Forum was held as scheduled in Hainan.

At this forum, many well-known real estate companies including Poly, China Resources, China Overseas, Gemdale, China Merchants, and China Resources Land expressed their judgment on industry trends and future opportunities.

Below, Mingyuanjun will sort out the future opportunities in the industry based on the speeches of real estate tycoons for the benefit of readers.

Where will the real estate market go in the next few years?

This should be the topic of greatest concern to all real estate practitioners, and also the most difficult to predict issue.

At this forum, well-known real estate companies including Poly, China Overseas, and Hang Lung, as well as well-known scholars such as Chen Huai, Fan Gang, Xia Yifeng, and Lu Ting, all expressed their predictions on the future trends of the real estate industry, but their views varied greatly.

First of all, well-known real estate companies represented by Poly, China Overseas and Hang Lung are relatively optimistic about the future market. They believe that positive factors have emerged in the real estate market, and there is still room for development in the industry in the future, so practitioners do not need to be overly pessimistic.

For example, Poly Developments pointed out that the real estate industry has undergone deep adjustments, but this does not mean the end of its life cycle, and the worst has passed.

Poly Development gave four reasons:

The first is favorable policies.

At present, most cities have lifted purchase restrictions, and sales restrictions and price restrictions have also been lifted. In addition, loan interest rates have been lowered, and down payment ratios have reached a historical low, reducing the cost and threshold of buying a house, releasing purchasing power.

The second is industry clearance.

After the real estate industry experienced capacity clearance, its concentration has increased significantly. Subsequent corporate profits are expected to recover and development will be more stable.

The third is turning and shifting gears.

Housing consumption has solved the problem of "whether or not", and the key to solving the quality problem in the future is to seize the structural opportunities in the market. As long as enterprises consolidate their basic skills and seize the opportunity to adjust their structure, they can usher in high-quality development.

Fourth, technological empowerment.

On the other hand, customers have higher requirements for intelligent, green and low-carbon living. As long as real estate companies actively embrace new technologies, they will be able to form new quality productivity and new product competitiveness.

Hang Lung Properties Honorary Chairman Ronnie Chan also said that the real estate industry has reached the bottom of the L-shape, and everyone should not worry too much. The industry will continue to develop in a healthy and rational manner.

Ronnie Chan gave two reasons:

First, the rigid demand still exists.

China has transformed from a country with no real estate market into the world's largest real estate market. Today, approximately 85% to 90% of ordinary people live in their own houses. But this does not mean that there is no new market. The rigid demand still exists, such as the demand for migration, the demand for replacing small houses with big houses, and the demand for replacing bad houses with good houses. From this perspective, China's real estate still has opportunities.

Second, industry clearance is not a bad thing.

For example, some real estate developers made a lot of money before, but much of that wealth was not real, because their loans were always about the same as their assets, or even higher than their assets.

Real estate developers who have not seen big cycles are unreliable. After experiencing this round of deep adjustments, it is a good thing for the rational and healthy development of real estate. I hope everyone will not worry too much.

However, some experts and scholars still expressed different opinions.

For example, Chen Huai, a professor at the Department of Urban and Rural Construction Economics at the Graduate School of the Chinese Academy of Social Sciences, believes that it will take at least three to five years for real estate to improve, no shorter.

Don't expect that next spring will be warm and flowers will bloom and the road ahead will be smooth. The conditions are not met at the moment.

First, we must fully appreciate the long-term and difficult nature of the difficulties.

The real estate industry is currently facing difficulties. Don't expect to recover in two or three days, or to have a secret recipe passed down from generation to generation that can bring you back to life tomorrow. It takes a long time to correct mistakes, and anyone who is eager for quick success is a quack.

Second, risks can only be balanced and cannot be eliminated.

For example, if we simply change the pre-sale system to the sale of ready-made houses, do we think that there is no guarantee of house delivery? Will the interests of homebuyers be protected? From the time a house is never fully built to the time it is delivered to the buyer, the risks involved will not be reduced no matter what form of housing purchase system is used.

Therefore, we cannot put all the pressure on one point. Only by evenly allocating risks to each link can we maintain the balanced operation of the industry on the largest scale.

Xia Yifeng, chief real estate industry analyst at BOC Securities, suggested that house prices are expected to see a narrower month-on-month decline by the end of the year, but it will take longer for prices to turn positive.

First of all, in first-tier cities, the prices of new homes in Guangzhou have fallen back to the level of 2021, and those in Beijing have fallen back to the level of 2018. Only Shanghai is still at a high level, and overall, Shanghai is still rising.

Looking at second-tier cities, new home prices in second-tier cities have fallen by more than 50% from their peak, returning to the levels of 2016 and 2017.

Overall, this round of house price decline has exceeded that of 2014. Although the overall average has not exceeded the level of 2014, the monthly second-hand housing growth rate has been close to the lowest month-on-month growth rate in 2014. Therefore, the overall month-on-month decline in house prices will continue for some time, and it will take more than two quarters to turn positive.

In recent years, many real estate practitioners have been discussing a question: Will China's real estate market follow the same path as Japan's "lost thirty years"?

This forum specifically brought this issue to the table, with the theme of - Will China's real estate industry face "lost years"? When will the upward path appear?

First of all, will China’s real estate face “lost years”?

After some discussion,Experts and scholars agree that there are many fallacies in comparing China's real estate problems with Japan's real estate collapse in the 1990s.

For example, Fan Gang, vice president of the China Economic System Reform Research Association and president of the China Shenzhen Institute for Comprehensive Development, a national high-end think tank, pointed out that in the early 1990s, Japan's real estate began to collapse. Later, many experts and scholars analyzed when it would reach the bottom and how many years would it take. At the beginning, they all said that it would only take a few years, but in the end it lingered at the bottom for two or three decades.

But there is a fallacy here. The period when Japan and China were similar was not the 1990s, but the sixty or seventy years after the Meiji Restoration until before World War II.

By 1991, Japan's urbanization rate was close to 80%, the level of a mature, modern, industrialized and urbanized country.

China's current rate is about 65%. In the subsequent urbanization process, rigid demand, improvement demand, and migration demand will continue to be generated. This is our advantage. As long as it is handled properly, there is still a lot of room for development.

Second, when will the path upward emerge?

According to Lu Ting, chief China economist at Nomura Securities, simply comparing Japanese real estate with Chinese real estate does not make much sense.

The more core question is, after the real estate bubble burst in 1991, what measures did the Japanese government take that are worth learning from for China?

The most important revelation is that we should wait patiently for the risks to be cleared.

Japan and China are similar in one respect, that is, if there is a problem, they try not to let it erupt suddenly, but instead clear out the risks slowly.

The combination of clearance and reform is undoubtedly the best.

Especially in the process of falling housing prices in China's real estate market, there are still a large number of problems with housing delivery, so clearing out the stocks becomes extremely important.

Why is guaranteed delivery an important way to clear the market? Because before this round of real estate crisis, new houses were the main ones, and new houses were pre-sold, which is equivalent to a futures market. The spot market is a payment and delivery, and the futures market is looking forward to future delivery. If there is no delivery mechanism and no supervision to maintain the order of the market, it is certainly impossible to expect this market to be cleared and the market to resume normal operation.

Therefore, how to deal with the issue of ensuring the delivery of houses is not only a question of how the government and developers have fulfilled their responsibilities over the past period of time, but also a key step in rebuilding the market's confidence in developers and confidence in supervision.

Mingyuanjun mentioned before that real estate is still a huge market with a scale of trillions, but it will split in two directions in the future.

The first is urban differentiation, where housing in low-tier cities will remain vacant for a long time.

The second is the differentiation of enterprises, including state-owned enterprises.

At this year's Boao Forum, real estate companies such as Poly Developments, China Overseas Land & Investment, and China Resources Land proposed a third differentiation, which is product differentiation.

For example, Poly Developments has proposed that the real estate industry has entered a new cycle of the "quality era", and developers need to establish new connections with customers by rapidly improving product strength. In the future, real estate may require continuous iteration of product brand series, just like automobiles.

The three characteristics of the "Quality Era" are:

First, effective demand will never die out.

The market and products are changing too fast. It’s not that customers don’t have demand, but they are waiting and waiting for better policies and newer products. However, there are still a large number of cities with small per capita living area, old houses, and a low proportion of commercial housing.

The most common reason for listing second-hand houses is to change houses, including changing to a better school district, a larger area, a better quality living environment, etc. What real estate developers need to do is to activate these effective demands.

Second, customer demands are constantly upgrading.

"Buying a house" is to "buy a life". The new generation of customers has greatly increased their demands for aesthetics, functionality, and personalization. Customers believe that a good life is not just about the house itself, but is also closely related to the neighborhood, community atmosphere, and urban integration.

Third, quality delivery has become the core of product recognition.

Homebuyers no longer equate developer strength with delivery strength. Compared with 2022, quality delivery has become an important decision-making factor in purchasing decisions.

So, how should real estate companies respond to market changes?

Yang Ou, CTO of China Overseas Development, provided a solution: Digitalization has solved some problems, including the low level of intelligence and brand incompatibility of smart home systems in the real estate industry. Our cars are becoming more and more intelligent, and in the future, our houses will also be smarter, smarter, and more understanding of you.

Yang Ou also proposed three goals for China Overseas’ digital development:

For example, in the smart community built by Huafa Group, when the elderly or children fall, AI cameras will promptly alert the police and provide rescue assistance.

Huafa also built a fully automatic smart airport around the wall of Zhuhai Bay, which allows drones to deliver express packages to the balconies of homeowners.

In the past few years, under the banner of the return of manufacturing, various places have launched a wave of setting up industrial parks.

According to public data, starting from 2023, the area of ​​my country's industrial parks will increase at a rate of 140 million square meters per year, and the total supply is expected to exceed 6.2 billion square meters by 2025.

For example, Huang Liping, executive director and president of China Electronics Optics Valley United Holdings Co., Ltd., pointed out that the traditional industrial park development model has three fundamental flaws.

The first is product-oriented thinking. Traditional industrial parks tend to conceptualize and simplify their understanding of demand. They also tend to simplify and conceptualize their understanding of spatial laws, especially spatial order.

The second is the concept of mechanical replication. Replication has been abused in the process of industrialization and urbanization in the past, and now industrial parks also use replication, which is far from the actual needs of customers.

The third is the biggest misunderstanding in the business model, which is to use land appreciation gains as the basis for profit.

So, facing these problems, how should industrial parks break through?

Ge Peijian, president of Gemdale Weixin Industry Research Institute, proposed that in the face of challenges, industrial park investment and operation operators need to make changes in three aspects.

The first transformation is from "space provider" to "industry operator", and the key word shifts from "space" to "industry".

For example, the East Lake High-tech Park has evolved from an initial manufacturing workshop to today's full industrial chain theme park, providing all-round services for industrial development from the perspectives of investment, operation, and park services.

The second transformation is the evolution from a "time partner" to an industry enabler.

For example, Chuanhua Science and Technology City has realized the development model of "shareholder + landlord + operator" by concentrating resources to build a life science theme park.

The third transformation is the evolution from "park operator" to "ecological linker".

For example, the overall industrial ecology of Zhangjiang High-tech Park is composed of major scientific and technological infrastructure represented by Zhangjiang Laboratory, innovative enterprises, media technologies and institutions, multinational corporations, professional service agencies and talent pools.

Luo Feng, president of China Merchants Shekou Industrial Research Institute, gave the following four suggestions based on the specific practices of the company's industrial parks:

Suggestion 1: You must create your own industrial track.

Every industrial park operator should build its own industrial track, because not every track can be operated, and not every track has the value of operation.

For example, China Merchants Shekou has focused on five emerging industries, including digital technology, life science, green technology, intelligent manufacturing and cultural industries, through extensive research, concentrating resources and leveraging its advantages.

Suggestion 2: Focus on building characteristic industrial parks.

As industry cultivation deepens, the company finds that comprehensive parks have many themes, diverse demands, and are difficult to operate; whereas theme parks can provide concentrated and precise services based on the characteristics of a certain type of industry, and have better industrial operation effects.

Recommendation 3: Strengthen industrial investment.

Industrial investment is the most imaginative business in industrial operations. For example, China Merchants Shekou uses industrial investment funds to provide full-life cycle financial services for enterprises.

Recommendation 4: Build an industrial capability system.

With the deepening of the strategic transformation of industrial operations, it is inevitable to do a good job in industrial research, product development, industrial organization and other industrial operations, and each of these contents requires more professional workers.

Therefore, enterprises must focus on the entire business chain of industrial operations and continue to forge a capability system that adapts to the development of new quality productivity and high-quality development of modern industrial parks.

Yan Jingyu, chairman of China Science and Technology Industrial Development (Shenzhen) Operation Service Co., Ltd., also said that at least four colors are needed to do a good job in attracting investment in the industrial park.

The first type is red, which is the landmark industry. The red flag cannot fall. For example, the red flag of Zhangjiang Hi-Tech Park is biomedicine and semiconductors.

The second type is black, which is the down-to-earth traditional industry. Industrial upgrading does not necessarily mean transformation. Traditional industries are not equal to low-end industries. Instead, they are often the best safety chain to combat risks when the economy is down. They are the best sponge for absorbing local employment. Traditional industries basically account for about 50% in a park.

The third type is the blue ocean industry of new productivity. How to take over the blue ocean industry? A very important point is to think about what kind of enterprises can be taken over by the existing resource endowment.

The fourth type is yellow, which refers to the golden industry. No matter what industry it is, as long as there is output value tax, it will be taxed.