The acceleration of local “storage”, what are the possible impacts?
2024-08-22
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(The author of this article is Zhao Wei, Chief Economist of Shenwan Hongyuan Securities)
Recently, Shenzhen, Nanjing and other places have announced the launch of "stockpiling" work, and the scope of "stockpiling" cities has been expanded to first-tier and core second-tier cities. If local "stockpiling" is further accelerated, what impact may it have on the development of new real estate models? This article provides a systematic analysis for reference.
The current model and mechanism of local "acquisition and storage" is mainly based on conversion into affordable housing, acquisition by leasing agencies, and demolition and resettlement.
Since May, local "acquisition and storage" work has been accelerated, and many regions have introduced "acquisition and storage" related policies to acquire existing housing through conversion into affordable housing, acquisition by rental agencies, and demolition and resettlement.The "leasing agency acquisition model" is that market-oriented leasing agencies purchase existing commercial housing to increase the rental housing supply; the "conversion of affordable housing model" is to acquire existing newly built commercial housing or second-hand housing and use it as affordable housing; the "demolition and resettlement model" is a demolition and resettlement project that purchases existing commercial housing instead of building demolition resettlement housing.
The "purchase and storage" details in many places show that completed but unsold houses and entire commercial buildings with complete supporting facilities are the key targets of collection.The main objects of acquisition and storage are completed but unsold commercial housing, i.e. ready-made housing. Although some regions collect pre-sold housing, they also require that certain conditions be met. The "acquisition and storage" standards also take into account infrastructure, geographical location, convenient transportation, and supporting parking spaces.
The affordable housing conversion model has become the main way for local governments to "purchase and store" housing, and many places have proposed that the purchase and storage price be based on the replacement price of affordable housing in the same area.Among the existing samples, more than 70% of the regions have chosen to convert to the affordable housing model, and the purchase price is usually based on the replacement price of affordable housing in the same area as the reference upper limit. In terms of the area of the acquired housing, the upper limit of the area of the allocated affordable housing is mostly 120 square meters.
Progress of the construction of the affordable housing system under "purchase and storage"? The allocation-type affordable housing is accelerating its implementation, and many places have launched allocation-type application plans
Allocated affordable housing may be an important incremental component in the subsequent construction of an affordable housing system.The relevant support policies for allocation-type affordable housing were launched in August 2023. Under the guidance of the new model framework for real estate development, allocation-type affordable housing may be a key construction area in the future. According to incomplete statistics, 22 cities set their annual fundraising targets for allocation-type affordable housing at the beginning of 2024, about 120,000 units.
Some regions may be able to speed up the completion of the target of raising funds for allocated affordable housing through "purchase and storage".At the beginning of 2024, the annual allocation-type affordable housing fundraising targets in many places are not low, accounting for 10% of the number of commercial residential transactions in 2023 on a comparable basis. Considering that affordable housing construction has financial support, local governments may "purchase instead of build" to speed up the completion of fundraising targets while alleviating the pressure on the "inventory" of new houses.
At present, some regions have introduced an application mechanism for allocated affordable housing.Since March, many places have launched application plans for allocated affordable housing; the allocation prices are all based on the principle of "break-even and small profits"; the repurchase prices are mostly based on the purchase price to take into account factors such as house depreciation and interest; the applicants are mainly local families and single residents who do not own their own homes or have a low per capita area.
How will “storage” and affordable housing affect the real estate industry? It may ease the cash flow pressure of real estate companies and affect residents’ demand for pre-sale housing
If the scale of local "storage" is increased and implemented more quickly, it may alleviate the cash flow pressure on real estate companies to a certain extent.If the "purchase and storage" policy is strengthened and the scope of collection is expanded to include pre-sale properties, the broad inventory-to-sales ratio of commercial housing will be reduced to 18 months, and the housing will be purchased at a reference price for allocated affordable housing. The required "purchase and storage" funds may be around 2.3 trillion yuan.
If the "purchase and storage" price is significantly lower than the investment cost of the real estate project, large-scale "purchase and storage" may mainly help alleviate the debt pressure of real estate companies.Compared with the cost advantages of land allocation, tax incentives, direct sales, and financing support for affordable housing construction, the floor land price, sales costs, and financial costs of commercial residential projects may be significantly higher. If the local "purchase and storage" price is generally capped at the replacement cost of affordable housing, greater "purchase and storage" support may mainly help alleviate the debt repayment pressure of real estate companies.
If the transition to affordable housing becomes the main "storage" model in the future, allocated affordable housing will be accelerated or replace some of the demand for commercial housing, especially pre-sale housing.Concerns about the delivery risks of pre-sale properties are one of the reasons why residents’ willingness to buy houses is slow to recover. If the allocation of affordable housing is accelerated in the future, some demand for commercial housing may be replaced by affordable housing, and the demand for pre-sale properties may further decline.
Risk Warning
The policy effect is not as expected; the real estate situation and policy changes are beyond expectations, etc.
This article only reflects the author’s views.
