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Vanke has another big news!

According to an announcement made by Vanke on August 21, in order to meet operational needs, Vanke's wholly-owned subsidiaries Beijing Vanke Enterprise Co., Ltd. (hereinafter referred to as "Beijing Vanke") and Beijing Vanke Huitong Real Estate Co., Ltd. (hereinafter referred to as "Huitong Real Estate", and together with Beijing Vanke collectively referred to as the "Seller"), will transfer their equity and debt claims in Beijing Wanjin Real Estate Development Co., Ltd. (hereinafter referred to as "Beijing Wanjin") to Jiaxing Dongfu Zhengqi Investment Partnership (Limited Partnership) (hereinafter referred to as "Jiaxing Dongfu" or "Buyer") for a consideration of RMB 2 billion.

According to the announcement, as of July 31, 2024, Vanke's guarantee balance is 80.467 billion yuan, accounting for 32.09% of Vanke's audited net assets attributable to shareholders of listed companies at the end of 2023. Recently, the yield of some of Vanke's bonds has risen again to more than 20%, and real estate bonds have once again become risky. Vanke's move may be to alleviate these pressures. Considering that Vanke's current business development is centered on ensuring cash flow, they may continue to resolutely promote the disposal of existing housing inventory and the disposal of assets and equity.

In fact, there have been many positive expectations and rumors about the real estate market recently, and the entire market will usher in the "golden September and silver October". So, can the real estate industry usher in a small climax during this period?

Vanke's big news

On the evening of August 21, Vanke issued an announcement. The announcement showed that in order to meet business needs, Vanke's wholly-owned subsidiaries Beijing Vanke and Huitong Real Estate transferred their equity and debt rights in Beijing Wanjin Real Estate Development Co., Ltd. to Jiaxing Dongfu Zhengqi Investment Partnership (Limited Partnership) for 2 billion yuan. Beijing Wanjin, Beijing Vanke, Huitong Real Estate and Jiaxing Dongfu signed an asset transfer agreement for the above transaction. Beijing Wanjin, Beijing Vanke and Huitong Real Estate shall perform all obligations under the agreement, and Beijing Wanjin will provide pledge guarantee for this matter with part of its receivables.

Vanke's 2023 Annual General Meeting of Shareholders reviewed and approved the "Proposal on Requesting the General Meeting of Shareholders to Authorize the Company and Its Controlled Subsidiaries to Provide External Guarantees", agreeing that the company will provide guarantees for its controlled subsidiaries, and for the credit business and other businesses of banks and other financial institutions of its parent company or other controlled subsidiaries provided by its controlled subsidiaries. The total amount of new guarantees provided during the authorization period shall not exceed RMB 150 billion, and the validity period is from the date of the resolution of the 2023 Annual General Meeting of Shareholders to the date of the resolution of the 2024 Annual General Meeting of Shareholders. While obtaining the authorization from the General Meeting of Shareholders, the Board of Directors has further delegated the authority to the company's president to make decisions on single external guarantees with an amount less than RMB 12.5 billion.

According to the announcement, as of July 31, 2024, the company's guarantee balance is 80.467 billion yuan, accounting for 32.09% of the company's audited net assets attributable to shareholders of listed companies at the end of 2023. Among them, the company and its holding subsidiaries provided a guarantee balance of 80.358 billion yuan for the company and other holding subsidiaries, and the company and its holding subsidiaries provided a guarantee balance of 109 million yuan for associated companies and joint ventures. The company has no overdue guarantees or guarantees involving litigation. After this guarantee occurs, the company's total external guarantees will be 88.663 billion yuan, accounting for 35.35% of the company's audited net assets attributable to shareholders of listed companies at the end of 2023.

Analysts believe that recently, the yields of some of Vanke's bonds have risen again to more than 20%, and real estate bonds have once again become risky. Vanke's move may be to ease these pressures. In the first half of 2024, Vanke achieved full-caliber sales of 127.3 billion yuan (a year-on-year decrease of 38%), corresponding to sales proceeds of 118.6 billion yuan, of which existing housing sales exceeded 24 billion yuan and car dealer sales exceeded 15 billion yuan, leading to an optimization of the inventory structure. At the same time, the company completed the disposal of assets such as Qibao Vanke, Shenzhen Super Land, Nanxiang Impression City MEGA, and the issuance and listing of Intime REIT in the first half of the year, with a total of more than 9 billion yuan in proceeds. CICC believes that considering that the company's current business development is centered on ensuring cash flow, Vanke will continue to resolutely promote the disposal of existing housing inventory and the disposal of assets and equity.

There are continuous good news, what are the results?

Since March this year, the real estate market has been experiencing continuous good news.

Yesterday, the Financial Supervision Bureau said that commercial banks have approved 5,392 "white list" projects, with a financing amount of nearly 1.4 trillion yuan. At present, in order to ensure the delivery of houses, the coordination mechanisms of various cities are fully understanding the information of real estate projects under construction that have been sold but not delivered. For projects that need to obtain financing support through the "white list" but have not yet met the "white list" conditions, the city coordination mechanism urges banks to put forward targeted opinions and suggestions, real estate companies to take measures to repair problematic projects as soon as possible, and city governments to strengthen coordination and promote the inclusion of projects that meet the "white list" conditions.

Judging from the current situation of the real estate market, from July 2024 to July 2024, the national commercial housing sales area was 540 million square meters, a year-on-year decrease of 18.6%; the newly started housing area in China was 440 million square meters, a year-on-year decrease of 23.2%; the construction housing area was 7.03 billion square meters, a year-on-year decrease of 12.1%; the completed housing area was 300 million square meters, a year-on-year decrease of 21.8%; the completed development investment was 6.1 trillion yuan, a year-on-year decrease of 10.2%; the total amount of funds in place was 6.2 trillion yuan, a year-on-year decrease of 21.3%.

The data is obviously not impressive, but there are still some phenomena that deserve attention. Guotai Junan believes that recently, there have been more and more cases of real estate project planning adjustments, and some cities have introduced new regulations to speed up the adjustment process. Compared with the previous planning adjustments of changing the nature of land from commercial to residential, the adjustment of the floor space ratio is more direct. The floor space ratio of new projects in some cities is relatively high, exceeding 90%. In general, high floor space ratios are often regarded by the market as a promotional tool. However, from the current situation, first-tier cities with relatively no shortage of demand have also seen projects with high floor space ratios. Past policies were more targeted at projects that have already been sold. At present, the resolution of unsold inventory is the key to the follow-up, and this is not only for private enterprises, but also central state-owned enterprises. They also need to destock projects on hand, and the floor space ratio policy will help promote destocking.

Huafu Securities believes that if the growth rate of existing residential sales area and the growth rate of pre-sale housing area remain the same as in June 2024 by the end of 2024, the inventory turnover cycle of residential existing housing will be reduced to 1.43 years. In an environment where regulators continue to promote the policy of storing existing housing, the growth rate of existing housing sales is expected to further recover, pushing the inventory cycle further down.