news

Not long ago, China Index Academy released the land acquisition statistics of real estate companies in the first seven months of this year. The total land acquisition amount of the top 100 companies was 430.7 billion yuan, a year-on-year decrease of 38.0%, and the decline increased by 2.2% compared with January-June.

Since last year, except for a few stable real estate developers, most private enterprises have basically stopped acquiring land.Land acquisition is mainly backed by central state-owned enterprises and local urban investment companies.

However, this year, many state-owned enterprises have also slowed down their land acquisition, and their land acquisition amount has increasedFor example, the amount of land purchased by some leading central enterprises fell by more than 60% year-on-year.

What is the reason for the sluggish land acquisition by real estate companies? What is the strategy behind the real estate companies that are still acquiring land?Let’s analyze it in detail below.

First, real estate developers have large amounts of existing land reserves, and their goal is to digest them in the short term.

According to data surveys, the overall sales time of real estate inventory has exceeded 20 months, which means that developers may not be able to sell out all their inventory in the next two years.

In addition, as of the end of last year, there were more than four real estate companies with land reserves exceeding 100 million square meters, namely Poly, Greenland, Sunac and Country Garden. The top 10 real estate companies have existing land reserves of about 40 million square meters. The land reserves of companies such as Longfor are at a medium level of more than 30 million square meters. These huge land reserves themselves are a headache for most real estate companies, and they will think twice even if they want to acquire land.

Secondly,The pressure on the demand side has not decreased, sales proceeds have shrunk, and capital flow is low.

According to CRIC research data, the top 100 real estate developers achieved sales of 2,130.93 billion yuan from January to July this year, down 37.5% year-on-year (-39.5% from January to June), with the decline narrowing by 2 percentage points, still at a low level. Judging from the data of real estate developers that are relatively active in the market, the sales performance of real estate developers this year is still not as good as before, and most of them have fallen by more than 30% year-on-year.

In addition, for many real estate companies, even if they have realized cash flow, they still have to repay their debts in a timely manner, especially around August, when U.S. Treasury bonds mature and have to be repaid. Once credit risks are caused by inability to repay debts, they will undoubtedly be hit harder in the current market.

Some real estate developers have even begun to "survive" by selling land, so staying alive is their first choice at the moment.

Finally, the land supply side is gradually developing towards refinement, and it is becoming more difficult to obtain high-quality land.

In order to give companies more time to digest inventory, reduce subsequent market competition pressure, and ensure supply and demand balance, the government has also begun to reduce land transfer.

In order to reduce the failure rate, many governments haveAdhering to the principle of supplying less but better land, the land auction market has seen a situation of "too many monks and too little porridge" and only good land will be sold.Integrated platform for real estate investment, construction and operation, helping to follow up investment returns in a timely manner

It can be seen that compared with the land supply in 2023, the total supply of commercial, residential and office land in typical cities in 2024 has decreased by 16% year-on-year, and the land supply plan has been significantly reduced. Typical cities such as Nanjing, Shenzhen, Suzhou, and Xi'an have a year-on-year decline of more than 40%, and the degree of contraction of land supply plans is very prominent.

The "small but good" land supply has also led to a conservative attitude among many real estate developers. In addition to taking the quality of the land into consideration, they also have to think about the market opportunities and risks they face. After all, even the best land is not safe in a downward cycle. Once the wrong land is taken, it will be a hindrance to the surrounding new and second-hand houses.

In short, the supply and demand sides have not reached a balance, the market has not bottomed out and recovered, and the funds of real estate companies continue to be under pressure, so it is normal for real estate companies to slow down their investment.

Although many real estate developers are hesitant to acquire land in the current market, judging from the past two months, real estate developers are still quite willing to acquire high-quality land plots, and some plots have even broken through the land premium ceiling in recent years.

Compared with their previous aggressive strategies, we can see that they have made major adjustments in their strategies:

1. There is a clear differentiation in land acquisition: either high quality or high cost performance

First, there is increasing attention on high-quality plots of land.

High quality mainly refers to core land locations, scarce resources, and low plot ratios. These high-quality plots will subsequently become sales value points for real estate developers, showing high transaction resilience in the current market and low subsequent sales risks, and are therefore favored by most leading real estate developers.

According to CRIC's survey and analysis over the past two months, most cities have recently launched low-density plots in prime locations to boost confidence. In the past two months, real estate developers have acquired more than 40% of plots with a floor area ratio of less than 2.2, and competition for these high-quality plots is very fierce in the current market.

For example, the land parcel sold in Fengshou Lake, Hangzhou this year,A total of 9 real estate companies participated in the auction. After 46 rounds of bidding, the finalIt was acquired by Greentown at a premium rate of 59.2%, a record high since 2019. The land plot covers an area of ​​about 22,600 square meters, with a plot ratio of only 1.2. The location and land value are also popular among real estate companies.

In addition, the floor area ratios of several plots of land that Greenland has recently acquired in core areas such as Xuhui and Hongkou in Shanghai are all 2-2.5, among which the land premium rate in Xuhui District has reached more than 30%.

It can be seen that when good land becomes available, leading real estate developers will spare no expense to compete for it.

Secondly, plots of land with low total prices and large profit margins are also favored by real estate developers.

According to CRIC data, among the land plots sold by typical enterprises in the past two months, the total price of the plots was less than 1 billion yuan, accounting for 47%, and the total price of the plots exceeded 3 billion yuan, accounting for only 8%.

For example, the land parcel acquired by the Urban Construction Group in Changping District, Beijing for RMB 1.99 billion this year has a sales guide price of RMB 39,000 per square meter for future pre-sale housing and RMB 41,000 per square meter for existing housing. The overall land-to-house ratio does not exceed 0.4, which provides considerable profit margins. Another example is the land parcel in Liwan District, Guangzhou, which was sold by Poly Development for RMB 700 million. The floor price is the lowest in the past five years in Guanggang New City.

In core cities, acquiring land at low prices can reduce the financial pressure on companies, while allowing greater flexibility in subsequent sales prices and ensuring subsequent profits. This is also a good choice for most real estate companies to acquire land.

2. The Yangtze River Delta has a significant head effect, and leading real estate companies have begun to sink and deepen their roots

Judging from the current land acquisition layout of real estate companies, the leading central state-owned enterprises have begun to break away from their original nationwide perspective, becoming more focused in land acquisition, and their local land roots are becoming increasingly evident.

Taking the Yangtze River Delta as an example, according to data from China Index Academy, from January to July 2024, the TOP 10 companies in the Yangtze River Delta acquired land worth 88.52 billion yuan, always ranking first among the four major urban agglomerations in the country. Among the cities in the Yangtze River Delta, first- and second-tier cities such as Shanghai, Hangzhou, and Ningbo have become a battleground.

Although the cake of the Yangtze River Delta is huge, in terms of land acquisition, local leading real estate companies occupy half of the market.

Among them, Greenland, Binjiang and Jianfa performed outstandingly. The total land acquisition amount of the three real estate companies accounted for about 60% of the entire Yangtze River Delta, and the land acquisition amount of these real estate companies in the Yangtze River Delta accounted for more than 60% of the entire company.

It is worth noting that the high-quality land resources in the Yangtze River Delta not only attract local real estate companies to compete for them, but also attract foreign state-owned enterprises to come and share a piece of the pie. For example, judging from the land acquisition data in the first seven months of this year in the Yangtze River Delta, foreign companies such as China Merchants, Poly, and China World Trade have also begun to increase their efforts in East China cities.

Data source: China Index Database

This is not difficult to understand. The Yangtze River Delta ranks among the top in the country in terms of urban economic level and population capacity. Moreover, due to the multi-city circle development in the Yangtze River Delta, there are naturally more opportunities to acquire high-quality land compared to the single city circle development in the Greater Bay Area and Beijing-Tianjin-Hebei.

In addition, in addition to the first- and second-tier cities in the Yangtze River Delta that have high-quality land, the third- and fourth-tier cities also have the conditions for local real estate companies to develop deeply.

The third- and fourth-tier cities here refer to county-level cities in the Jiangsu and Zhejiang areas. Although their urban levels are low, their per capita GDP and consumption levels can compete with other second-tier cities. They are among the top 100 county-level cities in the country, such as Yiwu, Cixi, Yuyao, etc., and have a large local high-end improvement customer base.

Therefore, some leading real estate developers have also begun to move to these third- and fourth-tier cities to seek opportunities. For example, Greentown, as a leading real estate developer in the Yangtze River Delta, has successively acquired land in Ningbo Yuyao, Cixi and other places this year, and last year it acquired land in Yiwu and Taizhou. These plots are of high quality and can well meet the improvement needs of local high-end customers.

When it comes to land acquisition in county-level cities, in addition to requirements for land quality, real estate developers will pay more attention to profit margins. For example, some real estate developers control the profit red line for county-level cities at 10%. Once it falls below this standard, they will need to go back to the meeting and give the decision to the president.

Compared with first- and second-tier cities, third- and fourth-tier projects have less room for error. Once the wrong one is made, it will bring great risks, and the responsibility for controlling land acquisition will be placed on people and projects.

It can be seen that under the current situation of fierce competition for land in local first- and second-tier cities, real estate companies have also begun to go deep into the local area and seek development opportunities, but risk control has also become more stringent.

Summarize

In the second half of real estate investment, stability is the main theme of real estate companies' development. It can be seen that real estate companies are not stopping acquiring land, but the pace of acquiring land has slowed down.From radical to conservative, is a kind of market self-adjusting feedback.

Land is the foundation of real estate market development, but the high land prices and the increase in financing costs have made real estate developers hesitant to acquire land. The past model of relying on high leverage is no longer applicable.For enterprises, the best option to cope with the market is not to blindly buy at the bottom when the market is going against the trend, but to do a good job in fine-tuning and localized land cultivation.

Formulating a rigorous land acquisition strategy at the outset will enable the company to cope with risks in the subsequent sales market.