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Introduction: Buying a house may be the most important investment in a lifetime for ordinary people. However, in recent years, the debt risk of some real estate companies has been exposed, resulting in frequent situations such as unfinished buildings and work stoppages. On the evening of December 12, Country Garden announced that the executives took the initiative to reduce their annual salaries, from 3 million to 120,000, to fully support the development of the company and give the majority of owners and consumers the greatest sincerity.
As ordinary consumers, we seem to have a relationship with real estate companies, but in fact, our fate has been closely linked to these companies.
Some time ago, a number of large real estate companies such as Country Garden, Sunac China, Wanda, and Powerlong Real Estate successively reported debt risk news, and a number of projects under construction were unfinished and suspended, which made people more worried about the development of the real estate industry.
Whether real estate companies can deliver houses is related to the vital interests of the people. Therefore, if there is a problem with the real estate company, we cannot turn a blind eye.
01. Hundreds of billions of real estate companies are thundering! Housing prices have entered the transformation from "soaring" to "bubble economy".
In the 90s, under the spring breeze of the opening up of the Special Economic Zone, the economy entered a rapid development channel, the urbanization process continued to advance, and a large number of rural people poured into the city, and the demand for housing became increasingly strong. At the same time, urbanization requires a lot of capital, and the fledgling real estate industry has become one of the important channels to raise funds.
Standing on the tuyere, large and small real estate enterprises, seize the opportunity, capital is optimistic, a number of real estate companies began to harvest the first batch of real estate industry rigid demand, non-rigid demand "leeks"!
As a result, with the blessing of dividends such as tax incentives and financing convenience, many aggressive real estate companies began to expand rapidly, frantically grabbing resources through high loans and pre-sales, and building commercial housing at the fastest speed. Superiors and banks are also happy to see the rapid development of real estate enterprises to drive the relevant upstream and downstream industrial chains.
Source: Harmony Hui, the age of housing buildings (left) and the per capita living area of urban residents (right)
In just a few years, housing prices have soared from one or two thousand yuan per square meter to nearly 10,000 yuan, and the property market has entered a crazy mode.
Country Garden, Sunac, Vanke and other companies that later became the "eight old people in real estate" all originated in this period. Taking Yang Guoqiang, who was only in his 30s at the time, as an example, he seized the opportunity and built Country Garden into a 100-billion-level enterprise in 5 years.
Source: Collation of financial report data of major real estate companies, comparison of the asset-liability ratio of Hong Kong-funded real estate enterprises and mainland real estate enterprises
Helpless for 30 years in Hedong and 30 years in Hexi, the mountain rain is about to come, and the wind is full of buildings! Once the property market begins to expand, the process itself is irreversible!
Source: National Bureau of Statistics
Behind the scenes, however, this model of rapid expansion has hidden dangers - over-reliance on pre-sales and financing to accumulate capital, and the cycle of building new projects with more debt, forming the so-called "high leverage". Once the economic situation changes and sales are sluggish, the debt will be unsustainable.
Now it seems that the blowout growth of the property market that year may be the bubble brewing and expanding, and the ending of Evergrande Xu Jiayin confirms this cruel fact.
In the new century, the mainland has shifted from stimulating demand to controlling bubbles. However, the overheated real estate market is difficult to ride a tiger, and some companies are caught in a dilemma of slowing down their development. Country Garden's performance in the deleveraging process has declined sharply, and Sunac has also accumulated trillions of debts under the high-leverage model.
Source: Official data collation
What seems to be a hard property bubble is actually fragile. When the bubble bursts, the huge risks will also be transmitted to the owners and society as a whole.
According to public data from the Ministry of Finance and the National Bureau of Statistics, the dependence of local real estate enterprises on land finance has increased from 41% in 2012 to a peak of 54.31% in 2021. However, in 2022, the dependence on land finance will drop to 48.89%, and from January to August 2023, it will decrease to about 37%.
All kinds of signs show that the reform of real estate enterprises is imminent, the official announcement of the way of "unbinding", the strict control of the source of funds has been implemented to the grassroots level, whether the real estate enterprises are willing to spend money to buy "rest assured", or are they willing to bear the supervision of the official and the people?
As of October this year, the total investment in real estate development was 9.59 trillion yuan, down 9.3 percent year-on-year, the construction area of real estate development enterprises was about 8.229 billion square meters, down 7.3 percent year-on-year, and the sales area of commercial housing decreased by 7.8 percent year-on-year, about 926 million square meters.....
Source: From January to October 2023, on "improving the main body supervision system and capital supervision of real estate enterprises" and "improving the macro-prudential management of real estate finance".
The current situation of oversupply of real estate enterprises, the establishment and improvement of relevant real estate enterprise norms and capital investment has been urgent, insolvent real estate enterprises are not a minority, how to resolve today's potential risks, long-term operation of real estate enterprises is a problem that every entrepreneur should ponder.
02, the real estate dream of the financial wizard, the thunderstorm may have appeared
Sun Hongbin, who ate the initial dividends of real estate, returned to China to establish Sunac Group with a master's degree in engineering from Tsinghua University and his Xi experience at Harvard Business School in the United States.
At the same time, Yang Guoqiang founded Country Garden in his hometown of Shunde, and two senior financial experts chose Beijing, Shanghai, Guangzhou and the Pearl River Delta as bases to enter this new market.
Sun Hongbin is a typical second-generation red question, and his professional knowledge and background have laid the foundation for the development of Sunac. In contrast, Yang Guoqiang's starting point is much lower, he started as an ordinary construction worker, worked hard to become a project manager, and then founded Country Garden.
Both company founders accurately captured the booming trend of China's real estate industry in the 90s. Relying on their respective network resources and business acumen, Country Garden and Sunac have achieved rapid expansion, and the scale of the company has grown rapidly. Especially after entering the new century, driven by national policies, the sales performance of the two companies has risen sharply, and they have become one of the super players in the domestic real estate industry in just a few years.
However, the rapid expansion model has also accumulated a lot of hidden dangers within the enterprise. Excessive loan leverage increases the risk of liabilities, and relying on pre-sales has the problem of capital chain when it is difficult to sell. Like a desperate gamble at the poker table, these businesses can get into trouble when there is economic volatility.
After the financial crisis in 2008, both Country Garden and Sunac faced a great impact, and were forced to start deleveraging and inventory digestion, and their performance growth declined. These have exposed the potential risks of the two companies in the period of rapid expansion, but the dividends of listed companies can always attract the attention of major media.
Source: Country Garden's dividends over the years
In the following years, despite the continuous development of the domestic economy, the growth pressure of real estate companies still exists. Country Garden's profits grew by billions of yuan in the decade from 2011 to 2021, an increase of only 30%. Sunac's sales declined in 2018 and then grew sluggishly. As of November 2013, Country Garden's sales from January to November this year were 212.45 billion yuan, which was the largest year-on-year decline among all the top 30 real estate companies, with a negative growth of 52%.
No wonder Yang Huiyan announced loudly at the group management meeting in December: Even if the pot is smashed and the iron is sold, the family will support the company, and the company will strive to become a model for the recovery of the insurance company as soon as possible!
In the past two years, these risks have become more prominent as macro policies have tightened. Country Garden's sales fell sharply, falling nearly 50% year-on-year in the first three quarters of this year. Sunac's debt restructuring plan was successfully passed, which seems to have turned the danger into a disaster, but it seems that it has not completely landed, after all, these debts still have to be repaid in the long run.
Source: The bonds due in 2023 of real estate companies, and the comprehensive collation of public financial reports
At present, both companies are facing great operating pressure. However, due to the large size, once a problem occurs, it will seriously affect the financial system and the rights and interests of owners.
03, the unfinished building started the history of buying a house with sadness! It is difficult to hand over the house, stop work and stop production, and lack of money
Nowadays, in the context of increasing downward pressure on the economy, many real estate companies are in difficulty, with sales declining and tight capital chains. The operating pressure faced by these real estate companies has directly led to the unfinished and suspension of some projects.
For example, Country Garden's West Lake City project in Zhengzhou suddenly announced a halt to construction last year due to a shortage of funds, and the construction party, China Construction Second Bureau, took Country Garden directly to court.
Mr. Wang was one of the victims. He originally lived in an old community, and in order to raise money for his children's schooling, he worked hard to raise money for the house and chose a house of more than 100 square meters in the new project. But just as he was about to hand over the house, the project suddenly announced a halt.
The main controversy is still the matter of whether the construction party, China Construction Second Bureau, and the construction unit, Zhengzhou Country Garden, are in arrears of the project payment, Country Garden claims that China Construction Second Bureau has breached the contract, China Construction Second Bureau claims that Country Garden is in arrears, and who is to blame for the long-term suspension of work in Country Garden Xiliuhu Famous City?
Source: Country Garden's contract payments have been made
The above figure adds: the contract money that has been paid, the main dispute is the increase in material costs due to the epidemic and other reasons, and the extra-contractual payments that need to be negotiated and handled, and the negotiation has been negotiated 7 times from 117 million yuan higher than the contract price (289 million yuan) to 67.86 million yuan, but it has not been successful, and the new project of Country Garden West Lake No. 8 Courtyard has not resumed work.
The biggest pain for home buyers like Mr. Wang is that they have worked hard to save for a house to improve their living conditions, only to have their living plans disrupted by the project.
Mr. Wang originally lived in an old community, and in order to send his children to school, he chose a house of more than 100 square meters for the new development launched in Country Garden. Just as he was about to move into his new home, the project was abruptly halted due to financial problems with Country Garden. Mr. Wang's family can only continue to live in the old apartment 20 years ago, and their children's education has also been affected. For them who are trying to improve their lives, it is like a bolt from the blue.
There is also Ms. Li, who bought a project of Sunac, who thought that a big brand could ensure quality, but the project was unfinished. Her dream property has become a pile of ruins, and her dream of buying a house has been completely ruined.
For the average home buyer, choosing a big-name developer is tantamount to an important investment in the future. People believe that big brands have the strength to deliver projects, and the dream of improving living conditions can be realized by buying a house from a well-known real estate company.
However, contrary to expectations, when big brand real estate companies also have sales difficulties and financial pressure, the dreams of buyers will be ruthlessly shattered. Many people are looking forward to moving into a new home with good quality and complete facilities, but they can only continue to live in the old home, or face the risk of losing the new home and selling it at a discount. It is tantamount to an honest home buyer who has been "slapped in the face" in the capital market, not only unable to realize their dreams, but also having to bear such a failed investment.
When real estate companies rely too much on financing in pursuit of rapid expansion and profit maximization, the needs and dreams of ordinary home buyers can easily fall victim to the capital game. In the face of the storm in the financial system, individual home buyers are in the most vulnerable position and ultimately bear the burden of unjustified disaster.
Source: Yang Guoqiang's rare appearance
04. The crisis and opportunity of the capital game, a "textbook" lesson
For the current predicament faced by real estate companies such as Sunac and Country Garden, it is not difficult to see that this is inseparable from the cyclical fluctuations of the real estate industry.
For real estate investors, the risks caused by the current difficulties of real estate companies are undoubtedly a major concern. These investors see that some large real estate companies are heavily indebted and are worried about whether the companies can guarantee the smooth completion and delivery of their projects. If quality and delivery time are not guaranteed, their investment risk will increase significantly.
What's more, the high cost of land and building materials has also directly compressed the profit margins of real estate companies. Investors need to recover their costs and get a reasonable return, but the decline in the profitability of real estate companies will inevitably affect investment returns. Some investors are stuck in trouble and forced to take on excessive costs of capital.
For young people and families who are ready to buy a home, the unfinished property also puts them in a dilemma. Buyers are worried about missing out on market opportunities and waste of money due to improper site selection. The more critical issue for buyers who just need a home is the education and living conditions of their children, but the real high-quality supply is rare.
图源：房企负债top 35
Both investors and consumers hope that real estate companies can operate stably, and only when real estate companies improve their profitability can the interests of consumers and investors be safeguarded.
05. Breaking the situation of real estate rectification, real estate companies must not be rotten and "lying flat"
Baolong Real Estate, which has encountered the same development difficulties as Country Garden, has recently been exposed to illegal operations, which has made people realize the chaos of real estate companies again.
As a large real estate company, Baolong Real Estate has not been able to avoid this problem. The pre-sale proceeds were used to fill the cash flow gap, which ultimately led to the inability to pay the interest of US$15,916,250 (about RMB 114 million) under the April 2025 notes. In the process of rapid expansion, some leading real estate companies are gradually facing difficulties.
Similar situations are not uncommon in the industry. The suspension of Yongle State Residence and the tight capital chain of Sunac indicate that systemic risks are accumulating.
On the other hand, all kinds of tall real estate advertisements can be seen everywhere, and the bright and beautiful real estate concepts such as "smart community" and "sports town" attract attention. However, after the actual completion, unfinished buildings and quality problems are not uncommon, which is inconsistent with the propaganda and makes people suspicious. Buying a house must not only look at the advertising packaging, but also have an in-depth understanding of the real quality.
Some real estate companies will only speculate on concepts and prices, so that housing prices are detached from the actual situation, which can only lead to the true value of the house being obscured by false packaging. It is difficult to rely solely on external publicity for a long time, and it is still necessary to return to the intrinsic value of products and services.
The current situation requires entrepreneurs to assume more social responsibilities and not be confused by immediate interests. In the mixed market situation, we should abide by business ethics and provide truly high-quality products to keep the market on the right track. Only by returning to the source of product value and making buyers carefree can the market develop healthily.
06. Conclusion
The "cold wave" that swept through real estate companies has sounded the alarm for us. Real estate companies should ensure sustainable development and effectively safeguard the rights and interests of consumers by changing methods and reducing leverage.
We, ordinary people, should also be vigilant, look at real estate rationally, and not only want to maximize temporary benefits and ignore risks. After all, if we want to live for a long time, we can't make quick money and lose half of our lives.
In the big picture, each of us should focus on diversifying risks and investing rationally, rather than betting all our money on the house. What do you think of Country Garden's smashing pot and selling iron insurance company?Do your friends have encountered unfinished projects?Welcome to discuss and exchange in the message area~#文章首发挑战赛#
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