I don't know if you still remember, at the end of August 2020, the central bank, the Ministry of Housing and Urban-Rural Development and some real estate companies held a symposium together, in which the rules for capital monitoring and financing management of key real estate enterprises were clearly stipulated, that is, a "three red lines" for the financing of real estate enterprises:
1. The asset-liability ratio after excluding advance receipts is greater than 70%
2. Net debt ratio is greater than 100%
3. The ratio of cash to short-term debt is less than 1 time
These "three red lines" are specially designed to target the current high debt ratio of real estate enterprises, aiming to regulate the financing behavior of high-debt real estate enterprises and encourage them to take the initiative to reduce the debt ratio. Based on the number of real estate companies touching the red line, we have set corresponding financing limits. Once a real estate enterprise touches the "three red lines", its interest-bearing liabilities will be strictly limited and cannot grow; if the "two red lines" are touched, the growth rate of interest-bearing liabilities will be strictly controlled within 5%; if only the "one red line" is touched, the growth rate shall not exceed 10%; and for real estate enterprises that have not touched any red lines, their interest-bearing liabilities will also be subject to a 15% upper limit. These "three red lines" are not only a hard constraint on the debt ratio of real estate enterprises, but also a strong restriction on their financing expansion to ensure the steady development of the industry.
The underlying reason behind this is the increasing size of the debt scale and the high debt ratio of the real estate industry. The liabilities of real estate companies are accumulating like a snowball, continuing to expand, and if not controlled, the consequences will be unimaginable. In the past decade, although the real estate industry is highly profitable, and the asset scale of many real estate companies has increased dozens of times, it has also brought about a continuous increase in debt ratio and debt scale. Nowadays, the profitability of real estate companies has become confusing, and the flow of funds has become more and more tight, as if it could fall into a debt crisis at any time, facing the risk of insolvency. Taking Evergrande, Fusheng, Tahoe and other real estate companies as examples, their crisis is caused by the rupture of the capital chain, and the deeper reason behind this is precisely due to their blind expansion and excessive debt ratio.
However, with the end of the two-and-a-half-year adjustment period of the domestic property market, the market has shown a new situation. The second-hand housing market has experienced a continuous decline in prices for nearly two years, and the housing prices in many communities have returned to the level of 2019 or even earlier in 2016. This reflects the far-reaching impact of property market control policies and the significant changes in the relationship between market supply and demand.
Against this backdrop, life is becoming more and more difficult for developers. Debt defaults occur frequently, and many real estate companies are facing the dilemma of tight capital chains. The willingness to acquire land is sluggish, the sales market is sluggish, and the upstream and downstream supply chains are in a payment crisis. This situation not only affects the operation of developers, but also affects the stability of the entire real estate industry.
At the same time, the banking industry is also feeling the pressure of the property market adjustment. In the past, during the real estate boom, banks were happy to lend development loans to real estate companies. However, as the risk increased, banks began to tighten financing policies, not only reducing development loans, but also tightening financing channels for real estate enterprises across the board. This has undoubtedly brought more pressure to cash-strapped real estate companies.
In this case, it is not enough to only introduce ordinary rescue policies, and the real estate industry needs financial support, which is why the State Administration of Financial Supervision has clearly listed "resolving risks in key areas such as real estate" as an important work goal at the 2024 work conference.
In the article "The Ministry of Housing and Urban-Rural Development's Favorable Policies Frequently Occur, First-tier Cities Respond Quickly" published by China News Network on January 30, 4024, the significance of the real estate financing coordination mechanism deployment meeting held by the Ministry of Housing and Urban-Rural Development at the beginning of the year was deeply analyzed. The meeting not only set the tone for the next real estate work, but also was regarded as an authoritative guide to market trends, and its policy signals and guidance had a profound impact on the industry.
The article emphasizes that the current property market rescue measures are not only unprecedented, but also show a high degree of precision and pertinence. While maintaining the overall stability of the real estate market, the government pays special attention to the liquidity risks faced by individual real estate companies, and is committed to mitigating the risks and preventing their spread. This strategic shift not only demonstrates the government's deep insight into property market regulation, but also highlights its firm determination to maintain market stability and its ability to respond to risks efficiently.
It can be seen that the property market rescue measures have risen to the national strategic level, which puts forward higher requirements for governments at all levels and relevant departments, and has issued a dead order:
1. It is necessary to adhere to city-specific policies, precise policies, and one city, make good use of the policy toolbox, and fully give urban real estate regulation and control autonomy, and cities can adjust real estate policies according to local conditions.
2. For real estate regulation, Ni Hong, Minister of Housing and Urban-Rural Development, once used the metaphor of "nine out of ten pots". The latest tone of this year's urban regulation and control policy direction is also considered to send a strong signal to implement the responsibility of local entities.
In fact, the traditional "one-size-fits-all" policy model can no longer meet the unique market demand and development conditions of various localities, so the new regulation and control ideas emphasize "adapting measures to local conditions", that is, local governments need to formulate property market policies according to their own actual conditions to ensure the stability and healthy development of the market.
At the heart of this new strategy is the decentralization of more decision-making power to local governments. In the past, property market regulation policies were often formulated by the central government and implemented by local governments. Now, the central government's expectation for local governments is that they can formulate policies that are in line with the national spirit and can effectively respond to market changes. To put it simply, it is to remove the "tight spell", and all localities have introduced rescue policies according to their own local conditions to ensure that the property market returns to the normal level of development.
Obviously, the property market policy in 2024 has set the tone: the rescue of the property market in 2024 will be increased, and the intensity will be great. For example, Guangzhou has fully liberalized the purchase restriction policy for houses with an area of more than 120 square meters, and Beijing, Shanghai, Shenzhen, Hangzhou, and Suzhou have also relaxed the purchase restriction policy to varying degrees. Now that the house is not easy to sell, many second-hand owners can only keep lowering the selling price in order to sell the house, and finally close the transaction at a price that is much lower than the market price. In this regard, some professionals believe that selling the house at a low price is to give money for nothing, with the increase in the rescue of the property market, the market situation is improving, not to mention the rise in housing prices, but at least it can be sold according to the current market price.