Image source: Visual China
China's real estate market, which has not subsided, is showing a picture of "looking horizontally at the side of the ridge into a peak". Vanke, which has just come out of the danger zone, is still optimistic about the future of the real estate industry, but the latest news, including Li Ka-shing's 50% sale of Dongguan real estate and Gree Real Estate's withdrawal from the real estate development business, has cast a shadow on its relatively optimistic judgment on the market.
On the evening of July 9, Vanke disclosed a record of investor relations activities, saying that this round of policies is the right medicine, directly to the pain points, and the effect is obvious, "We believe that the policy tools to respond to market changes are very sufficient and have been prepared." At the same time, Vanke believes that the current supply level of the real estate market is insufficient in terms of total volume and structure relative to the potential aggregate demand, and there are opportunities for companies that can survive and provide high-quality housing.
According to Vanke's estimates, the market demand in the next ten years can fully guarantee the annual construction of 1 billion ~ 1.2 billion square meters, but the new construction of commercial housing in 2023 will only be 690 million square meters, and it will further decline by 25% in January ~ May this year, and the new residential construction this year is not expected to exceed 500 million square meters, and the per capita volume is lower than the current level of some developed countries. "Judging from the development stage of mainland cities and the people's pursuit of a better life, it is impossible to maintain the status quo for a long time, and the industry will have opportunities as long as it survives, especially enterprises that can provide high-quality housing and meet the needs of improvement, and the advantages will be more obvious."
Regarding the debt issue that the market is concerned about, Vanke said that the company has received great support from financial institutions, and its financing channels remain unimpeded. Since the beginning of this year, the company has added a total of more than 60 billion yuan in new financing and refinancing, and the corresponding repayment has exceeded 50 billion yuan, and major financial institutions have given great support to the company in the process. In the first half of the year, the company completed the safe payment of debt in the open market, and in the second half of the year, the relevant debt repayment arrangements have been made.
But Vanke has not brought good news to the market. According to the performance forecast announced in the evening of the same day, the company is expected to suffer a loss of 7 billion to 9 billion yuan in the first half of the year, and net profit will fall by 171% to 191% year-on-year. This is the first time since its listing in 1991 that Vanke has suffered a net profit loss in its semi-annual report, and it is also the first time that Vanke has become the largest loss-making enterprise in the industry.
The reasons for the loss are mainly three aspects: first, the delivery of high-priced land plots, because the profits settled by the real estate development business in the first half of the year mainly correspond to the projects sold in 2022 and 2023, and most of these projects are high-priced land purchased when the market is high, resulting in a loss from selling houses at a low market level; Second, Vanke has taken resolute actions to reduce its liabilities, including price reductions and bulk asset transactions, some of which are even lower than the book value; The third is to take the initiative to provide for impairment, and the provision for inventory decline is a way to account for asset impairment losses, and Vanke may have made more provision for impairment of inventory in this financial report than in previous years.
Despite the announcement of huge losses, Vanke's A-shares rose for three consecutive working days after the announcement of the results, partly due to the market's judgment that it was full of profits. Another factor may be Vanke's simultaneous announcement of the management collective shareholding plan. According to the plan, 1,862 key management personnel of Vanke plan to raise 200 million yuan to increase their holdings of the company's A shares. This is Vanke's first management increase since 2022, which Vanke said was "an expression of its determination to breathe and share a common destiny with shareholders and boost market confidence."
The mixed mix of negative and negative is not only reflected in Vanke, a "top student" real estate company, but also a portrayal of the current real estate market as a whole.
Ding Zuyu, chairman of CRIC Group, recently wrote that under a series of policies, key cities have stopped falling and stabilized, and the market is still in the cycle of releasing stock demand. However, he also pointed out that although there are some positive signs in the real estate market, the overall downward pressure is not abating.
Echoing this, on July 11, there was market news that Li Ka-shing sold a house at a discount in the Dongguan Haiyi Mansion project, and the original price of the real estate was about 24,000 yuan per square meter, and now it has been reduced to about 14,000 yuan per square meter through group purchase discounts, which is nearly 5% off.
Harbour Plaza is a project won by Hutchison Whampoa as early as 1999, covering a total area of about 7,000 acres, of which 2,000 acres is the Harbour Plaza Golf International Championship course, which was once known as the largest golf villa complex in Asia. The project's "fire sale" is particularly prominent in the current property market winter, but it is not an uncommon operation for Li Ka-shing, who has slashed the prices of residential projects in Shanghai and Hong Kong in the past two years, but the decline is smaller than that of the Dongguan Laguna Verde.
Compared with the first-tier cities, the downward pressure on the property market in Dongguan is greater. According to the data of Hefu Research Institute, in the first half of 2024, a total of 8,129 new houses were transacted in Dongguan, a year-on-year decrease of 39%, a new low in the past six years; At the same time, the trend of exchanging price for volume is becoming more and more obvious, and the average transaction price in the city has also fallen from 32,200 yuan/square meter in the same period last year to 26,600 yuan/square meter, a year-on-year decrease of 17%.
In fact, although the net profit of Cheung Kong Group fell by 20% last year, it still had 17.5 billion yuan, indicating that the company was "not bad for money". Li Ka-shing is most likely based on the judgment that the Dongguan property market will not improve in the short term or even in the medium term, and chooses to reduce the price and clear the inventory. Such a sharp price reduction and sell-off will undoubtedly affect market confidence, causing home buyers to wait and see, further exacerbating the downward pressure on the market.
But this is not a problem that Li Ka-shing considers, in business, the land price more than 20 years ago is enough to ensure the profit margin of any of his current operations, which is also the envy of real estate companies, including Vanke. In the context of the future of the real estate market is still murky, "run if you can't win" has become the choice of more and more real estate companies, and Gree Real Estate is the latest one.
Founded in 1999, Gree Real Estate recently announced its withdrawal from the real estate development business, planning to replace its assets, liabilities and external debts related to the real estate development business in Shanghai, Chongqing, Sanya and other places, and at the same time purchase no less than 51% of the equity of Zhuhai Duty Free Enterprise Group Co., Ltd. (Zhuhai Duty Free Group). The capital market gave positive feedback on this move, and after the restructuring announcement was issued, Gree Real Estate shares rose to a limit.
Although the real estate market situation is still "indiscriminately fascinating", it is worth mentioning that Gree Real Estate's shift to duty-free business is believed to be related to a new round of fiscal and tax system reform, especially the expectation of consumption tax reform, which seems to coincide with the trend of China's economic engine shifting from real estate to consumption. (Fortune Chinese Network)
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