Real estate companies want to make more money depending on what you can create for the city.
Editor's note: In the continuous suppression of regulatory policies, the real estate industry seems to have been the industry with the least future prospects and lack of investment value, but this industry still does not lack of value investors who insist on sticking to it, and Bian Hang, an investor with 23 years of real estate experience, is one of them, and probably most people are more familiar with his name on Snowball: ZhuJiu.
Just as a new round of real estate tax pilots is about to land, Bian Hang's new book "Seeing Through Real Estate Stocks: Starting from the Fundamental Logic of Value Investment" has also been published. In this book, BianHang still insists on analyzing why real estate is a good business, as well as the investment logic and valuation methods of real estate stocks. This article is excerpted from the two subsections of this book, "What will the real estate enterprises become in five years" and "Enterprises that can help the city make money have a future".
<h1 id="rpb34" > enterprises that can help the city make money have future</h1> lots, lots, or lots! This is a well-known real estate saying, but what is the location? Not only the central location of the city is a good location, different products have different definitions of locations, and the future location and our current understanding will also change greatly.
In the traditional urban layout, it is generally near the railway station as the city center, which is determined by the transcendent status of the train in the history of modern transportation. There are also some cities where railway traffic was not originally developed, and the city center is near the long-distance bus station. Whether it is a railway station or a bus station, these transportation hubs have driven popularity, but also led to the rise of industries such as catering, commerce and entertainment. Decades ago, the population of major cities was not as dense as it is now, everyone will generally go to the same central area to shop and consume, here is the most abundant place of living facilities in the city, the house price here is generally the most expensive, this is the traditional location.
Residential buildings in the city generally rely on the resources of the core business district, so the prices of each plate are basically determined according to the distance from the central area. A circle of expansion out, three kilometers of equivalent lines, five kilometers of equivalent lines, ten kilometers of equivalent lines, like the annual ring of the big tree, the house prices on each equivalent line are generally relatively close, but some areas will also be affected by factors such as landscapes, schools and enterprises.
Later, the central area was developed and could only be extended outward. With the gradual development of industrialization, it has also led to a large number of people pouring into the city, so each city has one sub-center after another. The differentiation of the sub-center is much greater than the original equivalence line, and the university city as the core often becomes a high-tech zone, with more high-tech industries, the income of the employed population is relatively high, and the house price is naturally rising. The sub-centers dominated by industrial enterprises tend to be more concentrated in low-profit manufacturing enterprises, and house prices will be relatively low. Some sub-centers develop rapidly, together with the original traditional central area, forming the origin of the price coordinates, and the Pudong New Area in Shanghai is a typical example. In this way, the city's original housing price system will change greatly, simply according to the distance from the center point, which is obviously outdated.
After the original concept of location was broken, the law of housing prices showed fragmentation, and factors such as housing age, products, brands, and education were continuously absorbed, in fact, the current lot and the location we said twenty or thirty years ago, many of them are not a concept. In addition to Pudong, Nanshan in Shenzhen, Zhengdong New Area in Zhengzhou, Meixi Lake in Changsha, Chenggong in Kunming, Guanshan Lake in Guiyang, etc., have all replaced the original old town and become the new urban price highland.
At this point, we can clearly see that the location is not a static concept, but a product of continuous evolution and upgrading with the development of urban development and technological development. More than 20 years ago, shanghai prevailed that "I would rather have a bed in Puxi than a room in Pudong", now what? The price of some houses in Pudong has reached 200,000 yuan / square meter!
Good location is created, in fact, the traditional central area of that year is also the product of creation, but everyone is accustomed to it. Now, the problem facing the housing enterprises is that the high-quality land that can be obtained simply by relying on bidding, auctioning and listing is too low, and the profit margin is too low. In fact, this is also fair, because these good plots are the essence of a city's decades of development, and their value is created by the city itself, and a foreign real estate enterprise wants to enjoy its success, so it can only endure low profit margins.
It's not hard for businesses to make more money, and it's not hard to see what you can create for the city. Whoever can change the original value system of the city, who can have more care for the city, can get more development space in the city. To build a shopping mall, you have to bear the pressure of later operation, but therefore you can get hundreds of thousands of square meters of good land; to be a cultural tourism city, the risk of operating behind is naturally greater, but it can also get millions of square meters of good land; and the operation of a city plate, its difficulty is more than the first two, but once successful, it can firmly occupy several square kilometers of excellent land.
The problem of the sustainability of housing enterprises, at least in the next ten years, will not be on the demand side, the key is to get good land. And the future of good land to create on their own, without this ability, the opportunity to sit back and enjoy its success will be less and less.
<h1 id="nl3df" > what the housing enterprises will look like in five years</h1> At the end of 2020, a certain line of housing enterprises released a corporate plan for the next five years, clarifying the development direction of the next five years. The article on "the following five trend characteristics are expected to appear in The future of China's real estate market", which represents the prediction of first-line housing enterprises for the future of the market, which is worth learning and learning. We are accustomed to listening to all kinds of "expert" remarks, look at the understanding of the market by companies in the industry.
1, the total amount of the real estate market is stable, will still maintain a slight upward trend year by year, it is expected to reach at least 18 trillion yuan of market size in 2030, the industry's top ten enterprises market concentration will be further increased to 35% to 40%, so we should still maintain strategic focus, adhere to the main business bigger and stronger, continue to maintain steady growth.
At present, various arguments believe that the market size of real estate development has entered a stage of decline, and they doubt the sustainability of the real estate industry and are not optimistic about the future growth space of housing enterprises. I personally expect that the future is the trend of volume contraction and price increase, with the insufficient supply of land in mature areas of the city, a large amount of purchasing power can only be released in the second-hand housing market, resulting in a decline in the transaction volume of new houses, but the continuous rise in house prices will continue to increase the total amount.
The scale of 18 trillion yuan is slightly higher than the 16.5 trillion to 17 trillion yuan that may be achieved in 2020, which is a reasonable expectation. Whether it can be maintained in 2030, in addition to whether the house price has achieved the effect, it is very important to have a significant impact on the supply of affordable housing, which will have a great impact on the supply of commercial housing land, which is a process of trade-off.
If the top ten housing enterprises can reach a market share of 35% to 40%, there will be a total sales of 6.3 trillion to 7.2 trillion yuan. Compared with the total equity sales of 3.45 trillion yuan in 2019, there is room for doubling. Ten years of double, it seems that the space is not particularly large, but in the process of slowing down the growth rate, the mismatch between income and cost will be more reasonable, the cost of debt will be greatly reduced, coupled with the operating profits of holding properties and other diversified income, the profit growth rate of the top ten housing enterprises to reach between 10% and 15% is normal, close to the profit growth rate of Moutai in Guizhou.
2. In the future, the real estate industry will enter the stage of differentiated competition from large-scale competition, and it is expected that the sales growth rate of the head housing enterprises will slow down to 5% to 15% as a whole. In the future, the increase in the real estate market is mainly driven by price, the proportion of demand for improved customers will continue to increase, product strength will become the focus of attention, and the company needs to enhance product strength as the core driving force for future development.
The real estate industry is moving from large-scale competition to differentiated competition, and the "three red lines" policy will accelerate this progress. The era of simple and rough fighting for debt and scale has passed, and only by constantly adjusting their product ideas according to the changes in the needs of market consumer groups can we better meet the new rules.
Enterprises with outstanding product strength will have greater advantages in future competition. The homogenization of the house is actually a false proposition brought to the market by the rapid development of the past 20 years. Different plots, different buying groups, are different product needs, personalized themes will be the trend of the future market.
The future products are not only better in terms of building quality, more reasonable community planning, greatly improved in the application of science and technology and landscape construction, and property services will become an important part of improving the living experience. For some super housing enterprises, there is a large enough land scale, and it can provide owners with completely different architectural contributions from the old and old urban areas in the environment and supporting facilities outside the community, which is something that ordinary housing enterprises can only sigh. What is the demand-side reform of real estate? Making your house different from others will be an important part of the residential consumer demand side reform.
3. Digitalization has begun to penetrate in all aspects of the value chain of housing enterprises, and will continue to bring subversion to the operating model of housing enterprises in the future. Therefore, we must actively explore the deep integration of a new generation of information technology with all aspects of the upstream and downstream of real estate, and comprehensively improve the quality and efficiency of operations.
With the rapid growth of volume, the management system of many housing enterprises also needs to be improved. For large housing enterprises with an operating scale of hundreds of billions of yuan, the effective improvement of a certain link may increase profits by tens of millions or even hundreds of millions of yuan. In the past, in the era of rapid progress, the improvement of management capabilities has lagged behind the growth of business scale, and the rapid performance growth has also made many enterprises not pay attention to the rigor of internal management. The promotion of business model and management efficiency in the digital era has been clearly reflected in all walks of life, and housing enterprises will generally benefit.
4. With the improvement of the financial environment, consumption upgrading and the maturity of the capital market, the valuation level of high-quality holding properties will gradually increase, and the future operating housing enterprises will be ahead of the sales housing enterprises in terms of corporate value. Housing enterprises should gradually increase the proportion of high-quality properties, increase the proportion of operating profits of holding properties in the overall profit, optimize the asset structure, and enhance the value of enterprises.
I often say a sentence recently, "The era of bidding and auctioning is over"! Although many people do not believe it, this is already a well-established fact in the industry. Among the head enterprises, most of them are building their own commercial brands, and at the same time, they continue to extend the circle of ability in terms of cultural tourism and industry, which is why this sentence is that "in the future, the operating housing enterprises will be ahead of the sales housing enterprises in terms of corporate value".
Holding properties are not inefficient assets, but a passport for long-term stable development in the future, which is the group choice of head housing enterprises. There are always people who like to teach these 100 billion yuan housing enterprises how to develop, just like there are always people who like to teach Messi how to play football.
5. Real estate enterprises in developed economies represented by the United States and Japan are good at capturing market demand at different stages, constantly enriching the relevant diversified product portfolio, and expanding innovative business areas, so as to obtain the ability to cross the real estate cycle and achieve sustainable operation.
Real estate is by no means only "lot, lot and lot", if in the past it was because the total supply of housing was lower than the total demand for a long time, it was unbalanced and insufficient, then in the future, the gap in our quantity will continue to shrink with the increase in affordable housing. However, in different market cycles, different demand changes will continue to provide market opportunities.
The current type of commercial housing is single, basically relying on the existing public facilities in the city, and the spread of the pie is constantly extended, and this is true for residential, commercial and office buildings. The types of housing in the future will be more diversified and will be more polycentric with the development of rail transit and network technology. Pension, vacation, exhibition, characteristic towns, industrial parks, new urbanization, etc., more housing enterprises are building a pan-urbanization development system. The destruction of geographical coordinates will make a large number of low-cost land become the new position of housing enterprises, of course, the comprehensive ability requirements of housing enterprises will be higher, and it is certainly not possible to build a house.
In summary, there is still a lot of room for development in the future of China's real estate industry, but with the increasing concentration of the industry and the rapid improvement, real estate enterprises must improve the quality and efficiency of operation and enhance their comprehensive strength in order to have a place in the industry. Although the growth rate of the real estate development industry will decline, it will still remain at an absolute high level for a long time, and in this process, the head enterprises will usher in a period of stable profit growth. The market's expectations for housing enterprises will also change with the stabilization of financial indicators and the continuous release of performance. In 2020, under the background of the overall downturn in real estate stocks, the strength of Longfor Group is a good proof.
The future is in the hands of housing enterprises, the development model of the past 20 years needs to keep pace with the times, only by "improving the quality and efficiency of operation and enhancing the comprehensive strength can we have a place in the industry", which is the key condition for investors to choose real estate stocks.
Title: Seeing Through Real Estate Stocks: Starting from the Fundamental Logic of Value Investing
Author: Bian Hang
Publisher: China Machine Press
Wen | bianhang
Editor| Peng Ren
(This article is for your informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.) ）