Real estate must see!How do financial institutions see the future market?


Real estate as a capital-intensive industry, the relationship between real estate enterprises and financial institutions is inseparable.In the fourth quarter of 2021, the real estate market showed great fluctuations at both the financing end and the sales end.Commercial bill repudiation, trust default, bond extension, real estate enterprises in all kinds of events, but also to the investment end of the financial institutions.Accordingly, the Middle Finger Research Institute conducted a market survey for financial institutions in the first quarter of 2022, in order to understand the market expectations of institutions and changes in investment decisions under the new cycle of the industry.(Click to obtain the full report) >> Related research (click to obtain) 2022 Property market outlook!For the direction of industrial policies and financing policies in the first quarter of 2022, 69% and 72% of respondents expect a moderate relaxation, and most institutions are optimistic about the degree of policy easing in the near future.In order to “de-financialize real estate” and avoid the industry becoming the gray rhino of the financial market, industry policies will be significantly tightened in 2021.However, since October, the regulatory voice frequently, released a number of marginal relaxation signals, the year-end financing scale recovery also shows that positive signals have worked.Therefore, the market generally believes that the “policy bottom” has passed, and it is expected that the regulation will maintain the characteristics of “marginal relaxation” in the future for a period of time, so as to manage and guide the market flexibly.As for the transaction volume of national commercial housing in the first quarter, only 7% of the institutions think that it has increased year-on-year, 28% think that it is basically flat, 66% think that it has decreased year-on-year;Half of those who thought it was down thought it was between 10% and 20% year-on-year.In terms of the year-on-year growth rate of the national monthly sales of commercial housing, double-digit negative growth began from August 2021, with a year-on-year decline of 18.7% in the fourth quarter.Affected by this, institutions generally lack confidence in market turnover, expected to maintain a downward trend.From the first quarter of commercial housing transaction price expectations, 31% of institutions think that the quarter-on-quarter basic flat, 18% expected to rise, and expected to decline accounted for 45%, nearly half of the institutions think that housing prices will continue to fall.According to the changes of the 100 Cities housing price index, there was a slight decline in November and December 2021. Under the current market trend, combined with the policy orientation of “three stabilizations”, the housing price may continue the trend of slight decline at the end of last year and further decline.Industry risk is expected to rise, sales financing difficult to rebound the current industry’s biggest suspense lies in the real estate tax when landing, how landing.Forty-two percent said it would happen within this year, 17 percent said it would be delayed until 2023, and 21 percent said it would happen in 2024 or later.Since the real estate tax was proposed, the real estate tax has been regarded as an important means to replace land finance. With the decline of the market heat of land auction and listing, the promotion of the real estate tax is imperative.As a result, more than 40 percent of the organizations judged that there will be pilot cities officially implemented relevant policies this year.As for the change of real estate credit interest rate in the future, 57% of the institutions think it will decrease, 19% think it will be basically the same, and only 16% think it will increase.The average interest rate of non-bank financing of real estate in 2021 was 5.54%, down 0.76 percentage points year-on-year.Due to the recent RRR and interest rate cuts, the cost of credit funds has been reduced, which will further reduce the financing cost of the real estate industry.In terms of expectations for the industry as a whole, 59 per cent believe risks will continue to rise, 21 per cent believe they will remain at current levels and 16 per cent believe they will begin to recede.In January, there continued to be risk events such as trust default of well-known real estate enterprises and offshore foreign debt extension. In addition, many real estate enterprises accelerated the speed of asset disposal, which is considered as a signal of tight liquidity of enterprises.The industry is currently in the stage of adjustment and differentiation, and risks are still being exposed.Specifically, 88% of the institutions consider insufficient sales collection due to the weak market as the most important risk in the current industry, followed by financing difficulties for enterprises, 76% of the institutions choose this.As a capital-intensive industry, real estate is highly dependent on capital. In the era of “high leverage”, external financing has become the main source of cash for real estate enterprises.As a result of the current tightening of financing environment, real estate enterprises cannot supplement cash flow through financing and can only rely on operating cash collection. However, affected by the downward cycle of the industry, their sales ability is also weakened, and real estate enterprises are in a dilemma.Large amounts of “off-balance sheet liabilities” outside interest-bearing debt were also a major risk for the industry, chosen by 74 per cent of institutions.In the development stage of “high leverage”, some real estate enterprises not only raise funds through normal channels, but also increase a large number of off-balance sheet liabilities through “real debt of stocks”, the issuance of financial products, increasing the scale of payables and other ways, making the real debt far higher than the book data, but also a huge hidden danger.Off-balance sheet debt has been the trigger for several defaults.In terms of the quality of their existing investment projects, 41% of institutions believe that some of their projects are at risk of default, while 52% believe that there is almost none. However, 7% of institutions still believe that most of the projects they invest in are at risk of default.The risk level of the remaining projects determines the investment intention of financial institutions in the future.In terms of the scale of investment in the real estate field this year, 48% of institutions will reduce the scale of investment, among which 22% of institutions investment decreased by more than 15% year on year;33 per cent maintained the level of the previous year;Only 19% saw a significant increase in investment.Affected by policy orientation, industry risk exposure and other factors, financial institutions generally lack confidence in the real estate sector, capital investment will also be reserved.In terms of the choice preference of counterparties in this year, nearly 80% of institutions preferred central and state-owned enterprises, followed by 55% of institutions preferred regional leading enterprises.Due to the nature of enterprises, central and local State-Owned enterprises have strict self-control and relatively controllable debt scale and structure. Therefore, they have shown good robustness and toughness in the current market environment, and thus become the preferred counterparties of institutions.Regional leading enterprises tend to have close cooperation with local financial institutions, with low degree of information asymmetry, and are also favored by institutions.From the perspective of investment target selection preference, 83% of the institutions will give priority to the nature of the subject of the bid, and 71% of the institutions will select the city level of their project.Both state-owned enterprises and private enterprises have their own advantages. The core advantage of state-owned enterprises lies in their strong capital strength, and most of them are core cities such as the first and second tier cities. Moreover, they are superior to private enterprises in financing ability and financing cost, and have less default risk.While some private enterprises acquire land mainly in the suburbs of third – and fourth-tier cities and core cities, and build differentiated products by virtue of their understanding of local regional land resources and customers, which has the advantage of regional deep cultivation.In addition, about 50% of the institutions will evaluate the investment value of the investment object comprehensively by re-examining the credit standing, operation style and scale of the enterprise.In the project review of financial institutions, solvency, enterprise nature and debt structure are the key factors for reference, while profitability and asset realization are the secondary factors.In the current environment, investors pay more attention to the degree of direct guarantee of corporate debt for security reasons, while profitability and liquidity are relatively less important as indirect guarantee of debt.With the fluctuations of the industry, diversified enterprises with strong brand strength also repeatedly broke out risk events, so these two points have been little attention by institutions.From the perspective of the main strategy of the real estate credit risk control, 72% of the institutions will combine the hard indicators of real estate enterprises, such as debt capacity, net cash flow, project layout, etc., to formulate the investment “white list”.Secondly, 64% of institutions choose to strengthen communication and exchanges with research institutions.Due to different perspectives and research advantages, third-party institutions can provide more reference information for financial institutions.Strengthening communication with research institutions and research on risk prevention and control of real estate will help to catch risk signals in advance and also play an important role in promoting the healthy and orderly development of the financial industry and real estate industry.57% of the institutions will continue to implement the relevant content of the Notice on Preventing Loans for business Purposes from illegally flowing into the real estate sector, strengthen the inspection before, during and after loans, and control the flow of funds;At the same time, in order to improve the credit investigation of real estate project companies and meet the relevant requirements of risk control institutions, the amount of guarantee of real estate enterprises and other related credit enhancement measures will be increased to prevent credit default risks.In addition, financial institutions have paid more attention to the supervision of pre-sale funds.”National Commercial Housing Pre-sale Funds Supervision and Management Measures” will be formulated recently, it is expected to effectively alleviate the problem of inadequate project funds allocation caused by excessive supervision in the early stage, in the real estate enterprises to reasonably arrange the use of funds, the sound operation of positive role.☞ Presale capital supervision and relaxation of how much?Can solve the immediate danger of the housing enterprise?Secondly, the real estate regulation policy is also one of the concerns of the institution.Recent market fluctuations are basically closely related to policy trends, and policy dynamics become the vane of industry development.According to the Central Economic Work Conference in December 2021, while strictly observing the bottom line of “housing should not be speculation”, developing the long-term rental market and promoting the construction of low-income housing, it is necessary to “explore a new development model” and “implement city-specific policies to promote the virtuous cycle and healthy development of the real estate industry”.How to cooperate with financial institutions and real estate enterprises to jointly explore the new development path of the industry is a problem that industry participants need to think about.Finally, mergers and acquisitions are also topics of interest to institutions.As real estate companies listed under financial pressure, some real estate companies began to sell assets in order to recover cash.Central bank, bank insurance regulatory commission on December 20, Taiwan affairs on the acquisition of real estate enterprise risk management project financial service of the notice, bank, enterprise mergers and acquisitions bonds has landed, compensation of enterprise part of the project has been on the shelves, participate in projects, investment or become a financial institutions in the new round of development opportunities.☞ The Central bank!It can be seen from the questionnaire that financial institutions still hold a certain reserve attitude towards the market and industry development, and invest cautiously. Their counterparties prefer stable state-owned enterprises, and they pay more attention to the debt guarantee ability of enterprises during the project investigation.Therefore, from the perspective of financing, the recent housing financing scale is difficult to have significant growth, financing capacity is also more differentiated.How to cooperate with real estate enterprises to grasp the trend of the industry and seek investment entry point under the new cycle and new development is the main problem facing financial institutions at present.

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