① Despite recent warm weather, it is still limited to high-quality housing enterprises and whitelisted housing enterprises, and the overall financing of the industry is still weak. ② Housing enterprises will still face significant debt maturity pressure in the first half of 2024. Among them, the amount of debt due in the first and second quarters was over 150 billion dollars.
Financial Services Association, December 29 (Reporter Li Jie) Housing companies are still facing heavy financing pressure this year.
Although financing policies for housing enterprises have taken a turn since 2023, the direction of bailout has changed to “rescue projects coexist with saving enterprises”, and the “16 financial regulations” have also been extended until the end of 2024, the financing situation in the industry is still quite serious. Most private housing enterprises are in a state of semi-stagnation in open market financing, and some housing enterprises with relatively stable finances are also facing financial problems.
According to Kerui data, 80 typical housing enterprises issued 305.6 billion yuan in bonds in 2023, a year-on-year decrease of 31%. Among them, domestic debt issuance was 296.3 billion yuan, down 15% year on year; while overseas debt issuance fell sharply by 90% to 9.3 billion yuan year on year, accounting for a decrease of 18 percentage points to 3% year on year.
In order to stabilize the market, towards the end of the year, the supervisory authorities issued policies several times, focusing on improving the financing environment for housing enterprises. Since October of this year, regulators have repeatedly proposed “treating them equally to meet the reasonable financing needs of real estate enterprises with different forms of ownership,” putting forward “no less than three” requirements for banks and other financial institutions in a more targeted manner, and proposed expanding the financing whitelist for housing enterprises.
S&P believes that the above policy aims to guarantee the reasonable financing needs of housing enterprises, bridge the widening gap in financing capacity between state-owned enterprises and non-state-owned enterprises, and may help some private housing enterprises ease the pressure to refinance.
“However, whether the market can regain confidence in non-state-owned housing enterprises ultimately depends on whether industry sales can stabilize.” According to S&P, with financial support, the key to how private housing enterprises operate depends on individual sales performance, and a good debt structure can give them a longer time to wait for industry confidence to return.
Analysts Kerry said that the real estate market still has both opportunities and challenges. Currently, the challenge is the “number one problem” facing housing enterprises, and only by surviving it can “shine through.”
Financing for private housing enterprises needs to be improved
From a financing perspective, 2023 will be unspeakably easy for housing enterprises.
Although since 2023, various departments have successively emphasized the need to promote the normal cycle of finance and real estate, implement the “16 Financial Rules”, etc., and extend the “16 Financial Rules” policy uniformly until the end of December 2024.
However, industry insiders said that only a very limited number of real estate companies benefited from the “three arrows” and “property security” policies. The scale of financing in the first and second quarters of 2023 showed a downward trend both month-on-month and year-over-year.
In particular, for most private enterprises, domestic bank credit and bond credit enhancement are still generally biased towards supporting high-quality housing enterprises with better financial conditions. Overseas, for most housing enterprises, the overseas financing environment is still frozen.
According to Kerry data, the amount of debt issued by state-owned enterprises and central enterprises in 2023 was 25.2 billion yuan, down 6% from the previous year, and the amount of debt issued by private housing enterprises was 36.8 billion yuan, a sharp drop of 71% from the previous year; the share of bonds issued by state-owned enterprises and central enterprises accounted for a sharp decrease of 71% over the previous year; the share of bonds issued by state-owned enterprises and central enterprises continued to rise by 22 pcts to 82% from 60% in 2022.
Analysts believe that in the current context where industry risks have not been fully clarified and market confidence has not been fully restored, the problems of difficult and expensive financing for most private housing enterprises still need to be solved.
It is worth noting that considering that financing difficulties are mainly private housing enterprises, the Central Financial Work Conference held at the end of October 2023 pointed out that “treating real estate enterprises with different forms of ownership equally can satisfy reasonable financing”, with the intention of emphasizing that commercial banks and other financial institutions should implement and implement detailed policies to support private housing enterprises in financing.
Meanwhile, the financial institutions symposium held on November 17 once again emphasized that “the reasonable financing needs of real estate companies with different ownership systems should be treated equally.”
Afterwards, a number of large banks responded to the spirit of the conference and intensively held housing enterprise symposiums to map out the financing needs of housing enterprises and implement measures to improve the financing environment for housing enterprises. Among them, housing enterprises such as Vanke, Longhu, and Xincheng attended the symposium many times.
“Banks have held symposiums one after another to show that policy support is being conveyed to housing enterprises. Domestic loans and self-financing segments funded for real estate development in November all showed signs of marginal improvement.” According to S&P.
Also, according to media reports, the regulatory authorities are drawing up a “white list” of Chinese real estate agents. It is possible that 50 state-owned and non-state-owned housing enterprises will be included. The listed companies are expected to receive support from various sources, including credit, debt, and equity financing. This list has expanded from the scope of high-quality housing enterprises with systemic importance at the beginning of this year.
At the Central Economic Work Conference held from December 11 to 12, the conference once again pointed out that real estate risks should be actively and steadily mitigated, that the reasonable financing needs of real estate companies with different forms of ownership be treated equally, and that the real estate market should be promoted steadily and healthily.
After the regulatory authorities stated their support for housing companies' financing, since December, many housing enterprises have issued corporate bonds or medium-term notes, but judging from the issuers, they are still dominated by whitelisted housing enterprises. For example, on December 12, CNOOC issued 3 billion yuan of corporate bonds with an interest rate of 3.2%; on the 18th, Longhu also issued 1.2 billion medium-term notes with additional guarantees from China Bonds, including initial development, Huafa, and China Merchants.
According to statistics, the increase in Chinese debt in 2023 and other financial institutions have provided various forms of guarantees for bonds over 20 billion yuan issued by 12 private housing enterprises.
Debt maturity pressure still exists in the first half of next year
Analysts believe that although warm weather has been blowing frequently recently, it is still limited to high-quality housing enterprises and whitelisted housing enterprises, and the overall financing of the industry is still quite weak.
Judging from the debt maturity situation, according to Kerry statistics, the total maturing scale of housing enterprise bonds in 2023 was 696.8 billion yuan, while the issuance scale was only 292.7 billion yuan, with a high maturity scale of 138%. This means that housing enterprises cannot cover old maturing bonds by issuing new bonds.
According to data from the Bureau of Statistics, from January to November of this year, real estate development enterprises across the country received capital of 11704.4 billion yuan, a year-on-year decrease of 13.4%. Domestic loans in China fell 9.8% year on year, and the financing environment for housing enterprises is still weak.
Meanwhile, housing enterprises will still face greater pressure to mature their debts in the first half of 2024.
“The first and second quarters of 2024 are still at the peak of maturity. The maturity scale is over 150 billion dollars. Housing companies' debt pressure is still high in the first half of next year.” Kerry analysts pointed out.
Many experts believe that the key to supporting private housing companies' financing policies is implementation, and only with actual implementation can strong support be formed for housing enterprises.
“If the 'no less than three' policy can actually be implemented, it will improve the current difficult financing situation for private housing enterprises and help prevent the spread of risk in real estate companies.” According to analysts at the Central Index Institute.
According to reports, in November, regulators put forward “no less than three” requirements for financial institutions: the growth rate of each bank's own real estate loans should not be lower than the average real estate loan growth rate of the banking industry; the growth rate of public loans to non-state-owned housing enterprises should not be lower than the growth rate of the Bank's real estate loans; and the growth rate of personal mortgages for non-state-owned housing enterprises should not be lower than the Bank's mortgage growth rate.
Regarding the specific implementation of policy support, analysts at the China National Index Institute believe that first, it is necessary to establish a long-term mechanism, starting with optimizing credit policies, speeding up approval of loans, and clarifying due diligence exemptions, etc., to establish and improve long-term mechanisms to support private housing companies' financing. Second, to speed up the implementation of “no less than three”, credit financing support for private housing enterprises must reach a certain percentage.
“Finally, it is necessary to expand the volume and increase the amount of financing for private housing enterprises. Currently, the number of beneficiary enterprises is very limited. Credit enhancement bonds must adopt more flexible central and local joint expansion and expansion and expansion of guarantors. In addition to supporting high-quality and large-scale private housing enterprises, it is also necessary to benefit more small and medium-sized private housing enterprises.” The CDC analyst mentioned above added.