Source: Broker China Author: Zhang Da
Affected by the Spring Festival holiday, the scale of housing companies' financing declined in February.
According to data from the Kerry Research Center, the total financing volume of 65 typical housing enterprises decreased by 47.2% month-on-month and 49.3% year-on-year in February, a monthly low since 2021.
It is worth noting that this year's government work report and Minister of Housing and Construction Ni Hong emphasized once again at a press conference on the subject of people's livelihood that support should be treated equally for real estate companies with different forms of ownership. At the same time, the establishment of a coordination mechanism for urban real estate financing is being accelerated, and financing for high-quality “white list” projects has also been initially implemented.
Industry insiders believe that in the future, with the goal of preventing and mitigating risks, enterprise-side financial support is expected to be further strengthened, financing issues are expected to be improved, and industry risks are expected to be further mitigated.
The scale of financing hit a new low in a single month since 2021
According to data from the Kerry Research Center, the total financing volume of 65 typical housing enterprises in February was 21.887 billion yuan, a decrease of 47.2% month-on-month and a year-on-year decrease of 49.3%, a single-month low since 2021. Among them, the Spring Festival holiday had a certain impact.
In terms of financing structure, domestic debt financing by housing enterprises in February was 10.97 billion yuan, a decrease of 68.5% from the previous year; asset securitization financing was 10.917 billion yuan, an increase of 481.3% over the previous year, and an increase of 504.8% over the previous year, mainly due to the successful issuance of consumer public REITs by China Resources Land in February, with a total financing amount of about 6.918 billion yuan.
In February, housing enterprise bonds were issued at 7.25 billion yuan, a year-on-month decrease of 70.2% and a year-on-year decrease of 72.8%. In February, no housing enterprises issued overseas bonds, so 7.25 billion yuan was all domestic debt. The scale of domestic debt issuance decreased by 69.3% month-on-month and 70.5% year-on-year. Among them, corporate bonds were issued 750 million yuan, up 7.1% from the previous year, and 94.9% from the previous year; the issuance of medium-term notes was 2 billion yuan, a decrease of 89.2% from the previous year, and a decrease of 20% over the previous year. The companies issuing domestic bonds are still mainly state-owned enterprises and state-owned enterprises such as Poly Development, OCT, and China Merchants Shekou.
The Kerry Research Center pointed out that since domestic debt issuers are still mainly state-owned enterprises and state-owned enterprises, domestic financing costs are 2.91%, down 0.42% month-on-month, and 1.25% year-on-year, and remain low.
Looking at specific corporate performance, the company that issued the most bonds in February was Poly Development, which issued an ultra-short loan of 2.5 billion yuan. There were 5 companies that issued bonds in February, a decrease of 7 compared to the previous month. Judging from the bond issuance period, Huafa Co., Ltd. issued a corporate bond with a term of up to 5 years, which was the longest bond issued in February. Judging from the bond issuance interest rate performance, the interest rate for an ultra-short loan issued by China Merchants Shekou was 2.27%, the lowest of all bonds issued by housing enterprises in February.
Judging from the annual cumulative data, the total financing volume of 65 typical housing enterprises was 63.341 billion yuan, a year-on-year decrease of 37.62%.
Also, according to statistics from the Kerry Research Center, a total of 19 bonds matured in February. Excluding the portion that had already been redeemed early, it was about 39.4 billion yuan, a decrease of 2% over the previous month. Early attention was paid to the fact that 19 bonds would expire in March. Excluding the portion that had already been redeemed early, it was about 58.1 billion yuan, an increase of 47% over the previous month.
Financial support is expected to be further strengthened this year
It is worth noting that in this year's government work report, it was once again emphasized that “the reasonable financing needs of real estate enterprises with different forms of ownership should be treated equally”; Minister of Housing and Construction Ni Hong also stated at a press conference on the subject of people's livelihood that one of the key tasks this year is risk prevention, and the reasonable financing needs of real estate companies with different forms of ownership should be treated equally.
Ni Hong also said that in order to support the reasonable financing needs of real estate enterprises with equal treatment, the Ministry of Housing and Construction, together with the General Financial Supervisory Authority, will guide local authorities to establish a coordination mechanism for urban real estate financing and propose a “white list” of projects in accordance with the “One Project, One Plan.” Up to now, 312 cities in 31 provinces across the country have established real estate financing coordination mechanisms, involving more than 6,000 projects, of which 82% are private and mixed ownership projects. By the end of February, more than 200 billion yuan of loans had been approved by commercial banks.
Chen Wenjing, director of market research at the China Index Research Institute, pointed out that judging from policy implementation, promoting a “white list” of real estate projects and implementing project financing through a financing coordination mechanism is the main way to support housing companies' financing. The speeding up establishment of financing coordination mechanisms is beneficial to improving the capital liquidity of real estate enterprises, especially some private enterprises. At the same time, as project funding is gradually settled, construction of the project will also accelerate, and the overall positive impact on the market is expected to be further evident. With the goal of preventing and mitigating risks, it is expected that corporate financial support will be further strengthened in the future. For example, financial institution due diligence exemption rules are expected to gradually be implemented to promote the substantial effects of various policies.
Yang Kewei, deputy general manager of the Kerui Research Center, also said that stabilizing the main body is an important aspect of stabilizing real estate. As can be seen from the recent implementation of financing coordination mechanisms in various regions, private housing enterprise projects have also received considerable policy support. For example, private enterprises and mixed-ownership housing enterprise projects in Guangdong Province received 98% of new financing loans, and non-state-owned enterprises such as private enterprises account for more than 80% of loan project subjects connected by the Agricultural Bank. On February 29, the Ministry of Housing and Construction and the General Administration of Financial Supervision jointly held a video dispatch meeting on the urban real estate financing coordination mechanism, stressing that according to the principle of “complete construction” of the coordination mechanism, cities at prefectural level and above should establish financing coordination mechanisms by March 15, not only to complete the “white list” promotion with high quality, but also to coordinate and resolve difficult project issues efficiently. Overall, the financing environment for housing enterprises continues to improve, and financing for high-quality “white list” projects has also been initially implemented, but the effect of improving the overall financing of housing enterprises remains to be seen.
According to Hu Xiaoyu, a real estate analyst at Galaxy Securities, the government work report emphasizes “addressing both the symptoms and the root causes”. The supply side may continue to gain strength this year, the financing problems faced by the real estate industry are expected to improve, and industry risks are expected to be further resolved.
Furthermore, with regard to suggestions to support financing for housing enterprises, the China Index Research Institute said, first, to effectively implement “equal treatment” to support housing enterprise financing, and that financial institutions must have “due diligence exemption” and “no less than three” practical and operable measures, so that the effects of the policy can be fully demonstrated. Second, the coordination mechanism for urban real estate financing should be implemented quickly, and the coordination mechanism should operate on a regular basis, focusing on supporting private and mixed ownership housing enterprises, evaluating the problems existing in the operation of the coordination mechanism, making timely improvements, and improving the pertinence and effectiveness of the measures. Third, refund the relevant investment in the early stages of housing enterprises and defer payment of land concession funds to reduce financial pressure. It is recommended that security deposits and upfront investments be refunded to enterprises participating in urban village renovation to ease the tight cash flow situation of private housing enterprises. Fourth, taxes and fees relating to real estate companies have been reduced, support the extension of land payment time, allow bank guarantees to be used in place of bid deposits, allow land concession payments in installments within 1 year, and those that pay land concession prices in installments will not be charged interest during the agreed installment period.
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