Prices Have Peaked, Sales Are Falling and the Giants Are Trembling

Even the giants of Chinese real estate are facing a major slowdown.

As of May 25, of 12 major cities, only Wuhan saw a yoy increase in sales of 5%. Hangzhou sales were down 53%, Beijing down 47%, Shenzhen down 36%. Sales are up yoy, led by 13.6% in Shanghai, followed by Beijing, Guangzhou and Shenzhen, but prices are barely growing mom. Together with falling sales volume, it equals falling sales for developers.

Vanke sales were about 5.2 million sqm and ¥67 billion from January through April, up 8.7% and 19.6% respectively, yoy. However, sales are declining and the outlook is not optimistic. Furthermore, most of Vanke's January sales of ¥28 billion was carryover from the end 2013. If those figures are subtracted, Vanke is already experiencing negative sales growth. Other big developers (¥100 billion+ sales) have even uglier numbers: China Overseas Land sales and area are down 12.4% and 22.3%; Poly Real Estate is down 9.5% and 22%.

Among the developers with ¥50 billion in sales, China Resources Land looks the worst, with sales down 40% and area sold down 32%. Clearly, if prices start to fall, the sales figures will quickly fall below the decline in area sold, as it has for CRL.

Vanke prices are still up this year, ¥11,665/ sqm in April, up 4.3% yoy, but down 2.1% from March and the third straight monthly decline.

The article also quotes Shih Wing Ching, founder of Centaline, as saying the firm has more than 10,000 employees on the ground in China so their assessment can't be wrong. There is a clear oversupply in the second- and third-tier cities and the large developers are beating a strategic retreat to avoid having stranded capital, better to take some losses and get out quick. Current home buyer demand is not enough to soak up demand and investors are avoiding the market. He also agreed with Pan Shiyi that the greatest risk is for financial products such as trusts, WMPs and private equity.

Related from WSJ: China's Game of Real-Estate Chicken: Who Will Blink First: Buyers, Developers or the Government? Developers. They will blink first or they will be flattened by oncoming traffic.

support the domestic property market continues to boom in sales area and sales prices of two core indicators, the sales area has been reversed, and have fallen sharply, although the average selling price remained high, but the trend has now peaked and began turn down.

When to June, the Spring Festival, the traditional off-season turnover and other factors can not explain the downturn has been the face of the property market.

Whether or civil official statistics data giant housing prices are a reflection of reality: China has entered the real estate industry to rely solely on price-driven growth in the danger zone.

Data display, including China Vanke, Poly Real Estate, China Overseas Property, China Resources Land, including the giant housing prices before the sales area four months of this year have fallen sharply, in addition to Vanke, the majority of the former giant in April fell more than 20% of the sales area. After entering April, Vanke has started nationwide sales price.

Hong Kong property Godfather, Zhongyuan Group founder Shih Wing Ching, said in an interview, once exposed to the mainland property market problems, it is possible from one extreme to another.

"April has started down the volume, in May than in April, I believe it will fall more and we have clearly felt that the market is changing, almost quantitative change to qualitative change has been the" Shih Wing Ching said.

Sales comprehensive emergency 

Circumstances are changing.

As of May 25, the China Index Research Institute's 12 major cities monitored, only volume appeared in Wuhan rose about 5%, and the rest fell. Among them, the largest decline in Hangzhou, was 53.13%; Beijing, followed by a decline of 47.21%; Shenzhen decline ranked third, 36.3%.

Although the data does not mean all, but continuous data indicates that the trend has changed.

Data from all parties to see, the situation is the domestic real estate industry while selling prices, the other side of the sales slump. Immeasurable rely prices rise, many giant housing prices remained a relatively irrational exuberance.

May 18, the National Bureau of Statistics released data show that in April into the monitoring of the 70 cities, prices rose despite the narrowing, but representing a decrease of only one, 69 are still rising, where the deep north of Guangzhou and other cities are still double-digit gains year on year.

Among them, the highest increase was Shanghai, which rose to 13.6% in the first place, Beijing, Guangzhou, Shenzhen and then were up 11.2%.

But the reverse of the coin, but it is another cold reality. In the real estate industry sales volume and sales prices of two core indicators, prices sideways up sales area was sharply down.

Shanghai Statistics show that in the first quarter of this year, the Shanghai market turnover of new housing area of ​​1.8 million square meters, representing a decrease of 37%.

Beijing first quarter volume of 16,418 new residential units, down 41.3 percent, down 55.8 percent, the highest since 2005, the lowest quarterly volume of new homes.

Shenzhen Municipal Planning and Land Commission data show that in the first quarter of this year, Shenzhen, turnover fell more than four percent. April 2936 in Shenzhen's new residential transaction sets, up sharply decreased by 25.5%.

Housing prices are leading sales performance this year in April, also confirms the reality of this embarrassment.

Data show that from January to April this year, Vanke total sales area of ​​5.243 million square meters, the sales amount of 66.98 billion yuan, an increase of 8.7% and 19.6% compared to the same period in 2013. But in volume and price increase does not match the two data. In fact, Vanke sales area fell for two consecutive months, 2014 sales situation is not optimistic.

Compared to data adjusted for Vanke, some of the other giants even more ugly.

The same period, the cumulative sea real estate property sales contract of approximately HK $ 45.565 billion, down 12.4%; gross floor area of ​​2.648 million square meters, down 22.32%.

Poly Real Estate from January to April contracted area decreased by 22.17% to 2.84 million square meters; contract amount decreased by 9.45 percent to 36.398 billion yuan.

While in the second tier of 50 billion housing prices equally worrying situation.

Data show that the first April Lake real estate contract sales of 12.61 billion yuan, with a decrease of 5.9% compared to last year, the contract sales area of ​​1.146 million square meters, down 11%.

China Resources Land contract sales of approximately 13.67 billion yuan, down 40.95 percent, construction area of ​​1,297,400 square meters of sales, down 32.14%.

From the above data is not difficult to see that in the first four months of this year, including Poly Real Estate, China Overseas Property, Lake Property, China Resources Land and other leading housing prices have been marked decline in sales.

In other words, if the price is still not a significant increase over the same period, the total sales of housing prices will be very ugly.

Housing prices peaked giant growth

If the first two years of the volume and price to fly fairly basic support, and now China has entered the real estate industry to rely solely on price-driven growth in the danger zone.

In fact, even the first four months of sales area increased by 8.7%, sales amounted to 66.98 billion yuan Vanke, the growth it has become weak.

Because most people do not know is that in January 27.65 billion yuan Vanke's sales, mostly from 2013 retained.

SW study shows, because the Spring Festival, China Vanke push plate January is not high, but before the accumulated about 35 billion has been subscribed to be contracted resources, reflected in sales in the first quarter of this year.

Vanke secretaries are pro-Cheng Tan Huajie, Vanke's January sales majority from 2013 has been subscribed, but not yet completed the signing part.

If deducted Tan Huajie mouth "majority", Vanke actual sales this year will undoubtedly negative growth.

In fact, in recent years the rapid Vanke onrush, housing prices contributed.

Data show that in May 2012, Vanke national average price of 10,252 yuan sales / square meter; while in May 2013, the average selling price rose to 11,604 yuan / square meter, up 1,352 yuan per square meter.

According to the latest data show that in April 2014, Vanke sales price of 11,665 yuan / square meter, a decline of 2.1%, but also continuous in March decreased numbers. But the year, the average sales of Vanke's still up 4.31%.

In fact, many have entered the price of housing prices driven growth phase, the most obvious example is the Dragon Lake.

Data show that in 2013, Lake recorded contract sales reached 48.12 billion yuan, an increase of 20%, but during the period, a total construction area increased sales grew by only 2% to 4,261,200 square meters, selling price 11,293 yuan, an increase over last year 17.6%.

In Haitong International seems to improve LONGFOR price is mainly due to the nationwide housing prices and sales contribution from the western decline.

If the Chinese real estate industry in recent years of irrational exuberance, the rise in house prices is their main weapon.

Look back at the 2013 hurricane giants.

2013, before the financial record May sales price of 21,020 yuan / square meter, an increase reached 29.8%; Vanke before May sales price for 11,550 yuan / square meter, an increase of 10%; Hengda average price 6548 yuan / square meter, up 7.5 percent year on year; former Shimao May average selling price of 12,882 yuan / square meter, an increase of 10.7%.

That is why, in May 2013, the majority of enterprise performance benchmarking ideals, including China Overseas Property, China Resources Land, Poly Real Estate, such as housing prices have completed more than half of the annual sales target.

And now, with the slump in sales, housing prices alone has been unable to maintain its former prosperity.

Relative to sales targets set at the beginning, the first four months in recent years, most of the progress is quite slow sales of housing prices. In addition to the annual sales target of conservative Evergrande completed more than 30%, the former housing prices Shimao performance, financial innovation in China, R & F Properties, Golden Group and other targets in April of the year accounted for about two percent.

Deutsche Bank research report that Hopson, BCL, Golden Group, Powerlong, CCRE, offshore real estate, etc. 9 housing prices or unable to complete the sales target this year, in the coming months if the price or increase sales efforts , is likely to result in significant cash flow problems.

The most obvious example is that this year, the country's housing fund was exposed strand breaks case there are more than 10 cases, including Zhejiang, Ningbo, Nanjing, Wuxi, Hefei, Anhui, Hubei Xiangyang, Shaanxi Shenmu other places, such as Ningbo Fenghua Xing Yun home, Haining Nanjing Jiangning Ying Jia Lide estate and real estate, etc., mostly small and medium housing prices.

And did not fall down dilemma

Consequences of declining sales is rising inventories.

E-House Real Estate Institute of monitoring shows that the end of April, the total amount of 35 cities in new commodity housing stock is 249 million square meters, growth of 2.6 percent, an increase of 19.5%, the highest in nearly five years, a record high.

View CRIC Research Center believes that the current round of price shocks great catch of 2011 when the market price of a nationwide trend, six pack none appeared again on the product category, mainly just need the product, the size of the housing enterprises are involved .

First, the price is still a drop in 2008 brought the country Vanke.

May 24, located in Guangzhou Panyu Hungnam Avenue just need the market launch of 204 sets of houses Opal Vanke, the average selling price of about 15,000 to 16,800 yuan / square meter. And a month before China Vanke Opal average price of 21,092 yuan net signed / square meter, the price fell nearly 30 percent from the previous month.

Information obtained showed the Economic Observer reported, Vanke has a sale in a number of key cities such as Beijing, Guangzhou, Shenzhen, Hangzhou and so on. And the magnitude intense.

Vanke insiders Economic Observer newspaper said, Vanke internal long as the price is ready, Shenzhen Vanke company back in April on a small set the tone, ready to cut prices of dumped goods.

In the above executives view, once the various disguised concessions can not support such increases, developers will take price cuts, price cuts may be between 10-15%.

The problem is that not all developers have cut prices of both strength and confidence.

Overseas Property in the report shows that the net profit achieved in the sea of ​​about 18.3 billion yuan last year, the real estate industry for 12 consecutive years ranked first, its high profit margins have always been regarded as the industry benchmark.

But housing prices is the trend of decline in the profitability of the entire industry, in the sea last year, gross margin declined from the settlement in 2012 of 38% to 33%.

Vanke figures also reflect this trend. Vanke 2013 settlement gross margin was 23.69%, down 3.72 percentage points compared with 2012; 2013 net profit margin of 12.76% settlement, down 1.16 percentage points compared with 2012. This is the fourth year of the balance sheet profit Vanke declined.

But price is not necessarily useful.

A state-owned enterprise executives in the room when accepting an interview with the Economic Observer newspaper said that at present, most of the real estate that opened not open, open not move. Housing prices this year almost all of the opening rate fell to 4 percent or less, compared with about 7 percent last year, showing sales slowed.

As for how the future of real estate trends, hardly anyone can tell. Hong Kong property has a godfather Shih Wing Ching said the representative of a certain word.

In an interview, Shih Wing-ching said that we have tens of thousands of employees in the Mainland, like detectors placed a texture in the mainland property market, we feel it should not be wrong.

It seems that the Shih Wing Ching, second and third tier cities oversupply situation has clearly exposed. In addition to the money will just need to enter the market, the investors must be shunned. Just to be alone is impossible at present to digest such a huge supply.

Shih Wing Ching said levelheaded developers have realized that the crisis is approaching, has begun to deploy strategic retreat. They know that in the second-tier cities should be discounted clearance as soon as possible, even if some of the losses suffered, but also an early departure. Otherwise, the funds could quilt dead, after carrying this burden too long.

And Pan Shiyi, like Shih Wing Ching considered the weakest link, the biggest risk is the financial products. In Shih Wing Ching seems to have had a central policy to restrict excessive bank injected funds to the real estate industry, but the developers or the use of trusts, financial products, private equity funds in disguise sets out to put money in the bank, which is now part of the money is about to expire a. Old debt is the preferred method, but the problem is that if the house no longer marketable, falling house prices, they may be hard to smooth financing from the market, the old debt would go wrong.

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