2014-06-18

June Land Sales Plunge

Even first tier cities are seeing land sales collapse. According to Centaline, through June 16, the four first-tier cities had sold only 8 parcels of land for ¥1.8 billion. The firm forecasts land sales will be below ¥20 billion for the month, the lowest figure in the past several years. Last year, the four cities sold ¥35.7 billion worth of land.

Beijing sold 53 parcels this year. 21 were listed in December 2013, 6 in January and 26 in February. There have been no listings until very recently, see Bejing to Have First Residential Land Auction in 100 Days, even though on May 30 the city announced plans to sell 80 parcels.

The big concern is over debt levels in some cities that rely on land sales. Municipal bonds could help, but they still haven't hit the market. This article doesn't touch on it, but local government spending will come under pressure as well, even ignoring the debt risk. Without land sale finance, cities will need to find other funding sources to fuel development projects.

First-tier Land Sales
Left to right: Date, parcels, avg. transaction price per sqm, avg price per sqm for planned building, avg premium, total sales in 万 (10,000元).

拎拎地方政府“钱袋子”:卖地不易发债且珍惜
Moment, due to the downturn in the property market, and more land market zero turnover, found it difficult to be affected before the first-tier cities land market was cooling: June before the half, north of Guangzhou-Shenzhen-four first-tier cities land turnover was only 1.818 billion yuan. Land situation in other parts of the country not much better. The local government debt is highly dependent on the land premium , land revenue decline, so that the local debt pressures.

In fiscal unsustainable land, while 10 pilot provinces and local government debt spontaneous work is also in full swing. Some analysts believe that local governments frequently start local debt stems from the dual pressures of fiscal and debt under the current economic situation.

June 2 billion yuan less than half the former first-tier cities land transaction cooling

Land north of Guangzhou-Shenzhen market is very light.

Centaline research statistics: As of June 16, June frontline land market is now cooling phenomenon. The total turnover of land four first-tier cities as 8, for a total turnover of land is only 1.818 billion yuan, said Zhang Dawei, director of the Central Plains real estate research, from the sale of land currently watching, turnover is expected to land on June 4 will be lower than the first-tier cities 20 billion yuan, will create the lowest point in recent years.

In June last year, four first-tier cities total land premium of up to 35.7 billion yuan. According to the China Real Estate Information Corporation (CRIC) statistics show that in May, Beijing, Shanghai, Shenzhen, Tianjin and other 10 cities in the land premium income of the typical 57.8 billion yuan, a decline of 20.3%, down 24.6%, 20 slightly wounded fall into negative growth range.

Cool significantly tier cities

From the construction area of ​​land transactions trend, 10 cities have a typical year for three consecutive months of negative growth, which, in Beijing, Shanghai, Guangzhou, Shenzhen and other cities of land transactions totaling 3,886,000 square meters building area, down 35.6 percent year on year fell 41.6 percent, the highest in nearly two-year low.

Dawei told the "Daily Economic News" reporter, after nearly six months of sustained cold room geothermal land market began to cool, found it difficult to be affected before the first-tier cities are also significant cooling.

Housing prices in the land market is prudent to take to freeze the main reason. Centaline Research Department statistics show that sales of the top 20 before the Chinese benchmark of housing prices, the number of the last few months to get to the monthly decline, the first half of June to get to total only 5.485 billion, of which only individual enterprises have to start.

According to statistics, these companies take years to total only 150.2 billion yuan, is expected in the first half to get to the total lack of 160 billion yuan. In the first half of 2013, to take the total to 20 ward rate of up to 197.7 billion yuan.

Housing prices in Beijing, a well-known insider told the "Daily Economic News" reporter, to get to the main business and market prospects consider their own funds, most of the money bet in the current business in the sale of the project under construction, is expected reimbursement period is longer, the current Beijing, Tianjin and Beijing market integration and also by the impact from the housing, is bound to take place very cautious.

The source also said the same time, to get to, the companies will give priority to good location, to ensure the sales cycle, and lots of land in general, unless the price is especially attractive, otherwise they would not rush the auction, while the four-tier cities is basically do not take into account the scope of it.

Or to the rhythm for about

Tier cities land market starting to turn cold and the local government for the land associated rhythm. Beijing's 53 land transactions this year, there are 21 listed in December last year, six in January this year, hang out, and the remaining 26 in February this year to hang out.

Since March this year, the Beijing land market has no business land transfer, the duration of the past three months, the situation in the calendar year Beijing land market, very rare. Beijing housing prices Assessment Center believes that on the one hand, the Beijing property market has emerged since the early signs of cooling, the developers are also expected to show significant differentiation, or difficult at this stage to push a high premium on land department intends to push to control the rhythm of the follow-up to ensure that the land transfer income.

On the other hand, in the first four months, the Beijing land market overall supply and turnover have increased significantly compared to previous years, even if the subsequent push to slow down the rhythm, the annual land supply plan will not be great.

Shanghai E-House Real Estate Institute researcher Yan Yuejin told the "Daily Economic News" reporter, Beijing land market rapid cooling, is suspended for the land the government level, this stagnation will soon recover, will continue to show steady after launch with a self-occupied type of commercial residential plots in order to complete the full year for the program.

May 30, the Beijing Municipal Land Bureau announced in 2014 the first batch of goods to be supplied to residential and commercial use. Intended to supply a total of 80 plots of land area of ​​about 1,046 hectares.

In the announcement of the first day of the proposed supply plan, Beijing Land Bureau, said the city government will take effective measures with the relevant departments and county government, really good job announcement plots of land supply work. At the same time, accelerate land development, to ensure timely supply to form an effective safeguard legitimate demand for land land market, land market to keep running smoothly.

18.3 billion local debt issuance will tender "hot" faces three mismatches

Yesterday (June 17), the integrity of the international joint meeting with Moody's credit risk in Beijing, Moody's said that the Chinese government has recently developed initiatives to improve the local bond market has a positive impact on credit, the local government can strengthen its investment and borrowing bears responsibility activities.

The 10 pilot provinces and local government debt spontaneous work is also in full swing: Guangdong, Shandong has completed the tendering of two rating agencies, and conduct bond credit rating, the former faster pace, where the formation of the underwriting syndicate work has ended. Ningxia, Jiangsu, Jiangxi, three were hanging out of the formation of local debt syndicate notice.

However, senior analyst in the integrity of government and the public financing of international rating Ministry Yan Wentao to the "Daily Economic News" and other media said that the current Chinese local government debt is still facing the benefits and risks mismatch, maturity mismatch and debt structure mismatch III large mismatch risk.

Debt structure mismatch

When the pilot areas also spontaneously started working bonds issued by the Ministry of Finance of the first batch of local government bonds also launched a tender. June 13, Gansu, Xinjiang, Fujian, Guangxi, Sichuan, the first phase of the five provinces where the issue of debt this year, a total of 51.6 billion yuan, 18.3 billion yuan of local government debt Phase II will also be bidding on June 20.

Some analysts believe that local governments frequently start local debt stems from the dual pressures of fiscal and debt under the current economic situation. Earlier, Vice Finance Minister Wang Baoan in a speech that "this is the most important local government debt pressure year." Said Wang Baoan in local fiscal revenue growth slowed this year, spending rigid background Local debt pressure will further increase.

According to him, this year, local governments need to repay the maturity bears the responsibility to repay the debt accounted for 21.89% of the total balance of the debt, according to data released by the Audit Commission, as of the end of June 2013, local governments bear the responsibility to repay the debt of about 11 trillion million, in accordance with the ratio of debt service this year, local governments need to repay debt or to 2.4 trillion yuan.

Currently, local government debt is highly dependent on the land premium, but the recent downturn in the property market, the land premium was also affected, and more with zero land market transactions, the China Index Academy after a report showed that 300 cities nationwide in May land premiums fell by nearly forty percent.

Yan Wentao believes that debt repayment structure mismatch is one of the three major issues facing local government debt, "the local government to repay the debt on the land transfer revenues rely too large, the proportion of debt in some provinces promised land revenue to repay up to 50% repayment of land and real estate market trends affecting local government debt is large in the current real estate market boom downstream of the background, over a single centralized structure has increased the debt of local government debt exposure. "

In addition to the existence of the debt repayment structure mismatch, where there are benefits and risks bonds mismatch. Audit report shows that the provincial and county levels of government debt growth showed the overall low level of government debt growth rate was higher than the growth rate of the previous levels of government.

Yan Wentao said, the overall local government debt credit sink, on the risk of shifting trends become more apparent, the benefits and risks further separation. "Each subject is entitled to debt financing income, while its debt risk assumed and even high-level government has continued to migrate to the same level of government. Financing platform for credit to the government's own credit continue to move closer closer, gradually from the credit risk of individual credit risk to the region migration risk and macro systemic risk, credit risk, high-level government continues to accumulate to increase. "

Local debt risks facing the shift

While China's regulators repeatedly said that local government debt risk overall control, compared with China's total economic output, so the size of local government debt and not enough to cause particular concern, but the Audit Commission data show that local debt outstanding structural risk, some local government debt ratio over 100%.

Estimates by the Ministry of Finance, local governments the next three years (2015 - 2017) was 17.06% solvency proportion, 11.58% and 7.79%. In good faith have also been estimated that the data shows that most provinces shorter maturity structure of the debt, the next two years in some provinces due debts up to 60%.

"Use of funds, the municipal building and transportation is still a major capital investment in the provinces, the provinces municipal building both traffic and transportation plus the total proportion of all funds invested almost all more than 50%, half of the provinces, more than 60% a longer period of use of funds, debt maturity structure and the maturity mismatch between funds prominent contradictions. "

International believes in good faith, in the new local government debt financing trends, the future of local government debt risk will be the existing three mismatches evolved into the following three main risks: the risk of the real estate market adjustment will be the main risk; shift in risk and weakened national credit fallback squeezed at both ends of the place (local) risk amplification; slowdown in the local fiscal revenue, loans and financing of non-standard compression backdrop, financing risks resulting from the shift switch.


Published by the National People's Congress in March this year fiscal plan, in 2014 amounted to 400 billion yuan of local financial Deficit, size of local bonds is 400 billion, the current size of 109.2 billion yuan approved by the Ministry of Finance "spontaneous self also" local government debt and fiscal Acting bidding 51.6 billion yuan of local government debt, are in this list.

Conducive to the effective control of public offering size and risk of local debt and promote local government information disclosure, the governance of local debt "to open the main gate, blocking scary," an important initiative. Among them, some places will also be used to repay debt, "the old compensation."

The integrity of the international report, but also to resolve the debt rollover debt maturity mismatch conflicts, and to some extent the slow release of the local government debt risk. The agency determine the future of local government debt financing will be presented the following five trends: indirect financing to direct financing of transition; non-standard products to standardized product transition; national credit reveal all the credit to local government transition; implicit guarantee from the government bear the risk of transition to the issue of species ; debt financing platform in the future for a long period of time will continue to be the main way of financing local government

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