At the end of July, the Politburo meeting announced that the trend of real estate investment growth will become more and more obvious after insisting on “staying and not speculating”
The author predicts that in the second half of the year, we should not look at the trend of real estate investment with linear extrapolation. Due to the shrinking of the land and the cliff, the investment also has the risk of falling down.
At the macro level, the big policy of “staying and not speculating” means that any policy involving the real estate sector will be strict in the future. Since mid-April, the Banking Insurance Regulatory Commission has already produced a set of severe combination punches. First, it issued the “No. 23 Document” for financial institutions to support the financing of real estate enterprises. Later, the window guided and controlled the scale of the real estate trust business, and recently suppressed the real estate channel business. During this period, the market even reported that the regulation prohibited some housing companies from financing through the capital market. In short, the regulation of real estate companies has now formed a comprehensive blockade.
Even under the policy demand of lowering the financing cost of the real economy, the regulation used the means of reforming LPR (the loan market quotation rate) to conduct a small “rate reduction”, and also treated the personal housing loans differently, so as not to let the mortgage interest rate fall. As an important means for residents to increase leverage, the stagnation of the downward trend of mortgage interest rates will directly bring a cost impact to residents’ demand for home purchases. Historically, the incremental changes in residents’ medium- and long-term loans have indeed converge with the interest rate trends of individual housing mortgage loans. If the supervision continues to guide the bank to increase the proportion of mortgage loans, the willingness of residents to purchase houses will be further weakened, and the prosperity of the real estate market will deteriorate again.
At the micro level, we can find many signals that indicate that real estate investment is difficult to support in the second half of the year. As is typical, the shed reforms that support the high-profile of the third- and fourth-tier cities have started at 2.89 million units this year, a significant reduction from the actual start-up of more than 6 million units last year. With 2.89 million sets, more than 2 million sets have been completed in the first seven months, and the amount reserved for the second half of the year is not much.
Developers slow down the pace of land acquisition
In the case that the trend is basically clear and the expectations are relatively consistent, the market still has confusion about the slowdown in the growth rate of real estate investment. If the downside is small and the speed is slow, for example, only down to 9.8% by the end of 2019, then in the second half of the year, under the policy of “expanding infrastructure + stable manufacturing investment + promoting domestic demand”, the endogenous growth momentum of the economy It may not be too bad, there is a risk of exceeding the market expectations and the revaluation of various asset prices.
Therefore, not only the trend, but also the rhythm and speed of the downturn in real estate investment are equally important, and to do this, we need to quantitatively measure real estate investment. At present, the market has two ideas for the quantitative measurement of real estate investment growth rate:
One is to regard real estate investment as a whole, look for macro variables that are ahead of real estate investment, and conduct regression analysis. However, the actual operation of this method is more difficult because of the lack of forward-looking indicators for real estate investment trends in macro data. Once used as a front-end variable in the real estate cycle, real estate sales are a good indicator. However, after 2015, due to the change of inventory in the third- and fourth-tier cities, the inventory of housing enterprises declined, and the transmission of sales to investment was blocked. In the low-inventory environment, even if the sales growth rate declines, there will be land acquisition. Replenishing the power of inventory, so that real estate investment reverse sales trends.
The other is to split the real estate investment into two categories: Jian’an expenditure and other expenses, and predict the scale of Jian’an expenditure and other expenses separately, and then calculate the total amount. Of the other expenses, 87% are land acquisition fees. The trend of growth rate is basically the same as the cumulative growth rate of land acquisition fees. Therefore, if you can find the indicators that are ahead of the land acquisition fee, you can use regression analysis to obtain Year-on-year growth and absolute size of other expense items.
Through the research on reflecting the land acquisition index of the real estate enterprises, the author found that the land transaction price has a significant leading relationship with the land acquisition fee and other expenses, which is about 10 to 11 months ahead. This kind of leading lag relationship exists because: 1. The land transaction price and the land acquisition fee are basically the same in the statistical caliber. The mapping is the land acquisition behavior of the housing enterprises in the land market, which ensures that the two have strong correlation. 2. The method of calculating the land is different. The land transaction price is the amount of the land transfer contract, which is included in the calculation. The land acquisition fee is recorded in installments, which will reflect the previous land acquisition. This ensures that the land transaction price is purchased compared to the land purchase. The fee is more forward-looking.
From the trend point of view, since 2019, the year-on-year growth rate of land transaction price has experienced a cliff-like decline. As of July, the cumulative year-on-year growth rate was negative 27%, which was 45 percentage points lower than the 18% growth rate at the end of 2018. This is mainly due to the fascination of the sheds in the third- and fourth-tier cities and the tightening of financing, and the contraction of housing companies to take advantage of the land. According to this trend, the growth rate of land acquisition fees and other expenses in the second half of the year may also be a cliff-like decline, driving the growth rate of real estate investment to exceed the expected downward trend, and considering that land acquisition is the front end of the new construction, the reduction in land acquisition is available. The decline in the growth rate of land reserves will further drag down the new construction of real estate.
Jian’an expenditure is difficult to rebound in the short term
For the forecast of Jian’an expenditure, the traditional analysis is mainly divided into two factions. One fact is to dismantle Jian’an expenditure into “construction area* unit construction cost” and comprehensively calculate it by estimating construction area and unit construction cost. Most of the construction area estimates will be indirectly derived by estimating the new construction area, because the new construction is the main component of the construction area, and the two trends have a strong correlation in the past. However, in the past two years, housing enterprises have mostly used fast turnover as their main business strategy. After the land acquisition, the new construction was generally accelerated. When the pre-sale conditions were met, the construction was suspended and the funds were invested in the new land reserve project, resulting in new construction. The area is high, but the construction area is at the bottom. The difference between the two is widened and the trend correlation is greatly reduced. Therefore, this prediction method is not applicable at this stage.
The other party started directly from the new start, using the correlation between the new construction and construction and construction expenditures, and using regression analysis to obtain the estimated value. This method is also faced with the constraints of new construction and construction differentiation, and the accuracy has been greatly reduced and is not recommended.
The author believes that relatively more reference value is based on the growth rate of real estate development funding sources to make a qualitative outlook. From the data point of view, this indicator is ahead of the year-on-year growth rate of Jian’an expenditure, but the lead time is uncertain, there is no obvious law, ranging from two months to six months. Therefore, if modeling regression, there will be certain obstacles, the goodness of fit is not high (about 55%), and the accuracy is low. However, through the leading lag relationship between the two, it can be confirmed that the Jianan expenditure in the second half of the year lacks a substantial rebound. Because it has been emphasized in the previous article, the current regulatory layer has completely blocked the financing of the real estate industry, and the growth rate of real estate development funds has downward pressure.
Combining other expenses and Jian’an expenditures, although it is impossible to get specific values, we can do a scenario analysis to help us judge. The existing conditions are known to be: 1. Other expenses, the annual growth rate in 2019 is expected to be between 5% and 12%, and the corresponding scale is between 4.4823 trillion and 4.7704 trillion yuan (RMB, the same below); Jian’an expenditure, the cumulative year-on-year growth rate of 6% in July 2019, the absolute scale of 2018 million in the whole year of 2018; assuming that by the end of 2019, the growth rate of Jian’an expenditure items may appear 4%, 5%, 6%, 7%, In 8% and 9% of the six cases, other expenses were also discussed in different situations, which were divided into three categories: pessimistic, benchmark and optimistic, corresponding to 5%, 8% and 12% respectively. Considering multiple factors, the growth rate of real estate investment in 2019 will fall within a wide range of 4.4% to 10.1%.
Further screening, the author believes that the probability of Jian’an expenditure growth rate falling between 5% and 7% is likely. Because of the downward trend of the new construction trend, the rebound in the growth rate of Jian’an expenditure mainly relies on the stock project to speed up the construction of the housing pressure. Such a large construction stock plate has better stability than the other costs of taking the land, and it is difficult to make a big change in the short term. Moreover, considering that the completion is the consumption of the construction project, only the obvious rebound of the growth rate of the completion will be seen, and the support of the construction of the construction will be shaken. At present, there has not been a significant improvement in the growth rate of completion, which indicates that the existing stock construction drive for Jian’an expenditure is still sustainable in the short term, and can hedge the negative impact of financing tightening to a certain extent. Further, if other expenses growth rate remains neutral (8%), then by the end of 2019, real estate investment growth may be between 6.1% and 7.4%.