Opened to the king the mystery behind the frequent - case-based study

 Opened to the king the mystery behind the frequent mm case-based study
Jie Chen Fudan University
Executive Director of Housing Policy Research Center
What are the reasons driving the courage to withstand the high cost of developers, regardless of market risk and policy variations and fight sites the root causes behind the phenomenon.
experienced hot in 2007 and 2008 winter, 2009, an unexpected moment of China's land market, rose to boiling point again, especially in the second half turnover of abnormal hot, the achievements one after another sites years have increased by 49%. which, Hangzhou land transfer up to 105.4 billion yuan, ranking first in the country to achieve 238% year on year rate of increase, followed by Shanghai to 104.3 billion yuan, an increase of 172%, also reached the third Beijing 92.8 billion yuan, an increase of 85%. the top 20 largest increase year on year in Ningbo, 617%, the amount of 48.8 billion, ranked sixth, or second place is Xiamen, is 475%, the amount of 303 billion, ranking 12th. estimate down, the country's land transfer about 2009 GDP of 4.4%.
addition, the author under the China Real Estate Information Group (CRIC) to calculate the statistical data, in 2009 before the domestic floor price of land transactions 20 barriers to entry have reached 20,963 yuan / square meter, the average price of up to 32,724 yuan / square meter, the highest of 4.6 yuan / square meter. Most of the floor price far exceeds that of the surrounding real estate prices, expensive than bread flour land auction frequently in various placards bid to seize .09 insight to grab the land premium in the top 20 turnover rate of the minimum are already 427%, the highest and achieved 767%. the other hand, the industry department, repeated demands to curb land store, its prevention and control enclosures hoard seems to have a fairly comprehensive policy instruments, but under the weight of such regulation, What are the reasons driving the courage to withstand the high cost of developers, regardless of changes in market risk and policy factors and fight ; their blind arrogance? a pure Fools game? or specificity analysis of the five angles, trying to explore the phenomenon of China to the king behind the root of the frequency.
A corporate self-interest motive
1, overly optimistic expectations in the first quarter
09 the property market began to pick up, the market is expected to boost the developers confidence turn for the better. Some real estate development company of the future property market is extremely optimistic that the land regardless of geometry, will always pay back the cost of a link, so they actively take to prepare, increase the size of land bank for distribution. However, the current hunger for local government land policy, forcing them to grab a large amount of money to bet on tomorrow.
alone Vanke, Poly, gold and the four real estate investment real estate in Shenzhen leading enterprises in 2009 and spent about 93 billion yuan to buy land. the most radical of which Poly Real Estate, in 2009, 8 months, looting, the total cost of 43.3 billion yuan, of which 9 months and 12 months, respectively, close to the percentage of funds to buy land billion. And the company's 2009 total contracted amount of 43.382 billion yuan, but also. Vanke is relatively stable throughout the year took only 227 billion yuan, Poly Real Estate is only 54%. In addition, the payment to the Group in 2009 in the land market spend 19 billion yuan, investment real estate to spend 7.8 billion. [1]
2, passing the signal
according to the signal mechanism, companies weigh the signal gain and signal through the cost, whether the high standard to make decisions. wear sites , with sites to attract media attention, with the title of the king immediately fame in the industry, the rapid establishment of banks, builders, designers and other cooperation partners, which will facilitate it in other cities to take, open to expanding the market situation in other provinces .
typical case: August 24, 2007, Nanjing Suning Real Estate Development Co., Ltd. to 4.404 billion yuan was competing Shanghai Nanjing Road Pedestrian Street, Huangpu District, Business Office 163 mm treasure neighborhood block, equivalent to the floor land 66,930 yuan / square meters (2.57 times the starting price), the mainland has become the unit to the king, this record has not broken. to the king through the creation of this record, the original unknown, the original base around the satellite only in the city of Nanjing to do some low-level look at the properties for sale real estate Suning child not only in the multitude of strong and even on the beach are renowned on the national real estate market. Although August 2008 Suning crumbling real estate prices in Shanghai in time, can not stand the pressure to return to the land, but for its own sake words, no doubt, made a huge ad. even more peculiar is, Suning to find real estate for an underground line of 10 mm rail transit construction schedule submitted to the Government can not open grounds (in fact in 2006 had 10 lines plan announced), I do not know what behind the operation, even last a full refund by the Government.
can be said for enterprise development, strategic considerations, coupled with land captured in the non-payment or payment in installments The loopholes in the system, some companies will use to seize the king at any cost and then wait for an opportunity based on market prices and then decide whether or not the strategy of development. even some simply do not seriously intend to develop, always ready to make out. Although this strategy to meet their own maximize the benefits, but the destruction of the market played a great disturbance.
second, with sites to the market at the same time promote its own strength, can more easily introduce strategic investors, successful IPO misappropriating public.
typical cases: before the listing of Country Garden and Hengda are wantonly reserve land, and to this its main selling point to sell to the capital markets.
the program in 2008, Hengda listed at the end of 2006 was less than the land bank at the end of the 6 million square meters .2007 a staggering 45.8 million square meters. In other words, In the year 2007, Hengda nearly 7-fold expansion of land bank. An example can explain to the frenzy of desire Hengda. Hengda August 3, 2007 after nearly 700 at auction, to 2.53 billion yuan, respectively, won in the price Yuzhong District and nine gold regions of two sloping land, won one fell swoop Chongqing and King companies listed on the win to the king, is equivalent to load equal to the company assets and stimulate the stock raising. In addition, the company can use the Once declared to be in the form of new shares or corporate bonds financing the land bank, are sought after suffering from capital markets and investors, raising a looted, the share price rising. Thus, in between the property market and the stock market, the existence of such a path Figure: house prices, increased earnings of listed companies are expected to drive the stock prices, corporate finance space greatly increased again after the high prices in land bank financing, to further push up earnings forecasts. listed in the property market, the stock market to achieve such a cycle of a double harvest.
According to the agency report, in 2009, Poly Real Estate, Lake real estate, R & F Properties, Forte Group, many large Chinese enterprises, housing prices are way through the issuance of corporate bonds to increase the amount of financing, real estate corporate annual total corporate bond issuance has totaled more than 200 billion; another offshore real estate, the first open shares, Greentown China, China Resources Land and other enterprises through the issuance, placement and other ways to achieve equity financing to refinance the capital market. In addition, in 2009 there were Housing prices in Hong Kong to 10 mainland IPO market successfully. [2]
typical case:
Country Garden was listed during the use of the listing of about 19 million square meters during the end of 2009 increased to 41.5 million square meters. Country Garden in 2009 high-interest bonds issued twice, the first issue due 2014 $ 300,000,000 senior notes, notes issued by the estimated income amounted to $ 294,700,000. After, Country Garden and then send 7,500 million U.S. dollars in global bonds due 2014, interest rate up to 11.75%. but still sought after by the market. price of 1.9 yuan from the beginning to the end of the year rose to 2.5 million. In the Country Garden and Agile and Guangzhou R & F Properties to 25.5 billion yuan joint bid for the Asian Games in Guangzhou city block, made of new debt financing is brewing.
that both China's capital market which non-rational, there are rooms unique real estate development in information asymmetry. outside investors often difficult to assess the true performance of a real estate company, the actual operating capacity and future development trend, the number only on the basis of its land bank. to some extent induced by listed real estate companies desperately take place. jargon saying, , executives get big bonuses. if they fail, there are also passed on to investors. no immediate loss of their own interests.
Second, inter-enterprise conspiracy
1, bidding the king waging marketing
More importantly, the significance of the phenomenon may lie in contrast market hot atmosphere, which Shill marketing. I will be bidding collusion between enterprises are two types of marketing:
First, the market level of long-term speculation. for the land market and housing market , the confidence in the decision to market trends, determine future of the industry. It is because of the real estate market to the national economy and the importance of living, has never been a lack of spotlight attention. Based on this, developers are tacitly use of local competition Wang subjects sizzling markets will induce consumers to purchase, the use of land prices in the conductivity effect of driving up prices, to seek their own industry as a whole to maximize profits and excess profits, and other developers can make their own market in a warm atmosphere profiteering.
Second, the enterprise level short-term speculation. refers to two or more enterprise based on a one-time secret agreement or long-term cooperative relationship, one of the sites through the identity of the other side near the price real estate generating sales immediately spillover benefits. The price linkage model can be between two or more related developers to start, possibly through a secret agreement or repeat the game process to achieve stable equilibrium, to help each other in the sale of real estate appreciation, expand profitable space.
2, twelve joint development
development of primary and secondary linkage between enterprises conspiracy way, developers can effectively share the two cash flow pressure, high motivation to take the business to become the king. in the main by the land price pure transfer payments, compensation for the development and construction, urban infrastructure costs of three parts. If a conspiracy between the developers and two developers, will produce a win-win results, to maintain stable relations of cooperation. For a developer and words, may not fund further development of the land for two, through the development of primary and secondary linkage, it can be divided in two much larger in the interests of development; on the two developers, a prime location if the bullish , but it is expected to bid fiercely or he did not win then the strong financial strength of the site, which can be developed using twelve linkage to require a developer to develop some of the terms tend to win their bid, or even demand the return of the land price in compensation for the development and construction. Thus, although the nominal land price when the auction is high, but the actual payment of a large, but less. Therefore, two developers more incentive to get high.
Third, bank-enterprise conspiracy
SOHO Pan Shiyi, chairman of China has publicly stated that China 1 / 3 of the developers never build a house just down the land, store is an important reason for soaring prices. But dare to unscrupulous developers hoarding land is an important reason is because there are bank credit and stock markets consolidated financial dependence on more than 80%. in the development of part of it, according to central bank regulations, land reserve loans taken by way of security should have the legal land use certificate, the highest rate of mortgage loans shall not exceed the assessed value of collateral, 70%, for a period not exceeding two years. This means that the higher the collateral value of land will receive more loans. commercial banks in the way of security for the developers to land bank loans, loan mortgage rate is generally not more than 50%, and are taking the total to total credit (bank credit based on direct loans to developers headquarters, branch offices do not accept the project land bank mortgage loans). But bank days the amount of construction area and land reserves, big developers, lending conditions have to discount a lot. In this way, the more the king at all costs become, the more likely a lot of credit from the bank, the more favorable in the latter part of the development, can grasp the initiative. of course, if at a certain market risk and cost of capital on the balance point. Even the king of funding individual projects yield little, but day by the king to obtain the amount of money, there are always opportunities for in-house cash flow, to maximize business efficiency.
days, but the amount of bank funds by developers at the same time, they would reap a huge profit. in the price rally, the mortgage is a very high-quality products, but also competitively very formidable indeed. In this way, many banks for their own interests, often with major developers, there is overt or covert strategic alliances, often took place before the developer has said good credit support, so developers take more emboldened to time. Bank of actual be sold to real estate developers, partners and even the angel of the king behind the scenes.
a lot of the media that the ] China Index Research Institute January 14, 2010 released a survey show that in 2009 construction workers and peasants in the four main commercial banks, state-owned banks provide credit to the real estate of more than 3300 billion yuan. According to the statistics agency , 2009, Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and other domestic banks to the real estate business throughout the year the total amount paid over 330 billion yuan of bank credit. including green space, Shimao, Greentown access to bank credit, respectively, 47.4 billion yuan, 150 billion and 10 billion yuan. [4]
typical case: Vanke August 18, 2009 announcement, recently signed with the China Construction Bank Corporation long-term strategic cooperative relations. Under the agreement, Vanke China Construction Bank Corporation will provide 50 billion yuan credit line. Construction Bank and China Vanke in real estate development loans, bank guarantees business, bill acceptance and financing bonds extensive cooperation in many areas. This is the Construction Bank following the 2007 Vanke 20 billion yuan credit line to give, after further increasing the credit strength of Vanke.
Fourth, enterprises and government collusion
1, the local government transfer of benefits
Since China adopted the central government and local government tax distribution, officials promoted the system as the core of the main achievements is the GDP to measure, and some local governments to pursue the maximization of short-term revenue, making the local government in particular the hot real estate enthusiasts . The current leasing system, the local government sold the land can get land for decades to rent, plus you can get from real estate taxes, building a lot of tax revenue, so, in reality, the Government has pushed up interest incentives and developers conspire land, especially through several sites of take place before the local officials and more likely to mark the ground and the intention of the developer sufficient financial strength to . or win a piece of land developers, unable to develop the Queen, you can find the local government about the conditions. These practices, in some provinces and cities in the unspoken rules is the industry. the government out of the change of land on favorable terms may include construction planning, by supporting a good move , adjust volume, increased height limit, reduction of the purchase back, delaying payment of land transfer, part of the tax return and so on. the interests of such transmission, the natural dilution of the take to the cost, the enterprise will certainly positive to take, even if this piece of land seemingly Enterprise and captured the core project is located in Beijing's Chaoyang geographical Guangqu the 15th, the high price of competing bids was 4.06 billion yuan this block. removing 15,000 square meters land for low-cost housing and a school and a sports park land, which floor of a block, the average price of about 16,200 yuan per square meter / square meter, a record price of land transactions Beijing was the most to the king and the national total. The total land area of 155,918 square meters land, of which construction area is 119,056 square meters, collect the urban public land area of 36,862 square meters, plan property for residential, sports and residential land for public buildings, the floor size of 280,118 square meters of building control, integrated volume rate of 2.25.
However, in December 2009 30 day, the official website of Beijing Planning Board issued a , A4m10 block building control height from 80 meters by 100 meters. Meanwhile, in the same area of land under the premise of the project with construction of the sports park position and shape have also been adjusted, will A4m7 sports park land and residential mixed public A4m8 adjust the location of construction sites.
industry estimates, even if the land can be sold Guangqumen 15, the total floor area does not change, the change point for the planned construction area per square meter on profit maximization, this plan if approved, will add in of more than 20 million square Xing profits.
2, breach of contract as long as the low cost and to pay a small deposit
developers will be able to get to the king, not the one to get after It paid the full premium payment. Although the country has repeated demands, the price must be strictly required to be paid within two years (December 2009 Year after 12 months to 50%), but in fact are often unreachable. if development is only in price during the loss of the first payment of interest. paid land transfer overdue, or there are other reasons had to retire to , at most only a loss of tens of millions of deposit and the first premium payment. phased development of facilities hire more developers. Many developers often can be found under the contract a , not to hurt the slightest to get out, such as Suning real estate such a typical case. Developers take to boost the regional high house prices, housing prices over the sharing of gains, but also the process without the need bear the adjustment costs incurred in the land market. Local Government condoning the king free exit, the attitude of breach of contract, prompting developers to be more fearless in the rush to war staged the auction site.
3, acquiescing to hoard
a large number of current revenues come from all over the land So, basically most of the local governments do not exclude high land prices, but does not prohibit the rush, the store, for two years without developing the basic provisions of the resumption of land are open eyes closed eyes. This gives developers business as long as the store to the ground, there are a lot of room.
because many developers believe that housing prices in China are on the rise long-term range, so even if land prices so high, as long as Ao Dezhu, to the first store with the Government reminders are not normally as long as a good relationship with the Government, even in the price are dragged not to have a big problem, a few years since that developers can always find the right time to start opening and sale, even hand down, but also huge profits.
five, the central enterprises and large state-owned enterprises operating soft constraints and credit advantages
and 07 years to get to the performance difference is that in 2009 more than half of high price and large-scale land plots are central enterprises State-owned enterprise or a background in the bag. market evaluation, the state-owned enterprises are often characterized by a very generous hand, determined to win once to participate in the auction can be said to take place regardless of the cost of the enclosure, so many private enterprises are also known as the big developers are afraid. If the information under the CRIC, in 2009 the top floor price of land transactions, nearly three-quarters of 20-word or local state-owned enterprises scored.
Case: November 20, 2009 in Beijing Tianzhu the 22nd Land and Resources Bureau of Land Consolidation Reserve Center auction, Lake, ocean, Poly, built, KWG, Rongqiao gathered biggest real estate site, etc., which also includes Sinolink, Tai Lung, First City, Le Meridien high, Dacheng, Ampang insurance Muller 12 developers involved in the auction. After going on for nearly a half hour after 190 rounds of bidding, under the Beijing Municipal People's Government of Shunyi District, Tai Lung Albert Real Estate Development Co., Ltd. 5.05 billion yuan in the price of land will be successful Tianzhu the 22nd in the bag. the land from the floor price of 8,336.98 yuan start / m raise to the last 29,859 yuan / square meter, the final transaction price of 1.41 billion yuan than the reserve price higher than the 3.64 billion yuan, up 258.2 percent premium, many developers have indicated the presence of bank lending channel patency, the parent company capitalized, low comprehensive cost of capital, also has local government support and other advantages. central state-owned enterprises in China, is enjoying the political status of many state-owned central enterprises the heads of the party than the head of local government posts to much higher, the local state-owned enterprises is a rush for the central level, could wish for, at least not afford to offend, and in the development of green areas is everywhere, all the way smooth.
central state-owned enterprises and the collusion between state-owned banks is the deepest and most impenetrable De In 2009 the banking system issued 9.5 trillion days as part of a specific amount of credit in the short-term financing to support the state-owned enterprises. However, with investment in environmental degradation, overcapacity in the real economy, the risk of increased stock market, and inflation expectations, These state-owned enterprises access to credit, the land can only be bought as a hedge fund.
Case: June 30, 2009 through 97 bid to buy the final sale only, Fang Xing of the block in addition to the parent company of the Group purchased additional shares of its parts, the first half of 2009 also received a total of 24.5 billion yuan of bank credit. This is a lot of money into the portrayal of the real estate industry.
On the other hand, the central enterprises to large state-owned enterprises won the Queen a few years even if very few people do not develop accountability, development manager for the failure of the punishment mechanism is almost non-existent, even though the SASAC to search, you can completely pushed to the market risks, most CEOs another place to do. but when the king makes the operating performance won substantial growth can justifiably be a huge bonus. This is only achievements, awards, restriction, who does not punish the good things worth it? Therefore, they do not fear the State control the property market a portfolio, just grab heavily increasing the value of the assets to achieve, to show their performance under any, to lay the foundation for future career.
current government to rectify the land market so-called state-owned enterprises for the central level, the more they play advantage, will stimulate and increase their trouble in the land market.
as May 2009, Beijing in accordance with the contract the two sides, R & F first pay 20% of land transfer, and the rest paid in 180 days; and June 30, 2009 in the Xing in the middle of the party won 4.06 billion yuan of the land, according to the contract, Sinochem Xing Fang paid within 3 working days all the land price. the gap between the financial strength is evident. VI Summary: This paper points out China sedan chair each child, by driving up land prices; three collusion between banks and enterprises. to have the financing advantage of the king, the banks volunteered to transport bombs to the king; Fourth, collusion between government and enterprises. The Government's mandate to sizzling real estate developers through the herd, maximize access to land transfer, give to the king after the compensation; five state-owned enterprises operating soft constraints and credit advantages. For more than a few possibilities, limits the disclosure of the material, some of it is difficult to entirely hypothetical to prove, in empirical test on the more difficult to quantify the specific reasons for the largest share of that. However, according to a variety of public materials and clues, I think the possibility of collusion between government and enterprises is very large, the proportion of high hazard is also the largest. About this article text and follow-up study of this issue, visit the Housing Policy Research Center, Fudan University Web site: www.chps.fudan.edu.cn