Coincidentally. Recently, Chengdu has also reduced the supervision ratio of pre-sale funds: if the enterprise's credit rating is A or above, the supervision amount can be reduced by bank guarantee; Three quarters of the main structure of the project is completed and the main structure is capped, and the upper limit of the pre-sale fund withdrawal ratio within the supervision quota is increased by 5% respectively; After the project is completed, the withdrawal ratio can reach 95%.
Table: Supervision and adjustment of pre-sale funds in Chengdu and Guangzhou
Recently, more than 40 cities across the country have strengthened the supervision of pre-sale funds to prevent developers from misappropriating funds. Why do hot cities like Guangzhou and Chengdu relax against the trend? What I want to say is that in order to avoid the delay in delivery of large-scale new houses, the risk of faulty goods, unfinished business and the rights protection of small owners, it is necessary to strictly supervise the pre-sale funds. The problem is that once it is strict, the developer's capital chain will be extremely tight.
One is "stability risk" and the other is "financial risk"; One is to ensure people's livelihood and security, and the other is to ensure growth. Stability is a territorial responsibility, "one size fits all", which makes no sense. Financial risk is the bottom line and must be firmly held. Either one is important, and no one can relax. The current situation is to strictly supervise the pre-sale funds to ensure stability, but problems may arise.
The trigger point is the tight capital chain, to a certain extent, developers do not take land, followed by unstable investment. This is the most concerned issue in this place. Therefore, it is necessary to strengthen supervision and create room for manoeuvre. This is difficult, even the opposite operation. The problem behind it is that after the industry enters a new era, the unique financing mode of China development enterprises is facing some subversion and destruction.
In the past, it was common for developers to get advance payment. For example, issuing false invoices and falsely reporting the progress of the project. , pre-sale funds are withdrawn in advance; For example, through departmental public relations, the city's "packaging" supervision, letter of guarantee replacement and other ways to revitalize. Getting pre-sale funds is often successful, because it is beneficial for banks and construction units to reserve funds except housing construction departments.
Why should developers take the advance payment?
Because developers want "small profits but quick turnover". That is, the cycle of "taking land-construction-pre-sale-taking land". After the pre-sale of the new house, a lot of repayment funds were not used to settle the project payment, so as to speed up the construction until the completion of delivery. On the contrary, many of them are used to buy land and then enter the next cycle, so that the scale can be enlarged. So, why "quick turnover"? There are several reasons:
First, developers buy land with little self-owned capital investment, and a large part of it is high-cost "pre-financing". Coupled with the high land price, in order to improve the rate of return on its own funds, it needs rapid turnover;
Second, developers all know that sturm und drang based on leverage is difficult to sustain. Such a feast is one footprint a day, and the dividend of this model can't be rushed up until it is finished;
Therefore, misappropriation of pre-sale funds is essentially a channel for developers to raise funds. Arrears of payment to suppliers, commercial bill financing, postponement of general contracting settlement and issuance of wealth management products are all financing channels. In other words, in addition to banks, trusts and private placements, there are also construction units, material suppliers, buyers, old owners, management and employees. All are financing developers.
Why are so many people willing to finance developers? Of course, the first is trust. Brand developers engage in "high turnover", which has been happening since 20 16. I remember that in 20 17, I went back to my hometown to sell my house to my parents, and the local people had a good impression on the house developed by the top developers. Because of the projects they develop, such as apartment design, garden landscape, big community and so on. It is rarely seen by local people. Moreover, compared with local small housing enterprises, brand housing enterprises have more standardized operations and better marketing.
Top-ranking developers have been stationed in second, third and fourth tier cities in a large area, but it has only a history of five years. Now as long as it is a third-and fourth-tier city, top-ranking developers will get together. Imagine, if there is no high turnover, how can so many developers suddenly emerge? Without high turnover, how can the sales of commercial housing triple at 10?
Another reason why all parties are willing to finance developers is the expectation of rising house prices, which everyone can share in this process.
In fact, house prices have risen on a large scale nationwide, starting from 20 15. I talked about "rising house prices" before, mainly confined to first-and second-tier cities. In 20 15, large-scale shed reform and "destocking" led to a sharp rise in house prices nationwide. Therefore, trusting top brands, coupled with the expectation of rising house prices, everyone is willing to buy faster houses and are willing to finance developers in disguise.
Moreover, not only property buyers, but also banks, construction units, supervision units and material suppliers are willing to finance developers. Because these subjects can benefit from the expansion of the business scale of developers. This has also promoted the proportion of auction in new house sales from 39% in 20 15 to 53% at present. It is also fun to misappropriate pre-sale funds to expand business scale.
For many construction units, the largest settlement will generally be obtained at the end of the year. In 20 18, the author attended the developer's year-end meeting, and a general contractor got a settlement of several hundred million yuan, which was very happy. After such a long delay, he doesn't seem to care much about reconciliation. After communication, the construction unit generally reflected that how to do big business without default is an unspoken rule of the industry, and everyone does so.
Obviously, this model is based on the continuous innovation of housing prices and the continuous improvement of scale. Since 2020, with the establishment of a long-term mechanism for the whole chain of financing terminals, such as "three red lines" for developers' financing, "developers must have their own funds" for land acquisition, "loan concentration" for bank loans, and "land price-house price" linkage for local land transfer.
Also, it is to completely control and block the financing of developers on and off the balance sheet. First, the scale in the table is limited. Even if the developers of the "three red lines" are all green files, the growth rate of interest-bearing liabilities cannot exceed 15%. Second, the off-balance-sheet trust is "two pressures and one drop" (both channels and financing business will drop), and the "new asset management regulations" start the penetrating supervision of funds. In this way, the main force as a lever is limited.
In fact, the main funds are limited, and other follow-up funds such as Qian Rong began to wait and see. In this way, the fierce enterprises in sturm und drang's early stage had the problem of debt default. In our past tradition, we paid attention to "big", and many industries ranked "big four", "big eight" and "big ten". Moreover, whatever is big is considered to be stable and good. But there is something wrong with the big one.
According to the logic just now, it is actually very easy to understand. The bigger the enterprise, the fiercest it may be in the early sturm und drang. Once the capital supervision environment changes, such as tightening financing in an all-round way, large enterprises can't stand it at first, especially in recent years, when the scale keeps going up and the sales scale has doubled in just a few years, which is often the most "leverage".
Now the information is very transparent, and through many cases of breach of contract, people's impression of big companies may not be as trustworthy as before. Confidence drops, which is the most deadly. At the same time, the concept of "housing without speculation" gradually infiltrated into the heart and spleen, and the market found that house prices might really fall. Besides, now that supply and demand are balanced, there are more houses, and the mood of buying a house is not as hot as usual.
As a result, both external funds and internal funds (sales receipts) are squeezed. At present, sales rebate and foreign investment account for 53% and 47% of the funds put in place by real estate development enterprises respectively. Since the second half of the year, the above two cash flows began to decline rapidly, and both of them deteriorated at the same time, which is rare in history, leading to many debt default/extension events in the industry capital chain risk.
This tight capital chain is transmitted, and as a result, developers have to discount sales on a large scale and misappropriate pre-sale funds. Even if it is time for completion and delivery, it will be forced to delay delivery and even risk unfinished business. For the housing and construction sector, it is necessary to strengthen the supervision of pre-sale funds, ensure earmarking, and even take over the supervision account of pre-sale funds and freeze the pre-sale funds.
It is understandable to strengthen the supervision of pre-sale funds, as it should be. The problem is that doing so will completely change the logic of the past real estate market. Under the previous model, there was a huge "scissors difference" in the growth rate of new construction and completion. The average annual growth rate of new construction is nearly 10 percentage point higher than that of completion, especially 20 17-20 19, which is the result of developers' rapid turnover and leverage.
Multi-channel financing, including pre-sale funds, is the developer's dependence on rapid turnover and leverage. In recent years, the property market has held high, and the scale of land transfer, construction and sales has been rising. Today, we have to face up to the grim situation we are facing: the unprecedented peak of completion has arrived, and only by continuing the original "leverage" model can we release this flood peak and continue to hold high and fight high.
However, the logic of the industry has completely changed. Farewell to real estate dependence, financial institutions have taken unprecedented precautions against risks, and formal financing channels such as development loans and credit bonds have been strictly controlled. Without this man, "Qianrong" will naturally turn off. Neither the construction unit nor the supplier is willing to push forward any more. On the whole, these will lead to a rapid increase in the proportion of pre-sale receipts in the source of funds, but the sales side is no longer hot. Even if the sales volume can be maintained, it can't be taken away at will as in the past, but it should be strictly supervised to ensure delivery.
Generally speaking, the original circulation chain is becoming more and more unstable. This is why the Baojiao Building and people's livelihood have reached an unprecedented height!
Therefore, all localities began to strengthen the supervision of pre-sale funds to prevent the emergence of uncompleted residential flats. However, misfortune comes from the mouth and happiness comes from the mouth, which in turn will worsen the developer's capital chain. As a result, Chengdu and Guangzhou began to relax the supervision of pre-sale funds, which is nothing more than making the cutting edge more stable, because the other end of the developer's capital chain is land transfer, commercial housing sales and real estate investment.
Recently, the financing side has increased its support for housing enterprises, but the focus is on the mortgage side, stabilizing housing enterprise credit bonds, M&A loans, etc., and the support for private housing enterprises is not optimistic. Even if the sales of new houses increase, they will all be converted into pre-sale funds under strict supervision. After the development loan is issued, it shall be earmarked for special purposes and the project shall be closed. Don't expect short-term real estate assistance, which will only strengthen the past rapid turnover model.
Recently, many people are talking about "pre-sale to cash sale" as the ultimate solution to the problem. However, in the case of high land price and financing control, huge funds were invested in land acquisition and financing in the early stage. If existing homes are still required to be sold, I believe that few developers can play around. I think as long as the pre-sale of the whole chain is well supervised and truly "earmarked", it will be enough.
Compared with developed countries, from the centralized management of the Ministry of Housing and Urban-Rural Development to the local industry authorities at all levels, China has strict system regulations on the pre-sale of commercial housing:
First, there are "three conditions" for pre-sale approval, that is, paying the land transfer fee and obtaining the planning permit, and the investment accounts for 25% of the total investment;
Second, there is a transparent process of "acceptance-review-permission-publicity" in pre-sale;
Third, there is a pre-sale fund supervision system everywhere, that is, the down payment and mortgage loan are paid in strict accordance with the project progress.
Fourth, China still has strict procedures for completion, delivery and acceptance. From the regulatory point of view, the pre-sale threshold in China is higher than that in Britain, America and Japan.
Therefore, the root cause is not the pre-sale itself, but the supervision and implementation.
The real problem is that the pre-sales management system of the whole chain mentioned above has not been effectively implemented. For example, for the project payment plan, the fund use node can be set according to several links such as "underground structure completion, main structure completion, completion acceptance filing, and first registration completion". Withdrawal can only be made at the node, which not only eases the capital chain, but also ensures earmarking.
Instead of pre-sale, developers will build the house and then sell it, and there will be no possibility of unfinished business. It seems that the problem has been solved and you can rest easy, but it actually covers up the problems in the whole chain management of pre-sale, which is not in line with the real estate development model with large initial investment and slow capital turnover. Imagine that it is necessary to maintain high land prices, maintain the scale of land sales, and maintain the scale of development investment, but it is not allowed for developers to raise too much money to maintain the safety of the capital chain, and it is also required to sell existing houses. How is that possible?