Real estate "inventory" is said to be slow to land. What is the crux of the problem?

Activating existing land stocks, acquiring completed commercial housing for affordable housing, is considered as one of the important measures of a package of policies to destock and stabilize the real estate market. How is the implementation of this highly anticipated policy combination? Is it progressing steadily or facing difficulties? Its actual progress is closely watched by the public. Shandong's Shouguang City Shanghai Chengtou Holding disclosed on December 23 that some of its land assets have been "acquired and stored," thereby successfully "activating" some of its existing land. At the same time, in recent days, companies like Zhang Jia Jie Tourism Group have also been actively promoting the activation of existing stock-related work. "Although some places have announced the acquisition and storage situation, overall, the acquisition of existing land and commercial housing faces many difficulties, and the related implementation work is not easy," a real estate industry analyst told reporters. Regarding the "acquisition and storage" work being promoted in various places, a senior management of a large state-owned real estate company stated at an industry exchange meeting held not long ago that repurchasing existing land is of great significance for accelerating the liquidity of funds for real estate companies. However, from the limited observations they have made so far, the repurchase work is progressing relatively slowly. "Because activating existing land and existing housing involves many areas, in practical operations, various regions often face complex issues. This may involve determining the acquisition price, obtaining funds, how to use the acquisition funds, and how to effectively utilize the land after activation," the above-mentioned real estate company's management said. "Although there are some obstacles in the process of acquiring and destocking, under the trend of continuously increasing the strength of the acquisitions and optimizing the detailed rules of the acquisitions, these issues will gradually be resolved. With the continuous increase in local motivation for acquisitions, the problem of existing housing inventory will be properly addressed to stabilize the real estate market," Wu Yinxiang, chief real estate analyst of Northeast Shanghai Research and Consulting Co., Ltd., pointed out Funding Shortages Await Solution In the process of real estate market regulation and resource optimization, various regions are actively exploring ways to activate existing land. On December 23, Shouguang City Investment Group disclosed that, through negotiations between its subsidiary Shouguang City Urban Construction Investment and Development Co., Ltd. and Shouguang City Land Reserve Center, the Land Reserve Center will acquire some of the land held by Shouguang City Urban Construction Investment Co., Ltd. It is understood that Shouguang City Investment will transfer 6 land assets to the Land Reserve Center, and the land certificate numbers involved include Lu (2024) Shouguang Real Estate Rights No. 0011751, No. 0004150, No. 0003240, No. 0030005, etc., with land use including urban residential land, industrial land, etc. The announcement shows that the transfer of the subject assets has a land acquisition amount of about 332 million yuan, while the purchase price is about 352 million yuan. "This land asset transfer is expected to generate a transaction profit of approximately 20.59 million yuan, accounting for 40.38% of the net profit of the consolidated financial statements of the company in the previous year," Shouguang City Investment said. Zhang Bo, the director of the 58 Anjuke Research Institute, pointed out that in order to optimize land resource allocation and improve land utilization efficiency, various policies have been introduced at the central level to promote orderly acquisition of existing land by local governments. In the actual operation process, local authorities usually prioritize the acquisition of land that companies are unable or unwilling to continue developing, as well as residential and commercial land already supplied but not yet under construction. Before Shouguang City Investment disclosed the information about the land repurchase, Zhang Jia Jie Tourism Group in Hunan Province had already launched a deployment to acquire existing idle land with special bonds. According to the WeChat public account "Zhang Jia Jie Tourism Group," Zhang Jia Jie Tourism Group will comprehensively survey the existing idle land assets to provide strong support for the preparation of the detailed control plan for the central urban area. While clearly defining goals, they will scientifically determine land prices, specify project application priorities, and strive to make full use of special bond funds for reclaiming and repurchasing existing idle land. Regarding the funding issue for repurchasing existing land, Zhang Bo told reporters that some cities may still face certain funding shortages. "As of now, local governments in various regions mainly use two methods to solve the source of funds for repurchasing land. One is for local governments to raise funds through issuing local government special bonds and other means, specifically for the acquisition of existing land. The other is to provide the purchased party with 'notes' during the acquisition process, to offset the subsequent land transfer fees in this land acquisition process, for example, Guangzhou issued 12 billion yuan in notes to YUEXIU PROPERTY in two installments this year," Zhang Bo said. Furthermore, Zhang Bo stated that in order to facilitate the rapid and effective use of funds and land, many cities have also embarked on various experiments. From the cases that have been announced, the primary ways in which the land is used after acquisition include construction of affordable housing, adjustment of plans and relisting, and combined with urban village transformation for other purposes. It is understood that these various methods are being advanced in various regions, with many cases focused on adjusting plans and relisting. For example, this year, Huaqiang City's 70,000 square meter TOD project land was acquired and stored, and after the land was adjusted according to regulations, it will be relisted for sale. Chongqing Plans to Invest 3.5 Billion to Acquire 13 Commercial Housing Projects While local governments are repurchasing existing land, they are also promoting the acquisition of existing commercial housing. According to People's Daily, Cheng Liang, deputy general manager of Chongqing Construction Engineering Group Investment Holdings Co., Ltd., recently stated that Jia Yu Company has signed contracts to acquire a total of 13 existing commercial housing projects for use in affordable housing projects in Chongqing, with 3 completed acquisitions and the remaining 10 steadily progressing, with an expected total investment of 3.5 billion yuan. "We have allocated 800 million yuan in funds, and the remaining 2.7 billion yuan will have to be financed," Cheng Liang said. In addition to Chongqing, Anhui, Guangxi, Jilin, and other places have also recently announced the latest progress in purchasing existing housing projects. According to the People's Bank of China's Anhui Provincial Branch on December 2, since May this year, the People's Bank of China has established a 300 billion yuan re-lending for affordable housing to support local state-owned enterprises in purchasing existing completed commercial housing for use in affordable housing.Since its establishment, the Anhui Branch of the People's Bank of China has actively promoted financial institutions to implement this policy.Currently, the Wanda Apartment Project in Shucheng County, Lu'an, and the Pushui Zhuangyuan Project in Mengcheng County, Bozhou, have obtained housing rental group purchase loans, with a total approved amount of 535 million yuan. The loans have been disbursed in an orderly manner according to the contract schedule, and will be followed by applications for affordable housing refinancing. The Wanda Apartment Project in Shucheng is jointly financed by the Bank of China Anhui Branch and the Agricultural Bank of China Anhui Branch with 105 million yuan, supporting a total of 685 small-sized commercial and residential apartments to be purchased for affordable rental housing. The Pushui Zhuangyuan Project in Mengcheng is financed by the Agricultural Development Bank of China's Anhui Branch with 430 million yuan, supporting a total of 865 residential units to be purchased for affordable rental housing. In Guangxi, according to information released by the Ministry of Housing and Urban-Rural Development on December 17, the Guangxi Zhuang Autonomous Region Housing and Urban-Rural Development Department has set up a special team to purchase existing commercial housing for affordable housing. By following a "weekly scheduling" approach, they are strengthening real-time tracking and scheduling of the purchase work. By the end of November, the region had completed the agreement to purchase 2876 sets of existing commercial housing for affordable housing, totaling 301,300 square meters. Next, Guangxi will accelerate the implementation of projects to ensure that the first batch of purchase plans are implemented by the end of the year. In addition, on December 19, the Jilin Provincial Housing and Urban-Rural Development Department introduced that in order to digest existing inventory and optimize new additions, Jilin Province aims to purchase no less than 1 million square meters of existing commercial housing area for affordable housing. Currently, they have purchased 397,000 square meters of existing commercial housing. Why is the implementation slow? Regarding the "purchase and storage" plans proposed by various regions, many analysts have pointed out that the progress has been slow. According to data from the China Index Institute, more than 50 cities have announced the purchase of existing housing for affordable housing this year. However, according to data released by the People's Bank of China, by the end of September, the balance of 300 billion yuan in refinancing loans for the purchase of existing commercial housing for affordable housing was 16.2 billion yuan, an increase of only 4.1 billion yuan from the end of June. The overall progress of the purchase and storage work in various regions has been slow. Regarding the slow progress of the purchase and storage work, an analyst from a real estate agency told reporters that there is a certain time interval from fundraising to completing the purchase and storage, whether it is repurchasing idle land or purchasing existing commercial housing. On the other hand, the use of funds requires paying a certain cost. While state-owned enterprises can obtain relatively sufficient sources of funds, how to ensure that the funds are effectively turned over within a certain period and achieve the expected return is also a consideration. In addition, Zhang Bo pointed out that since "purchasing and storage" is not purely public welfare work, local governments need to at least achieve a balance between project revenues and expenditures. Therefore, when repurchasing idle land or purchasing commercial housing, local governments often examine whether the targets being acquired are "high-quality" enough. Behind this consideration is the need for local authorities to ensure that the investment is sufficiently safe and to assess whether the project meets the expected return requirements, as well as evaluate how the funds invested in the project will turnover within a certain period of time. For example, when purchasing commercial housing, local governments often have strict requirements for factors such as the geographic location, layout, area, and price of the properties, but the number of projects that meet the purchase conditions is relatively limited. Moreover, differences between regions may also affect the implementation of the "purchase and storage" work. An analyst from SouFun Property pointed out that third- and fourth-tier cities differ significantly from major cities in terms of actual purchasing power, local government fiscal strength, and sensitivity to asset price changes. Therefore, in the process of using "purchasing and storage" to reduce inventory, there may be more problems to solve and higher difficulties to overcome, especially in lower-tier cities. As for the purchase of existing housing, the issues faced in practice include whether the financial strength of local governments or state-owned platform companies can support the purchasing tasks, and in cases of funding gaps, whether cities with low economic status can obtain sufficient financial or special loans support. "The biggest challenge is how to make an assessment of the potential demand for purchasing and storing work and affordable housing at the operational level. This work is very important, and if the assessment is wrong, it may result in resource loss and waste," the SouFun Property analyst said. Chen Wenjing, director of policy research at the China Index Institute, also believes that the purchase of existing commercial housing still faces difficulties such as difficulty in price matching and supply-demand imbalance. These obstacles in the "purchase and storage" need to be addressed with more supporting policies. "The special loans for urban village transformation and local special bonds can both serve as incremental funds for purchasing existing commercial housing. As more incremental funds are put in place, it will help accelerate the pace of local governments' purchase of existing commercial housing," Chen Wenjing said. This article is reprinted from Caixin, edited by GMTEight: Chen Wenfang.