Middle Finger Research Institute: Loose Policy, Limited Financing, Advantageous Financing of Leading Real Estate Enterprises Highlighted.

On July 11, the China Real Estate Research Institute stated that in the first half of 2025, the good city and good house projects continued to have good sales, but the overall real estate market still faced certain pressures. Real estate enterprise financing support policies remained loose, with the scale of bond financing continuing to decline. Credit bonds and Asset-Backed Securities (ABS) became the absolute main force. Debt restructuring progress accelerated, debt reduction became an important choice for many real estate enterprises undergoing restructuring, and the alleviation of debt risks is expected to promote an improvement in the industry's financing environment. Looking ahead to the second half of the year, increased policy efforts are expected to drive expectations of recovery, but the real estate market's recovery still faces many challenges. Financing policies are expected to remain loose, but the scale of financing will still be affected by the market's recovery. Financing scale: decreased by 10.0% year-on-year, continuing to decline In the first half of 2025, the central and regulatory authorities continued to implement "stabilizing the property market" policies, focusing mainly on destocking, expanding demand, new models, and risk management. The acquisition of surplus idle land and unsold commercial housing was a focus. In terms of risk management, the real estate financing coordination mechanism continued to expand and improve, and efforts were made to ensure the completion and delivery of housing. According to data released by the China Banking and Insurance Regulatory Commission, as of early May, the "white list" loans approved by commercial banks amounted to 6.7 trillion yuan, supporting the construction and delivery of more than 16 million residential units. Continuing to ensure the completion and delivery of housing plays a positive role in restoring market sentiment and alleviating residents' concerns about buying homes. In the first half of 2025, the real estate industry achieved a total bond financing of 254.19 billion yuan, a year-on-year decrease of 10.0%. Since the second half of 2021, the real estate market has undergone continuous adjustments, with financing scale dropping significantly. In the first half of 2025, the downward trend continued, but the decrease was narrower compared to the previous year. Overseas debt issuance saw a slight recovery from a low base, but the overall scale remained small. Credit bonds became the absolute main force of financing, while ABS financing accounted for over one-third, showing a slight year-on-year increase in importance. Monthly bond financing totaled over 40 billion yuan in March and April, slightly declined in May, and picked up again in June. Data source: China Real Estate Information System (CREIS) In terms of the on-site funds of real estate development enterprises, the year-on-year decline in the decrease rate has significantly narrowed. Boosted by policies like the urban financing coordination mechanism "white list," domestic loans accounted for a higher proportion compared to the previous year. Deposits, advance receipts, and individual mortgage loans were the main sources of funds, with a slight decrease in their proportions compared to the previous year. The decline in sales still had a negative impact on the financial situation of real estate enterprises. From January to May 2025, the on-site funds of real estate development enterprises amounted to 4.0232 trillion yuan, a year-on-year decrease of 5.3%, with the narrowing of the decline rate by 11.7 percentage points compared to the previous year. Financing structure: Credit bonds are the main financing source, with ABS issuance ratio increasing Data source: China Real Estate Information System (CREIS) Credit bonds: Monthly issuance volume increased since May, with major central state-owned enterprises as the main issuers In the first half of 2025, the real estate industry's credit bond issuance volume was 152.66 billion yuan, a year-on-year decrease of 17.9%, accounting for 60.1% of the total financing scale, a 5.8 percentage point decrease compared to the same period last year. The average issuance period was 3.92 years, with the proportion of issuances with a period of over 3 years accounted for 58.4%, an increase of 12.8 percentage points from the previous year, indicating a significant extension of the period. In terms of issuance structure, credit bonds were mainly issued by central state-owned enterprises and local state-owned enterprises. In the first half of the year, the issuance ratio of credit bonds by central state-owned enterprises exceeded 90%, an increase of 1.6 percentage points compared to the same period last year. The issuance ratio by private enterprises and mixed-ownership enterprises decreased. In the first half of 2025, only four private enterprises and mixed-ownership enterprises issued bonds, a significant decrease from the previous year, all of which were large-scale enterprises that had not experienced defaults. Table: Issuance ratio of various types of enterprises' credit bonds in the first half of 2025 Data source: China Real Estate Information System (CREIS) Looking at the issuance ratio by top real estate companies, the top 10 companies accounted for 48.2% of the financing amount, an increase of 4.1 percentage points from the previous year, and credit bonds funding was more concentrated towards the top companies. Top companies were mainly central state-owned enterprises, with Poly Developments and Holdings Group, CHINA RES LAND issuing over one hundred billion yuan, and Beijing Capital Development, China Communications Construction Real Estate, and Vanke issuing over fifty billion yuan. The financial advantage of the top companies lies not only in their good credit quality but also in their resilient sales and high land acquisition efforts. In terms of credit quality, CHINA RES LAND adheres to increasing revenue while controlling expenses, maintaining a safe cash flow bottom line, with cash reserves reaching 133.21 billion yuan by the end of 2024, a year-on-year increase of 16.5%. The total interest-bearing debt ratio and net interest-bearing debt ratio remained at industry lows, with the overall weighted average financing cost hitting a new low. Standard & Poor's, Moody's, and Fitch maintained the company's industry-best credit ratings of BBB+, Baa1, and BBB+. In terms of sales, the sales of top companies continued to increase, indicating strong performance. In the first half of 2025, in the sales of the top 100 real estate companies, the top 10 companies accounted for 48.7% of sales, an increase of 0.5 percentage points from the previous year. The top 20 companies accounted for 64.8% of sales, an increase of 0.8 percentage points from the previous year. Poly Developments and Holdings Group, CHINA RES LAND had sales exceeding one trillion yuan, ranking among the top five companies in the industry, with two of the four companies with sales exceeding one trillion yuan in the first half of the year. In terms of land acquisition amount, the top companies continued to strengthen their land acquisition efforts, with a significant increase in the proportion. In the first half of 2025, among the top 100 land acquisition amounts, the top 10 companies accounted for 55.3%, and the top 20 companies accounted for 69.3%, representing a 13.9 percentage point increase and a 14.4 percentage point increase, respectively, compared to the end of the previous year. The proportion of land acquisition by top real estate companies has significantly increased, with companies like Poly Developments and Holdings Group, CHINA RES LAND, and Vanke acquiring land and selling homes exceeding 30%, indicating their strong intention and capability to invest. Credit bond issuance channels have been shrinking after a long period of market adjustment and defaults by companies, especially private real estate companies, whose financing willingness and capability have been constrained. In this transitioning period of market forces, credit bond issuance may continue to be subject to policy openness with limited scale. As emerging forces, small and medium-sized private real estate companies would need to gradually establish credit bond channels. At the same time, due to their generally small scale of development, these private enterprises may not have high demand for open market financing. Central state-owned enterprises, as the market's main force, have relatively smooth access to various financing channels. They have the need to keep these channels open, but would flexibly match their financing structures based on their development scale, financing costs, and ease of financing access, to maintain healthy debt structures and manageable costs. Overseas debt: Growing from a low base, few companies issuing In the first half of 2025, the issuance of overseas debt amounted to only 5.73 billion yuan, a year-on-year increase of 14.5%, accounting for 2.3% of the total financing scale, an increase of 0.5 percentage points compared to the same period last year. Overseas debt issuance remained sporadic. In 2025, Greentown and New World successively issued overseas debt, opening the door for more overseas debt issuance. The main purpose of the two real estate companies was to raise funds to repay expiring overseas debts and adjust their financing structures. Against the backdrop of continued pressure on sales, the sustainability of investor confidence remains uncertain. ABS: The issuance ratio increases, with nearly seven-tenths backed by underlying assets in CMBS/CMBN and REIT-like products In the first half of 2025, the issuance volume of ABS amounted to 95.8 billion yuan, a year-on-year increase of 4.8%, accounting for 37.7% of the total financing scale, an increase of 5.3 percentage points compared to the same period last year. The increase in the issuance ratio of ABS indicates substantial potential to unlock existing assets, with financial channels opening for enterprises with high-quality holding assets. In terms of issuance structure, CMBS/CMBN was the main issuance type, accounting for 46.3%, REIT-like products, and supply chain ABS each accounting for 23.0%. The proportion of CMBS/CMBN rapidly increased, with an increase of 5.6 percentage points compared to the same period last year, while the proportion of supply chain ABS slightly decreased. supply chain ABS accounted for less than one-quarter, while CMBS/CMBN and REIT-like products accounted for nearly seven-tenths, indicating that ABS funding based on high-quality underlying assets is favored by investors and helps to activate existing assets. It should be noted that in today's pressure-cooked commercial real estate market, a decline in vacancy rates and rental prices will continue to affect the operation of existing assets. Excessive decline may cause some ABS to become another form of debt burden. Data source: China Real Estate Information System (CREIS) In terms of public REITs, policies have focused on expanding and enriching the infrastructure REITs market. Industrial parks and rental housing public REITs continued to expand, with listings of Huaxia Golden Yuyu Intelligent Manufacturing Workshop REIT, Fund Rich Shanghai Property Rental Housing REIT, and Huaxia Beijing Affordable Housing REIT successful expansions. In terms of asset-backed securities (ABS) for holding real estate properties, the Shanghai and Shenzhen stock exchanges have promoted the rapid launch of ABS products. According to public reports, the Shanghai market's holding ABS market is taking shape, with six existing products and 14 in the reviewing process. The industry types covered by holding ABS have become more diverse, with highways, rental housing, office buildings, and data centers all advancing simultaneously. Financing rates: Significant decrease in financing costs In the first half of 2025, the average bond interest rate for the industry was 2.83%, a year-on-year decrease of 0.28 percentage points. Influenced by factors such as this year's reserve requirement ratio reduction, interest rate cuts, changes in corporate financing structures, and channel structures, the industry's average bond financing cost significantly decreased. The average interest rate for credit bonds was 2.61%, a decrease of 0.44 percentage points year-on-year; the average interest rate for overseas debt was 9.73%, an increase of 4.14 percentage points year-on-year; and the average interest rate for ABS was 2.77%, a decrease of 0.32 percentage points year-on-year. Table: Average financing rates for each channel Data source: China Real Estate Information System (CREIS) Conclusion In the first half of 2025, financing policies remained loose, but bond financing scale continued to decline. Uncertainties in market recovery and increasing differentiation have raised doubts among investors about the real estate industry, leading companies to adopt a cautious approach towards new financing. Financing scale continued to shrink, with a narrowing decline rate. Looking ahead to the second half of the year, the real estate policy environment is expected to remain loose, with previously implemented policies expected to be further implemented, but market differentiation may persist. Companies should plan their cash flows in advance based on sales and land acquisition situations, guard against financial risks, and actively utilize financing policies such as the "white list" mechanism, operating property loans, support for bond issuance, private placements, public REITs, and holding property ABS to expand financing channels and flows, extend existing debt maturity or refinance with new debts.