After the new existing-home policy was rolled out, private enterprises have been surprisingly aggressive in land acquisition.

More than two months have passed since the implementation of the new existing home sales policy. We have sorted out 283 residential-related land parcels transacted in the bidding, auction and listing markets of 32 first- and second-tier cities since September. There is a surprising signal: among the 45 land parcels transacted at a premium, private enterprises account for nearly half of the total land parcels acquired.

Real estate enterprises have maintained a strong presence in the competition for high-premium land parcels.

01

The new existing home sales policy has raised the thresholds for capital turnover, pushing the overall investment of real estate enterprises into a "shrinking circle" mode, where only a small number of high-quality land parcels remain highly popular.

According to the monitoring data from PTI Puru Smart Cloud, 283 residential-related land parcels have been transacted in 32 monitored first- and second-tier cities across China since September, with a total transaction value of 160.986 billion yuan, among which 45 parcels were transacted at a premium and the remaining 238 parcels were sold at the reserve price.

Among the 45 premium-transacted residential land parcels after the new policy was launched, 21 parcels have a premium rate of over 20%, accounting for nearly 50% of the total. This means that the competition among real estate enterprises for high-quality residential land remains fierce.

After the implementation of the new existing home sales policy, the first residential land parcel with a premium rate exceeding 100% nationwide emerged in Xiangmi Lake, Shenzhen. On September 10, the land parcel attracted 7 real estate enterprises to compete on the same stage, with as many as 257 rounds of bidding. It was finally won by China Overseas Land & Investment, with a total transaction price of 2.55 billion yuan and a premium rate hitting 125.5%.

In addition, Taiyuan, Hangzhou, Xi'an have also successively produced highly popular land parcels with a premium rate of over 40%.

02

The existing home sales model extends the capital return cycle, and the market generally believes that private enterprises under pressure from capital costs may slow down their land acquisition pace, but the data gives a different answer.

Among the 45 premium land parcels, private enterprises (including consortiums) acquired 21 parcels, accounting for nearly half of the total. Among the top 10 land parcels by premium rate, private real estate enterprises won 7 parcels, while central SOEs and local SOEs only took 3 seats. Most of these active private enterprises are familiar local players deeply rooted in the regional market.

For example, Binjiang Group acquired the land parcel in the core unit of Century City at a premium rate of 48.53% on October 30, which is the land parcel with the highest premium rate in Hangzhou's land market since the new existing home sales policy. This is another high-premium land acquisition of Binjiang Group after it jointly won the land parcel in North Gumei Community, Minhang, Shanghai with China Merchants Shekou and Nanshan Holdings at a 24.4% premium rate on September 29; Haiwei Real Estate, in cooperation with Greentown, acquired the land parcel in Shuangqiao Unit at a premium rate of 33.04%; Zhengho Real Estate, a local real estate enterprise in Henan, won the land parcel of Zhengzhou No.2 Grain Depot at a premium rate of 32.67%.

The logic behind these private enterprises acquiring land at a premium is highly consistent, that is, adopting the "isolated island tactic" to deeply cultivate the familiar core market, and hedging the impact brought by the existing home sales model by relying on local product reputation and the base of existing customers.

Bontai Real Estate, a private enterprise, adopts a different strategy, and it occupies 2 seats in the top 10 land parcels by premium rate since the new policy was launched.

On September 30, Jiangxi Bangyu Real Estate, a subsidiary of Bontai Real Estate, competed head-on with Poly Real Estate and won the land parcel in Xiaodian District, Taiyuan at a 75.8% premium rate, marking its first entry into the main urban area of Taiyuan. This is also the land parcel with the second highest premium rate among the 32 cities after the new policy. On the same day, it entered Zhengzhou, competed with China Overseas Land & Investment and China Merchants Shekou in the Ersha area, and won the land parcel in Zhongyuan Ersha Block at a premium rate of 35.62%, making its first layout in the main urban area of Zhengzhou.

According to Puru Smart Cloud, Bontai Real Estate's land acquisition amount from January to October reached 10.8 billion yuan, ranking 13th, and its full-caliber sales amount in the same period was 20.57 billion yuan, ranking 27th. The ratio of land acquisition amount to sales amount reached 52.5%, which shows its aggressive land acquisition strategy.

Against the backdrop that the vast majority of private enterprises are shrinking their business scope, Bontai Real Estate is one of the few private real estate enterprises that still adhere to the national layout strategy.

03

Further analysis of the 45 premium land parcels shows that the land parcels that real estate enterprises are willing to acquire at a premium have three main characteristics.

First, in terms of urban distribution, Shanghai, Shenzhen, Beijing, Guangzhou, Hangzhou and Zhengzhou are the cities with concentrated high-premium transactions, where many popular land parcels with a premium rate of 20%+ have emerged. The investment strategies of enterprises will be more focused on core first- and second-tier cities, and "no investment in non-core cities, no investment in non-core plots" has become an iron rule for investment.

Second, low-density improved-type land parcels are the key target of competition. Among the premium-transacted land parcels in this round, 30 parcels have a floor area ratio below 2.0, accounting for nearly 70% of all premium land parcels.

A typical example is the land parcel by the Wenyu River in Houshayu Town, Beijing, with a floor area ratio of only 1.01. On the one hand, low-density land parcels are easier to develop improved products to match the current mainstream demand for upgraded housing. On the other hand, the overall construction period of low-density products is controllable, and the products have sufficient premium space, which can hedge the pressure brought by the extended capital return cycle of the existing home sales model.

Third, small-sized and low-total-price land parcels are more favored. Among the premium-transacted land parcels, parcels with a total price of less than 1 billion yuan account for nearly 70%, and most of the enterprises that acquire these parcels are private real estate enterprises. In addition, more than 40% of the premium land parcels have a planned floor area of less than 50,000 square meters.

Under the existing home sales model, such "small and exquisite" land parcels have controllable capital occupation pressure, which is a safe choice for real estate enterprises. When facing large land parcels with high total prices, real estate enterprises are more inclined to choose consortium cooperation to disperse capital risks. The case that China Merchants Shekou, Binjiang Group and Nanshan Holdings jointly acquired the Gumei land parcel in Shanghai is a typical example.

After the new policy on August 28, no matter the existing home sales model or the capped pre-sale system, the capital occupation cycle has been extended from the previous 6 months to 1 year to more than 2 years. According to the calculation of Puru Smart Cloud Research Center based on typical projects in sample cities, the additional financial cost of the existing home sales model compared with the off-plan property model accounts for about 11% of the total land price. Although the existing home sales policy will extend the cycle, enterprises are still willing to accept a certain premium for high-quality land parcels in core areas, especially low-density residential land, on the premise that "the account can be balanced".

No matter betting on first-tier and strong second-tier cities, or acquiring small-sized, low-density "small and beautiful" land parcels, the core standard for real estate enterprises to acquire land at a premium is still "safety first, certainty supremacy".

This article is from the WeChat Official Account "Ding Zuyu Comments on Real Estate Market", written by the editorial department, and published with authorization from 36Kr.