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On March 16, the “2021 China Real Estate Development Enterprise Comprehensive Strength TOP500 Evaluation Research Report” was released. The China Real Estate Association and the China Real Estate Evaluation Center of Shanghai E-House Real Estate Research Institute pointed out in the report that as the real estate financing policy continues to tighten, the industry Financial dividends are gradually disappearing; market transaction structure is gradually shifting to first- and second-tier cities; under the premise of continuous increase in transaction amount, the growth rate of transaction area has slowed down significantly, and industry differentiation has become more obvious.
The evaluation report shows that in 2020, the sales area and sales amount of commercial housing across the country hit a record high. At the same time, more and more real estate companies, including large-scale real estate companies, have withdrawn from competition due to incorrect decision-making and excessive leverage.
In the long run, the population tends to gather in metropolitan areas. On the one hand, the household registration reform system continues to advance, which increases the freedom of population movement. More importantly, the cities participating in the competition for talents continue to expand, and the preferential policies continue to increase, which has also led to obvious regional differentiation.
The first and second camp companies are relatively stable
In 2020, the average total assets of TOP500 real estate development companies was 82.989 billion yuan, a year-on-year increase of 16.64%, and the growth rate was 1.26 percentage points lower than the previous year; the average net assets were 17.881 billion yuan, a year-on-year increase of 17.89%, and the growth rate was 1.76 higher than the previous year. Percentage points. On the whole, the asset scale of TOP500 real estate companies maintained a growth trend, and the growth rate of total assets has slightly narrowed.
In 2020, the sales of the top four real estate development companies accounted for 14.30%, and the concentration of the four companies rose steadily. The market shares of TOP10, TOP20, TOP50, and TOP100 real estate companies calculated by sales amount were 25.28%, 37.64%, 53.82%, and 63.94%, respectively. Among them, TOP10, TOP20, and TOP50 increased by 0.06, 0.57, and 0.20 percentage points respectively from the previous year, and TOP100 decreased by 0.2 percentage points from the previous year.
On the whole, the market development of the sales amount of real estate companies is relatively stable, and the upward trend of concentration remains the same. Leading real estate companies still occupy the advantage of scale.
Comparison table of national commercial housing sales in 2020 and sales of TOP500 housing companies
Data source: National Bureau of Statistics, CRIC, China Real Estate Evaluation Center.Unit: 10,000 square meters, 100 million yuan
According to the evaluation report, Vanke, Evergrande, and Country Garden occupy the top three TOP500 comprehensive strengths of China’s real estate development enterprises in 2021. Among them, Vanke rose by two places, ranking first in terms of comprehensive strength, and Evergrande and Country Garden ranked second and third. China Shipping, Sunac, Poly, Longfor, China Resources, Shimao, and Xincheng ranked fourth to ten.
Compared with 2020, the TOP10 rate of change in 2021 is 10%, among which Shimao is a newcomer; the rate of change of TOP50 is about 10%, which is relatively stable as a whole.
From a regional perspective, East China accounted for 37.6%, Northeast China accounted for 3.0%, Western China accounted for 8.2%, a year-on-year decrease; South China accounted for 20.2%, North China accounted for 16.6%, and central China accounted for 20.2%. 14.4%, a year-on-year increase. The number of enterprises in the three regions of East China, South China and North China accounted for 74.4%, and the proportion of the central region continued to increase, and the development momentum was good.
Industry profit margins are narrowing, investment attitudes tend to be cautious
In 2020, the average operating income of TOP500 real estate development enterprises reached 18.3 billion yuan, an increase of 10.36% over the previous year. The average operating cost was 13.9 billion yuan, an increase of 17.05% over the previous year.
In the past two years, the average growth rate of operating income and the average growth rate of operating costs have been on a downward trend, and the growth rate of operating income has not been as fast as the growth rate of operating costs. The average net profit reached 1.101 billion yuan, a year-on-year decrease of 11.08%. The average net profit growth rate was negative for the first time in recent years.
2016-2020 TOP500 real estate enterprises’ absolute profitability index average change graph (100 million yuan) (%)
Data source: corporate announcements, Wind, China Real Estate Evaluation Center
In 2020, the average return on total assets of TOP500 real estate development companies was 1.32%, a decrease of 0.52 percentage points from the previous year; the average return on net assets was 4.53%, a decrease of 4.16 percentage points from the previous year; the average cost and expense profit margin was 11.25 %, a decrease of 6.75 percentage points from the previous year. The profit margin has narrowed, and the total assets of real estate companies have increased year by year. In particular, the net profit growth of real estate companies in the past two years has not been as high as the increase in assets, resulting in a decline in the return on total assets.
In terms of business layout, real estate companies changed their strategy of acquiring land that was fully rolled out in the past, and gradually became cautious, instead of pursuing only quantity, they began to pay attention to land quality. Many real estate companies focus on first- and second-tier cities, especially the Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area and other places, as well as third- and fourth-tier cities surrounding the metropolitan area. Demographic changes have brought about changes in the urban structure. Many real estate companies have begun to deepen their cultivation in key cities, and land reserves in key areas are still the guarantee for the long-term development of real estate companies.
The financing environment is gradually tightening, and reducing debt becomes an important task
At the beginning of 2020, the financing environment of the real estate industry is relatively loose due to the impact of the epidemic. With the advancement of resumption of work and production, the domestic economy has gradually returned to normal track, the real estate industry has also recovered quickly, and signs of overheating have appeared, and financing policies have gradually tightened. The financing supervision of real estate has entered a new stage, and “deleveraging and reducing debt” has become one of the important tasks of real estate enterprises.
Under the supervision of the “three red lines”, the leverage ratio of TOP500 real estate companies has been reduced, and the reduction of leverage has achieved initial results. In terms of long-term solvency, the average asset-liability ratio of TOP500 real estate companies in 2020 was 78.77%, a decrease of 0.89 percentage points from the previous year, the first decline since 2012; the average net debt ratio was 85.08%, a decrease of 11.62 percentage points from the previous year. Compared with 2019, there is also a substantial improvement. In terms of short-term solvency, the short-term solvency of TOP500 real estate companies in 2020 will slightly decline. The average current ratio is 1.40, down 0.05 from the previous year, and the average quick ratio is 0.49, the same as the previous year.
Comparison of the mean value of solvency indicators of TOP500 real estate companies from 2016 to 2020
Data source: Wind, China Real Estate Evaluation Center
Under regulatory requirements in 2020, real estate companies have begun to actively reduce their leverage levels, but the debt levels of various companies are not the same. Leading real estate companies have good reputations, actively promote sales collections, and have strong risk control capabilities. Some small and medium-sized real estate companies are subject to financing channels. Tightening, slow collection of sales, and the high cost of land acquisition in the early stage, and the accumulation of debt risks, need to be alert to capital chain risks.
Operating indicators declined slightly, and expansion of non-residential areas accelerated
In 2020, the average inventory turnover rate of TOP500 real estate development companies is 0.11, which is a decrease of 0.02 compared with 2019; the average overall current asset turnover rate is 0.14, which is the same as in 2019; the average total asset turnover rate is 0.10, which is a decrease of 0.01 compared with 2019. From the perspective of the three major operating indicators, the overall data is still at a low level.
2016-2020 TOP500 real estate enterprises’ operational efficiency indicators change chart
Data source: CRIC, China Real Estate Evaluation Center
As the financing environment continues to tighten, financial dividends are gradually disappearing, and the era of management dividends is coming. Strong turnover ability is one of the important manifestations of management dividends, but in the current market environment, the factors driving turnover have changed. Compared with the high turnover driven by high leverage in the past, in the context of tighter financing, real estate companies are now increasing the speed of corporate turnover by improving execution efficiency and implementing fine management.
At the same time, in recent years, leading real estate companies have tried asset-light operations in non-residential areas, and accelerated their expansion in non-residential areas such as property, leasing, office, commerce, cultural tourism, and elderly care.
In addition, product quality, as a basic item of product quality, is also an important point for real estate companies to open up and stabilize their market position. In recent years, real estate companies have also invested more energy and awareness in improving product quality to improve product reputation. At the same time, real estate companies form differentiated competition through diversified innovation capabilities to provide new impetus for the growth of corporate value. Carry out strategic innovation, organizational innovation, management innovation, technological innovation, product innovation and marketing innovation in a top-down structure.