“If you don’t go back to work, I won’t pay for the property.” “If you don’t pay for the property, the bank won’t give me money. I have no money. How can I go back to work?” “If you don’t go back to work, how can I pay for the property?” “You don’t pay for the property, How can I go back to work?” “…” “…” The mainland property market is now caught in this “dead loop”, which netizens dubbed the ultimate conflict between “dynamic repayment” and “dynamic handover”. Contractors and suppliers have also joined the battle circle recently, threatening that if real estate developers do not find the final number, they will neither continue to “suffer loyalty” nor be able to repay their debts to banks. To break the “iron triangle” predicament, only the government as a “fourth party” intervenes and injects funds or policy assistance to “guarantee the delivery of buildings” and stabilize the overall economic situation.
In response to the “unfinished building” turmoil, the China Banking and Insurance Regulatory Commission held a press conference yesterday. Liu Zhongrui, head of the statistical information and risk monitoring department, emphasized that he would “do everything possible to ensure the delivery of the building”, including guiding banks to actively participate in related work and effectively meet the reasonable financing needs of real estate companies. , Support project mergers and acquisitions, etc.
In fact, the unfinished stock issue has fallen into an “infinite loop”, because the relevant projects are stopped because the capital chain is broken, regardless of the reason behind the “break”, such as whether it involves the developer’s illegal misappropriation of funds, but the reality is that these projects are The bank account has been dried up. As the property market continues to decline, coupled with a large number of small property owners who have no deadlines to buy properties, they have initiated a “collective loan suspension (discontinuation)”, making it even more impossible for banks to release funds for suspended projects.
What’s more, seeing that the “collective suspension of loans” by small property owners seems to have won some sweetness (it is rumored that the authorities will give owners of suspended projects a “buffer period”, and the suspension of property supply during the period will not be regarded as a breach of contract). Candy”, a number of contractors and suppliers have recently followed suit, claiming that they have been owed a huge amount of money by the developer. Developers start to restore “find numbers”.
Unfinished “iron triangle” requires government intervention
In all fairness, contractors and suppliers are indeed one of the biggest “sufferers” in the current internal housing crisis. Although the construction industry has always had “several phases”, for example, it is only 3 to 6 months following construction or supply. However, since the implementation of the “Three Red Lines” regulatory policy last year, the situation of “dragging” by developers has intensified. It is related to “accounts payable” and is not included in the “red line” supervision, so even if the developer has money, he would rather repay the debt to the bank or redeem the bond to reduce the debt leverage ratio, but “delay as long as possible” for accounts payable. “.
For example, for a real estate company in China Evergrande (03333) alone, as of the end of June last year, its accounts payable and commercial paper exceeded 1.1 trillion yuan (RMB, the same below), accounting for nearly 60% of its total liabilities. According to industry estimates, the scale of accounts payable and commercial paper in the entire Chinese housing industry exceeds 5 trillion yuan, which means that contractors and suppliers are owed huge sums of money, and many accounts are overdue for more than 12 to 24 months. With the property market in turmoil, developers do not know what year and month to “find money”, and many contractors and suppliers themselves are facing bankruptcy, and they are simply unable to repay the bank.
In other words, the “dead loop” of unfinished buildings is now like an “iron triangle”: first, the small owners refused to provide mortgages because of the shutdown of the building; then the bank failed to receive the payment and refused to release water to the developer, and the latter had no money to find the contractors and suppliers. In the end, the contractors and suppliers were owed huge sums of money and refused to continue construction and supply, making the resumption of construction of the building hopeless.
To break this deadlock, only the government can intervene as a “fourth party”. For example, the China Banking and Insurance Regulatory Commission emphasized yesterday that “do everything possible to ensure the delivery of the building”, and will guide banks to extend credit as much as possible to meet the reasonable financing needs of developers. This means that it is better to let the bank bear the high risk of bad debts of the project, but also to inject live water at the source to open up the cycle of construction and delivery; otherwise, if the property market continues to be stagnant, there will be more and more unfinished projects, from small owners, developers to contractors and suppliers. Businesses are unable to repay their debts and have the opportunity to drag each other down, and the financial system may face greater losses and risks.
At the same time, some local governments have also begun to take action. For example, in Zhengzhou City, Henan Province, the “hardest-hit area”, the local government decided to set up a “Real Estate Relief Fund” to participate in the revitalization of problem real estate through asset disposal and resource integration. The government of Xi’an, Shaanxi also recently issued the “Working Measures to Prevent the Issue of Delayed Delivery of Commercial Houses”, requiring the banks involved in the unfinished sale to be “responsible for recovering the funds, and those that cannot be recovered shall be liable for compensation in accordance with the law”, which is equivalent to asking the bank “Release profits” and advance a certain amount of resumption funds for unfinished projects in order to achieve the overall goal of “guaranteing the delivery of buildings”.
Breaking through the “golden window” in the next few months
In the final analysis, the property market carries 70% of the nation’s household wealth, and the real estate and construction industry directly created 15.8 trillion yuan of GDP last year, accounting for 20% of the country’s total economic output. Once the property market continues to collapse, the “iron triangle” is tightly entangled, and the entire Chinese economy and financial system will be unimaginable. So now is not the time to be held accountable, the question is not whether to “save the market” or not, but “how to save it”. At present, the most urgent task is to revitalize the unfinished market as soon as possible, restore people’s confidence in buying properties, and reopen the industrial chain and capital chain.
The trend is “dynamic”. In fact, “dynamic repayment” and “dynamic handover” both symbolize flexibility. The most important thing is to “move”, then there is hope, it is better than “lying flat” and rotten. Just like the theory of physics, the government must take the lead in injecting the “first driving force” in order to get rid of the endless cycle of “if you don’t return to work, I won’t supply the building” and “if you don’t supply the building, I won’t return to work”. There is not much time left for the Chinese property market, and the next few months may be the “golden window”.
