Is the investment enthusiasm of real estate companies not decreasing? These trends are worth paying attention to, and the Shanghai land auction market continues to "zero flow auction" the real estate market | Shanghai | flow auction

As a first tier city in China, Shanghai's real estate market trend has a guiding significance. Generally speaking, there is a transmission effect between the performance of the land market and the real estate market, but compared to the dull performance of the real estate market, the two batches of land auctions in Shanghai this year have been somewhat warm and harmonious, continuing to maintain the record of "zero flow auctions".

Moreover, less than half a month after the second batch of land auctions in Shanghai was completed, many plot planning plans began to be announced. Why is the enthusiasm of real estate companies on the supply side not decreasing? What other trends are worth paying attention to behind the warmth of trading?

Adjusting the rules of land auction and lowering the bidding threshold

This year, Shanghai has completed two batches of land auctions. In the first batch, a total of 19 plots were sold, with a total amount exceeding 50 billion yuan; The second batch has a total of 24 land transactions, with a total amount of 64.4 billion yuan. There are over 60 potential real estate companies participating in both auctions, which is the highest among all previous land auctions in recent years.

The performance of the land market is closely linked to policy supply. It is not difficult to see that there have been many adjustments to the rules for the second batch of land auctions in Shanghai this year.

Since the implementation of centralized land supply in 2021, Shanghai has been regarded by the market as the "most difficult land auction city". Simply put, there are two reasons. One reason is that the amount of funds is huge, and it is not enough to only prepare for land acquisition. According to the rules, once a company participates in the auction, the funds to be regulated must reach 110% of the starting land auction price. Secondly, the rules of land auction are brain burning and test the technical strength of enterprises in land auction.

Strictness does not mean rigidity. This year, in order to adapt to the real estate market environment and boost market confidence, Shanghai's land auction rules have been flexibly optimized.

Firstly, the second batch of centralized land supply was split into two rounds for the first time, with the first round of 15 transactions in July and the second round of 9 transactions in August. Industry insiders analyze that dividing the transaction into two rounds can avoid companies investing too much money at once, providing more options for land auctions.

Secondly, the "one-time written quotation" method has been changed to "lottery". Shanghai Zhongyuan Real Estate Market Analyst Lu Wenxi told reporters that this adjustment significantly reduces the operational difficulty of real estate companies.

"One time written quotation" refers to the reasonable setting of the starting price, termination price, and maximum quotation for land parcels under the linkage mechanism of housing and land prices. The bidding method has been adjusted from the original bidding method to "bidding+one written quotation". If the bidding method does not reach the suspension price, the winner will be determined based on the principle of winning the bid with the higher price; When the bidding reaches the suspension price, it will be converted to a written quotation, which will be won by the real estate company closest to the average price of the first written quotation.

Changing to "lottery" means that after triggering the termination of the bid, the intended bidders will no longer enter the "one-time written quotation" stage, but will decide who will win the land through a random and fair lottery mechanism.

In this way, the soil auction process can be simplified and efficiency improved. Lu Wenxi stated that after the change in rules, the randomness and fairness of the lottery will increase, providing opportunities for small and medium-sized enterprises to participate in the auction.

Investment shrinking towards core cities and land parcels

The forms of land supply and the thresholds and rules for land auctions vary in different regions, making it difficult to obtain a national urban land auction transcript. But without a doubt, Shanghai is one of the cities in China with relatively healthy performance in land auctions. In the more than two years since the implementation of centralized land supply, although Shanghai Tupai has set a high threshold, it has always maintained the record of "zero flow auction". This year, the premium rates for two batches of land auctions have exceeded 7%.

The reason is that there is no shortage of buyers in Shanghai. In fact, more and more real estate companies want to enter the market and become "players".

According to the research department of Tongce Consulting, after fierce competition, a total of 21 bidders stood out from the second batch of more than 60 intended enterprises. Among them, Greentown was the biggest winner, winning 3 plots of land, while Dajia, Zhejiang Qianjiang, and Ningbo Weike Joint Venture won 2 plots of land, and the harvest was quite substantial.

In addition to well-known large developers, some companies with unfamiliar names have also entered the public eye. Their main business is not real estate, such as Ningbo Weike, which entered Shanghai for the first time, and their main business is investment in high-tech industries; The buyers who were unable to win the land, Aaron Real Estate and Weixing Real Estate, mainly engaged in textiles and rubber. Industry insiders analyze that these enterprises are mostly supported by industry, and investing in real estate is to seek higher returns.

Despite the large number of buyers, there is a clear differentiation between hot and cold in the plot. Taking the second batch of transactions as an example, the 6 plots that were sold at the bottom price were all located in remote areas such as Lingang in Pudong, Fengxian, Wusong in Baoshan, and Zhonggu in Qingpu.

Land parcels sold at a premium are generally located in the core areas of urban, suburban, and suburban new cities with well-developed supporting facilities and a strong residential atmosphere. The Meilong community in Minhang has received particularly high attention. In the second round of land auctions that have just concluded, the Meilong Community plot is the most expensive one, with significant advantages and complete commercial, educational and other supporting facilities. It is close to the station of Line 15 of the rail transit, and the regional planning includes Line 19, making transportation convenient. Therefore, the starting price reached 5.614 billion yuan, but the high price did not prevent it from attracting up to 15 bidders to sign up, ultimately resulting in a transaction at a 10% premium rate.

Song Hongwei, Research Director of Tongce Research Institute, believes that the current characteristics of the Shanghai real estate market are not cooling down but rather "differentiation". Core area projects are still receiving attention, with a large number of potential homebuyers, and the purchasing power of peripheral area projects is relatively insufficient. Under this influence, real estate companies naturally show more enthusiasm for plots with fast flow rates and easy to sell, while some remote and difficult to sell plots naturally have lower popularity.

Behind the intensification of hot and cold differentiation in Shanghai, it reflects that in the context of the continuous decline of the national real estate market, real estate companies are becoming more cautious in their investment strategies. In order to ensure investment safety and payment speed, the investment strategies of real estate companies are gradually converging, and the land auction budget is shrinking and focusing on the core plots of core cities.

Why is it Shanghai? Although the overall residential transactions in Shanghai have been lackluster this year, looking at the whole country, there is still a good market foundation, and the decentralization of project sales is more guaranteed.

According to the sales price changes of commercial housing in 70 large and medium-sized cities released by the National Bureau of Statistics this year, the sales price index of newly-built commercial housing in Shanghai showed a monthly growth trend from January to June.

However, it should be noted that despite the warmth in the transaction, it is not difficult to see that Shanghai Tupai still faces many challenges.

Firstly, the deep adjustment of the real estate industry and the decline in national commodity housing sales still affect the transmission to the land market. It can be seen that the proportion of land sold at the bottom price in Shanghai has begun to increase——

In the first batch of this year, 4 transactions were made at the base price, accounting for 21%, while in the second batch, a total of 6 transactions were made at the base price, accounting for 25%. That is to say, the differentiation between hot and cold in Tupai has become increasingly evident, and the remote areas around it continue to cool down.

Secondly, state-owned and central enterprises remain the main force in land acquisition. Although the participation enthusiasm of private enterprises has increased overall compared to last year, and the private enterprise Green City has won three plots of land at once, state-owned enterprises with strong financial scale are still the main force in land acquisition. In the second batch of this year, state-owned enterprises and central enterprises accounted for about 80% of land acquisition, while private enterprises still have a strong wait-and-see attitude.