Investment assignment
The Real Estate Market In China
Number: 40901106 Name: 林英 Class: 8
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CONTENT
1. THE PRESENT SITUATION OF REAL ESTATE
INVESTMENT................................................................................. 3 2. THE REASONS OF HIGH HOUSING PRICE ........................ 5 3. MEASURES ................................................................................. 6 4. ANALYSIS THE STOKE OF BINJIANG REAL ESTATE GROUP ............................................................................................. 6 (1). FINANCIAL ANALYSIS .................................................................. 6 (2). ANALYSIS OF THE RISK FOR THE COMPANY ............................... 7 (3) INDUSTRY ANALYSIS ..................................................................... 7
5.REFERENCES ................................................................................. 8
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The Real Estate market in China
In recent years, the price of housing is high in China, in many Chinese cities, especially in the big cities. The price of housing has deviated the income level of many common people, seriously. It is common that many people should spend more than half of salary on the mortgage every month, we call those people: house slave. Even, a common person can not afford a common house in our country.
1. The present situation of real estate investment
First, In order to more directly perceived, I did three tables about the real estate market in China from 2006 to 2012. (almost data collected from National Bureau of Statistics of China.)
Table 1
National Total Real Estate Investment ( 2006 to 2011）
Investment (100 million Residential Growth Rate Residential
year Yuan) Buildings Y/Y (%) Buildings
2006 214494 150437 26.34 55.43
2007 25279.7 18010.3 30.20 32.10
2008 26545.73 19332.66 22.7 25.2
2009 36231.71 25618.74 16.1 14.2
2010 48267.07 34038.14 33.2 32.9
2011 61740 44308 27.9 30.2
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Table 2 Sales of Commercial Buildings 2006——2011 Floor Space of Commercial Buildings Sales of Commercial Sold Buildings Absolute Absolute Value year 2006 2007 2008 2009 2010 2011
Table 3
average price of real estate year 2006 2007 2008 2009 2010 average price 3119 3885 3877 4695 6500 Growth (1000 Rate Y/Y Sq.m) (%) 61857.07 _ 77354.72 -25.05 65969.83 14.71 93713.04 42.10 104349.11 10.10 109946.00 4.90 Value Growth (100 million Rate Y/Y Yuan) (%) _ _ 31256.99 _ 25068.11 -19.80 43994.54 75.50 52478.72 18.30 59119.00 12.10 2011 6155 From these tables we can know that more and more money investment in real estate, the price is more and more high, sales also growing, although the government continues to publish policy. Now the price is high and unacceptable.
In resent years, the real estate industry has become the pillar industry to promote economic growth. It’s important to the national economic growth rate, related to the price index, too. In the continuous growth, the can't understand point is: on the one hand, government regulation and control policy more and more, since 2006. On the other hand, the price also is higher, and housing vacancy rates is high.
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2. The reasons of high housing price
What reasons have led to the High housing price? In my opinion, there are a variety of reasons for this trend，but the most important are the following reasons. Housing demands in China are rigid, given fast urbanization, disposable income increases. Investment and speculation demand increases, limited land resources and high price, and government poor regulation.
Housing demands in China are rigid; it also means many people have to buy a house. No matter the price is high or low. In the Chinese idea, housing is very important for a family. Because of fast urbanization, at present, more and more people need purchase a new house, which shows there is a good market future on the real estate.
When it comes to liquidity. With enough liquidity in hand, if people do not buy consumer goods, many might invest the money in assets, pushing asset prices to a new level, In recent years the stock market is not good, people need to put his money into the other place, real estate has become the good choice, In the face of rising prices, speculators are also involved in property speculation .No matter investment or speculation. Both push housing price high. It’s also an investment vehicle available for investors to fight looming inflation. More and more people involved in, so real estate more and more hot.
The price of land which has changed more and more higher in recent years is the important factor. We know the real estate includes two parts: the land and the housing. The price of the real estate includes the land’s and the housing’s price. Now more and more governments depend on selling the land to keep their income. The main way of land sale is auction; In order to obtain land ，it has to pay more money to the government. The expensive land increases the cost of the house; certainly, the cost will shift to the consumers at last.
The government is short of the function what it should have. It was a pity that only less people had enjoyed the preferential housing. The government neglected its duty; Take this point, the government should be partly in charge of the price of housing. But there is a simple fact; Chinese government attaches great importance to the more and more higher price of housing. The government wants to check the trend. Despite the measures taken to cool down the overheated real estate market, for example ，the government ordered commercial banks to charge higher interest rates on mortgages for second-home buyers and require that their down payments be at least 40 percent of the purchase price. Also ordered banks to restrict credit to real estate developers. The government's macro-control measure’s effect is not obvious. So, fewer people now believe that the prices would stabilize in the near future. Yes, we know macro-control measures need time to take effect, but the time is long enough. Lead us to doubt the government's efficiency and policies is executioned or not，right or wrong .
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3. Measures
The current housing price, which was bid up by a group of rich people, speculators and developers, is far beyond the ordinary person's budget. The most important measure is need macro policy to control. The government must insist on policy, not shake. The enhanced loan and credit interest standards will curb speculation. Meanwhile, Forced reduce mortgage loan who had a house. The property market heart was largely driven by loose monetary and credit policies; add adequate investment vehicles available for investors to fight looming inflation. The government's decision to restrain credit will help squeeze bubbles and hamper the speculation, leading to stable real estate prices. The government's policy is a great extent depends on Chinese economy. Thus, most of the trend of the price depends on national policy. This requires banks’ cooperate, but banks are profit-driven, so it’s difficult.
The government's land supply is limited, and housing demand is large, so property price depends on the land. The performance evaluation depends on GDP growth, GDP growth decided promotion. And the real estate industry is \"short cycle, effect quick, high efficiency”. Certainly become the needs of some local officials.We know that the real estate has made a great contribution on the China’s economic growth, especially the growth of GDP, no doubt to meet its GDP growth target. property prices are rising too quickly, luring speculators into the market and turning it into an asset bubble，not an economic driver.
4. Analysis the stoke of BINJIANG REAL ESTATE GROUP
(1). Financial analysis
Financial ratios Indicators \\ date 2011-12-31 2010-12-31 2009-12-31 2008-12-31 Net income (million Yuan) 78398.73 96620.56 64367.25 60426.74 Growth rate of net income (%) -18.85 50.10 6.52 32.58 ROE (%) 15.96 22.46 18.92 20.94 Leverage ratio (%) 80.59 79.85 77.92 75.21 Cash in flow / net income (%) -626.59 20.56 -15.39 -298.34 From the table we see this company profit is very high. In 2008—2010years is very high, but 2011’s growth rate of net profit decreased substantially, below the industry average (- 7.8%), shows that the company grows ability is low. ROE’s recent
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industry average: 10.49%.The profitability of the company is very strong. The company's Leverage ratio is high; we know the company’s great pressure of debt and debt repayment pressure. The index of the latest industry average: 76.93%.In 2011, cash in flow / net income very low, the company’s quality of earnings is poor, liquidity of cash is weak. Show the recover ability of the account is very weak, the great pressure of financial. The ratio of the latest industry average is 20.16%.
Company’s income in the real estate industry year Net sales(Million Yuan) Gross profits (%) Rate of total income 2011 2010 332720.09 608514.64 55.77 44.64 97.65% 99.32% Real estate is the main business of the company. In 2011, the main business income accounted for the total revenue is 97.65%, 2010 is 99.32% .The company’s business is very concentration, has been accounted for more than ninety-five percent of the company. The real estate industry impact on the company is very big. Gross profit is great high ，its benefit from an industry that continues to evolve and shift quickly . Real estate is a lucrative industry offering high margins.
(2). Analysis of the risk for the company
Policy risk
The real estate industry and the national economy relation is very close, the influence of the national macroeconomic regulation and control policy is great. Once the government takes more strict measures will directly affect the future development of the industry and this company. Operating risk
Real estate project development cycle is long, investment is large, related many industry, at the same time ，its related a number of government departments’ supervision and examination. Any problem may lead the High-cost or cause adverse effect.
Cross-regional operate risk.
At present, the company is dispersed in Hangzhou, Shaoxing, Shangyu, Jinhua and Quzhou and some other cities, it’s a test for the company’s internal management system, the project management system, so, the company face a cross-regional operate risk.
(3) Industry analysis
The total investment in real estate development in 2011 was 6,174.0 billion Yuan, a nominal annual growth of 27.9 percent, 5.3 percentage points lower than that in the
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previous year. In particular, the investment in residential buildings was 4430.8 billion Yuan, up by 30.2 percent, and accounted for 71.8 percent of real estate development investment.
in 2011，real estate industry’s inventory reached the highest level in nearly 4 years. Reflect the pressure of sales. Because of poor sales, reduced the recovery ability.
Due to credit in short supply, it’s more difficult to get loans from the bank. Rate of debt with interest is the lowest level since 2008.Form premier’s conversation, we can expected real estate industry financing environment will not change, debt rate will continue to decline.
As a result of the Limit purchase policy will continue, and the price change，more people choice wait-and-see, a long time in the future real estate sales is also very difficult.
In a word, The BINJIANG REAL ESTATE GROUP has a large of deposit received; it’s also a good performance company. But because of the influence of governmental control, the company’s stoke is uncertain.
5.references
1.Xianchao《The status of real estate》Economic and technology cooperation 2007 2. Yang Jian ping《China real estate macro financial regulation research》world economy
3. Liuxiaoyu《chengxuebing Trends in Real Estate Research》Statistical research 4. Wangwenbing《China's real estate price formation mechanism and influencing factors 》Nankai University
5.caoliang《Property Prices and Bank Lending in China》 2007
6.TuJiahua;ZhangJie《what promoted the rising prices: evidence from the Shanghai real estate market》the world economy 2005 (05)
7.ShenYue ;LiuHongyu《housing prices and economic fundamentals》 economic research 2004 (06)
8. LiangYunfang;GaoTiemei Empirical analysis of Chinese real estate price on difference regional 》economic research 2007 (08)
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