2024.10.22

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introduction：综合多家业内机构研究，新增100万套城中村改造，并实行货币化补贴，可以释放出规模可观的增量购房需求，有望拉动近亿平方米的住宅销售规模。

Author: Ma Yifan, Sun Mengfan, First Financial News

Urban village renovation is once again "booming." Last week, Ni Hong, Minister of Housing and Urban-Rural Development, stated at a press conference by the State Council Information Office that the government will implement an additional 10,000 sets of urban village renovation and dilapidated housing renovation through methods such as monetized resettlement.

This is undoubtedly good news for the current real estate market, especially the explicitly proposed "monetization of resettlement," which can inject funds into the market. In the context of significant changes in the supply-demand relationship of the real estate market, it is conducive to digesting the existing stock of commercial housing.

After the announcement, terms like "urban village renovation" and "monetary compensation" stimulated the market nerves, leading some to recall the previous two large-scale shantytown renovations in China, both of which triggered housing market booms. However, some market voices argue that the new scale of tens of thousands of units is significantly smaller than the previous two rounds of shantytown renovations, and may not have a significant impact on the housing market.

Compared to historical data, what exactly does the concept of ten thousand units represent? And how much of a market can the increase in funds potentially leverage?

Based on research from multiple industry institutions, the addition of ten thousand urban village renovation projects and the implementation of monetary subsidies can unleash a considerable scale of incremental housing demand, potentially driving residential sales of nearly 100 million square meters.

Expert: "Ten thousand sets" may just be a small test.

Looking back at history, before the year, China's shantytown renovation was divided into four stages. The pilot phase was from 1998 to 2004. According to historical data from the Ministry of Housing and Urban-Rural Development, the earliest "shantytown renovation" can be traced back to the urban shantytown renovation project initiated by Liaoning Province in 1995.

The national shantytown renovation initiative began in a certain year, with the launch phase spanning from a certain year to another year. During this period, the country started the renovation of various shantytowns, totaling 100 million households. The central and local governments invested more than 1 trillion yuan in shantytown renovation. Based on this calculation, the average annual number of shantytown renovation units during this phase was approximately 10 million units.

The years from to marked the acceleration phase, also the peak period for shantytown renovation projects. According to data from the Ministry of Housing and Urban-Rural Development, from to , the annual number of shantytown renovation starts exceeded 10 million units each year, with investment amounts of . trillion yuan, . trillion yuan, . trillion yuan, and . trillion yuan respectively.

After that year, the tide of shantytown renovation receded, with the annual shantytown renovation plan reduced to 10,000 units, and the actual commencement volume was 10,000 units. In the following years, the actual commencement volumes were 10,000 units and 10,000 units respectively.

After the year, the large-scale shantytown renovation is drawing to a close, and the renovation of old residential areas and urban renewal have begun to dominate. In the month of the year, the General Office of the State Council issued the "Guiding Opinions on Comprehensively Advancing the Renovation of Urban Old Residential Areas" and set a work goal: by the end of the "14th Five-Year Plan" period, efforts should be made to basically complete the renovation tasks of urban old residential areas that need to be renovated and were built before the end of the year.

From "shantytown renovation" to "urban renewal," the era of large-scale demolition and construction has temporarily come to an end.

From historical data, the newly added "ten thousand units" of urban village and dilapidated housing renovation projects do not seem significant compared to the peak period of shantytown redevelopment in our country. However, it is noteworthy that this time, the explicit mention of "monetized resettlement" carries a high "gold content."

Generally, the proportion of monetized resettlement determines the extent of stimulation to the real estate market. According to data from Founder Securities, during the early stages of China's shantytown renovation, the proportion of monetized resettlement was low, below %; it began to accelerate in the year and increased to around %; from -, it further increased to around %, after which no further figures were disclosed. Based on this proportion, it is estimated that monetized resettlement reached 10 million units in , and around 10 million units from -.

Although the proportion of monetized resettlement in recent years has not been disclosed, the recent trend has been towards "one for one" physical resettlement, original demolition and reconstruction, and housing voucher resettlement.

It is noteworthy that Minister Ni Hong of the Ministry of Housing and Urban-Rural Development mentioned what types of projects can receive policy support, including projects with strong public renovation intentions and significant safety hazards, as well as projects with mature plans, solid resettlement schemes, and the ability to ensure the smooth progress of expropriation work, effectively safeguarding the legitimate rights and interests of the public.

Zhang Hongwei, founder of Jingjian Consulting, told Yicai that such projects are mature and can be implemented immediately. According to this definition, the release time for the "additional 10,000 units" could be from now until the end of the year. If an increase of 10,000 units can be released within two to three months to see if it can stabilize the property market, this might just be a "small test."

"In fact, the new urban village renovation needs to be handled with care. Looking back from 2015 to 2018, many cities experienced a surge in the real estate market due to shantytown redevelopment. From the perspective of the decision-makers, on one hand, they hope the market can stop falling, but on the other hand, they do not want to see another surge, as a surge might lead to a subsequent crash. Therefore, the decision-makers want to see a gradual recovery and rise in the real estate market," Zhang Hongwei said.

Yan Yuejin, Vice President of Shanghai E-House Real Estate Research Institute, believes that the "10,000 units" mentioned by the Ministry of Housing and Urban-Rural Development is an increase on the existing base, so this quantity is actually not small. In recent years, the focus in the field of old housing renovation has consistently been on the "three major projects," and now the emphasis on "urban village renovation" carries a strong signaling significance.

It is expected to drive residential sales of 100 million square meters

The addition of ten thousand urban village renovation projects will have what practical impact on the real estate market?

Based on research from multiple industry institutions, the addition of 10,000 sets of urban village renovations and the implementation of monetary subsidies can release a considerable scale of incremental housing demand, aiding the digestion of existing housing stock and potentially driving the sale of nearly 100 million square meters of residential properties.

CRIC stated that, based on the estimation of the effect of the shantytown renovation with monetary compensation from 2015 to 2018, if the country starts 6 million shantytown renovation projects nationwide in 2023, with about 4 million being monetarily compensated, assuming each monetarily compensated shantytown renovation corresponds to the purchase of 100 square meters of housing, it would drive the sale of 400 million square meters of residential properties, accounting for 21.4% of the annual sales. Roughly estimating, the 1 million urban village renovations could drive nearly 1 billion square meters of residential sales.

S&P Credit Rating also stated that although the scale of this round of resettlement, involving 10,000 units, is not particularly outstanding compared to previous shantytown renovation policies, this round of policies can still play a positive stimulating role in the market.

On one hand, unlike the -year shantytown renovation which mainly focused on small and medium-sized cities, this round of renovation will target large and medium-sized cities. Considering the differences in city levels this time, if the resettlement is entirely conducted in a monetized manner, it is estimated that it could bring about a trillion yuan of incremental funds to the real estate market, assuming a cost of one million yuan per unit.

"The current annual transaction volume of the national commercial housing market is around a trillion yuan. If the current scale of monetized resettlement schemes can be concentratedly released in the short term, it will increase demand and effectively improve the market supply-demand structure," said S&P Credit Rating.

China Merchants Securities stated that the sales of 100 million square meters account for approximately % of the national commercial housing sales area and % of urban sales area. If the policies are successfully implemented, the renovation of 100 million units could have a significant impact on driving the structural market.

On the other hand, the goal of 10,000 sets is not the end of urban village renovation. Ni Hong, the Minister of Housing and Urban-Rural Development, mentioned that in large and medium-sized cities alone, there are 10,000 sets of urban villages that need to be renovated, and the number of dilapidated houses nationwide that require renovation reaches 10,000 sets. S&P believes that in the future, this policy has the potential to expand to medium and small cities and to a wider range of project types.

Yan Yuejin also stated that the 10,000 sets not only refer to the narrow sense of urban villages, but also combine with the renovation of dangerous and old houses, with the country's key large cities becoming the focus of urban village reconstruction. The urban villages mentioned in the past three major real estate projects actually referred to large cities and had little to do with prefecture-level cities. However, this time the concept of prefecture-level cities is explicitly mentioned, so the coverage is broader.

Zhang Hongwei believes that the majority of the "10,000 units" increase will fall into major cities. In the next two to three months, one can observe whether there is a rebound in the transaction volume of large and medium-sized cities, provincial capitals, and whether the market can recover and prices can stabilize. After January and February next year, when the effects of this stimulus policy have passed, will the market decline again? Based on the experience of the past two years, it is normal for the market to decline after the effects of the policy have passed.

"I think that after a 'small-scale trial', if the market experiences another downturn, then next year or the year after, there may be a sustained shantytown renovation policy implementation plan, but it will be difficult to reach the scale of the previous round of shantytown renovations. Perhaps there will only be tens of thousands to hundreds of thousands of units each year, totaling four to five million units over three years, which is actually quite significant and can have a positive impact on the market." Zhang Hongwei stated that in the next three to four years, the real estate market will inevitably enter a recovery and simultaneous increase in both volume and price, which will be a medium to long-term trend.

It is noteworthy that this round of urban village renovation is also supported by matching financial policies.

The recent press conference clearly outlined five support measures: firstly, prioritizing support for prefecture-level and above cities; secondly, enabling development and policy-oriented financial institutions to provide special loans; thirdly, allowing local governments to issue special purpose bonds; fourthly, offering tax and fee concessions; and fifthly, allowing commercial banks to issue commercial loans based on project evaluations.

Yan Yuejin stated that the policy clearly identifies four types of funding sources and support: special loans, special bonds, tax incentives, and bank loans, all being deployed simultaneously, fully demonstrating the strong support for ensuring the implementation of these measures. Particularly, the expansion of the use functions of special bonds indicates that local governments should fully utilize the special bond policy tools to continuously advance the development of urban village renovation projects.

“本次城中村改造，有助于房地产三项重要目标的统一，即房地产市场止跌回稳、防范化解房地产金融风险、房地产房屋安全。三个目标统一，有别于过去的棚改货币化工作，具有非常好的综合效应。”严跃进称。 WeChat editor | 雨林
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