Pan Shiyi, a mainland real estate developer, said on Jan. 8 that under the current financial and tax environment, there are two main types of people doing long-lease apartments on the mainland: one is a crook and the other is a fool, a Ponzi scheme.
According to China Securities Journal, at the 2020 SOHO China Season 4 Leasing Recognition Ceremony on January 8, Pan Shiyi, chairman of SOHO China’s board of directors, said that about five years ago, he studied the business model of long-lease apartments, and his final conclusion was that under the current financial and tax environment, one category of those doing long-lease apartments are liars and one category are fools. The crooks don’t think about the long-term development, they just want to cheat a sum of money; the fools don’t understand the accounts, the rental return of office buildings is more than 3%, the return of apartments is about 1%, and the interest rate of bank loans is at least 4% to 5%.
Pan Shiyi said, “If you borrow the money from the bank, build the house and then rent it out, and rely on the rent to cover the cost, you don’t understand the account. Therefore, long term rental apartments are a reflection of Ponzi scheme in the real estate market.”
Financial commentator Wang Jian also once said that long-lease apartments are a Ponzi scheme and have become a means of financing.
According to Wang Jian, the company rents the house from the landlord at a high price, and then rents it to the tenant at a low price after simple renovation, with high entry and low exit, with little profit or even loss of money in the middle.
However, many mainland real estate companies have started to layout to enter the long term rental apartments. 10 days ago, Vanke said that long term rental apartments are an important channel to solve the housing problem and the company is optimistic about the long term future of the business. The company will remain steadfast in promoting the business.
In the 2020 public offering of housing leasing special corporate bonds by Huafa, RMB 770 million is intended to be used for the construction and leasing expenses of the company’s housing leasing projects.
Longhu Group’s 2020 interim report mentioned that the company’s long term rental apartment brand, Crown Apartments, has opened a total of approximately 79,000 units. It has opened operations in Beijing, Shanghai, Shenzhen, Hangzhou, Nanjing, Chongqing, Chengdu and other cities.
Last year, the mainland’s long-lease apartments frequently burst into flames, hurting many people with lower and middle incomes.
According to Caixin on December 4 last year, as of September 2020, a total of 26 companies in mainland long term rental apartments burst mines, and some of the leading long term rental apartment companies are also facing huge risks: eggshell, Qingke and Lega are in a capital chain break crisis, and according to the public financial data of the listed eggshell and Qingke companies, these two long term rental apartments have been technically bankrupt (unable to make ends meet); Ziyou and Xiangfou are forcing landlords to reduce prices or compensate huge renovation fees but not to reduce prices for tenants, and Ziyou is involved in nearly 900 lawsuits.
Cai Zhen, director of the Real Estate Finance Center of the National Finance and Development Laboratory, was quoted as saying that the massive collapse of long-lease apartments mainly affects middle-income and low-income people.
According to mainland media, a tenant of an eggshell apartment in Guangzhou’s Tianhe Square jumped to his death from the 18th floor after setting his rented house on fire at 3 a.m. on Dec. 3.
Wang Jian believes that the Chinese Communist authorities should have intervened earlier to monitor the situation and come up with a policy, but the reality is that the authorities simply do not care.
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