Abstract
In recent years, with the regulation of national policy, Chinese real estate market has been rapidly cooling, and real estate enterprises also have difficulties in financing. Perpetual bonds as a historic mezzanine financial instrument abroad was formally introduced into China in 2013 and its own characteristics can satisfy the current needs of the real estate enterprises. This paper analyzes the plight of the real estate market and real estate financing under the current environment, discusses the issue of perpetual debt financing, and analyzes the advantages and risks of issuing perpetual bonds in multiple aspects.
Highlights
Some cities have loosed the Limited Purchasing Order since 2014, but the current speed of real estate markets have slow down, and most companies are facing the pressure of depreciation
Coupled with the future of real estate control policies are no signs of relaxation, market expectations are a lack of confidence for the real estate market, and the future of real estate financing may further increase difficulty, at this time may be issued perpetual bonds optimize the asset structure, thereby reducing future financing costs
Because of its own characteristics, perpetual bond can be a good fit of the financing needs of the real estate business, and can be a good solution to break current major financing difficulties
Summary
Policy of Purchase Restriction There are 48 cities which have issued the Limited Purchasing Order since 2011. Some cities have loosed the Limited Purchasing Order since 2014, but the current speed of real estate markets have slow down, and most companies are facing the pressure of depreciation. In the third quarter in 2014, China has built more than 6 million affordable houses, so that the pressure of buying commodity house has been released, the demands of commodity house have reduced, and the sales of real estate markets have declined at a certain extent. Monetary Policy Under the financial crisis of 2008 and 2009, loose monetary policy led the national real estate market to be hot, and companies frequently paid an extraordinary high price to buy a land to build houses. We can see that the current real estate sales overall are in decline both in the sales area or sales prices, and it indicates that the pressure of eliminating the inventory is still enormous [1]
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