Yuan Yihong: The property market is bidding farewell to the traffic dividend

Text/Yuan Yihong

One of the titles that Ctrip founder Professor Liang Jianzhang presumably prefers is demographer, and some media outlets call it demographer. For years, he has spared no effort in calling on Chinese families to have more children.

A recent speech he gave at the Wuzhen Internet Conference said that population is the foundation and core of economic development, and fewer children will not only not get rich quickly, but will lead to poverty. Therefore, the "theory of having fewer children leads to poverty" has not gone away.

Earlier, Liang Jianzhang also said that having more children is a contribution to the country, but the most direct beneficiary is the family itself. China should do more to encourage Chinese families to have more children. Please note that he emphasized this view after the introduction of the two-child policy in our country. That is to say, the second child is not enough, and the state should continue to introduce a policy of "encouraging fertility".

In my personal opinion, Liang Jianzhang's views are too radical. Judging from the actual situation of China's population, the population policy of two children alone and two children in an all-round way is more reasonable in such an orderly and gradual manner.

The view of "encouraging fertility", represented by Liang Jianzhang, is still essentially focused on scale and quantity, which I personally call the "flow economy". While flow-based production, which is based on scale and quantity, helps to expand investment and consumption, thereby boosting the overall economy, its demand for national welfare is equally enormous.

The revival of the scale and quantity to drive the development of related industries is behind the decline of the traffic dividend. This phenomenon has had and continues to have a significant impact on a number of fast-growing industries.

One word the venture capital community likes to ask is business model. Looking back, the business model in many fields is to seize the so-called outlet and quickly encircle the land with the help of the power of capital. Enclosure, in other words, is the entrance to occupy large-scale traffic. Although the leading enterprises in many fields like to call themselves model innovation, objectively speaking, this is a traffic economy model that wins by quantity and scale, rather than a model of product innovation.

Over the past few years, there have been at least three representative industries that have eaten the traffic economic dividend, automobile, real estate and e-commerce. They are all industries that continue to grow at a high rate.

Just from the "old three" shortage era to come to the period, the car was once the representative of luxury goods. I remember at the beginning of the 21st century, a car reporter told me: it is said that real estate profits are huge, but cars are the real profiteers. Nowadays, cars have not only become popular in the city, but also in the countryside. Every Spring Festival, a large number of migrant farmers who come to the city drive home and park the streets and alleys in the village. This phenomenon has gradually extended from the eastern region to the rural areas in the central and western regions.

The rise of e-commerce is the companion of 4G and smart phones. The rapid growth of Taobao, Tmall, and JD.com was once stunning. When people think that the e-commerce platform has reached the ceiling, Pinduoduo has come out and exposed the huge consumer group of small-town youth. The huge pull of e-commerce platforms on social retail is beyond doubt, but fundamentally, this is more like an alternative to sales models, and the increase in social retail consumption is actually relatively stable.

After continuous rapid growth, automobiles and e-commerce have slowed down significantly. The car went first, and it was also the first to enter the adjustment. According to the statistical analysis of the China Association of Automobile Manufacturers, automobile production and sales in 2018 fell by 4.2% and 2.8% respectively from the same period last year, which was the first decline in 28 years. From January to September this year, China's automobile production and sales were 18.149 million units and 18.371 million units, down 11.4% and 10.3% year-on-year, and negative growth throughout the year has become a foregone conclusion, and is expected to be between -8% and -10%. This is also the balance result of the new energy vehicles after maintaining more than 20% growth.

In the years when e-commerce first appeared on the stage, the growth rate was amazing, but it gradually declined after 2015. From 2015 to 2018, the growth rate of online retail sales was 33.3%, 26.2%, 39.17% and 23.9%, respectively, and it has fallen back to 16.8% in the first three quarters of this year. The growth of e-commerce last year and this year, a large basic force is from the support of small-town youth.

Real estate has experienced a similar growth curve. This is reflected in the increase in real estate investment, sales area of commercial housing and sales. As you know, since the housing marketization, the number of bases for real estate investment and commercial housing sales has been relatively large at the beginning, but in the hottest years, real estate investment has increased by more than 100%. The price increase of many real estate in big cities has also risen at a curve of 45 degrees in most years from 2004 to 2016.

In the second half of 2018, many core data of real estate finally stabilized. From January to September 2019, the national real estate development investment increased by 10.5% year-on-year, and the sales of commercial housing increased by 7.1%, which is a good figure. However, the sales area of commercial housing has been negative growth. This is, of course, due to this round of strict real estate regulations.

Even without such strict regulation, as far as the industry's own laws are concerned, the growth momentum of real estate has decayed. Overall, urban housing conditions have been greatly improved, and the new demand is limited; rising house prices have also raised the threshold for house purchases; financial risks under high house prices have increased, and some investment housing demand with lower risk appetite will also be prohibitive.

The high growth of real estate for many years, like automobiles and e-commerce, relies on the dividends of the traffic economy. The cornerstone of the traffic dividend is the demographic dividend. That's why when real estate developers choose to enter a new city, one of the factors they must consider is the number of net inflows. When the demographic dividend fades and the traffic dividend decays, these scale and volume-driven industries will inevitably slow down. They have to seek growth motivated by connotation and stock.

Although auto and real estate practitioners always expect to introduce stimulating policies again, after the traffic dividend enters the platform finishing period, even if it is stimulated, its marginal effect will gradually decrease, while the risk will accumulate exponentially. Rationally speaking, no industry can run at high speed forever. The head housing enterprise obviously knows this reason, so it chooses to control speed and reduce speed.

Automobiles, e-commerce and real estate, after years of high growth, are all returning to normal industries. This requires practitioners to find a mindset that matches the normal industry, and business owners find strategies that fit into the normal industry. But there is no need to be pessimistic, due to our large population base, especially after the rapid development of China's economy has cultivated a large middle-class income class, including real estate, many industries still have a strong market depth to grow. In terms of career options, real estate is still a good industry within 10 years.