This article is written by Dr. Yujia Li, Principal Investigator of Guangdong Provincial Housing Policy Research Center
01.
The Central Economic Work Conference for the first time described China's current economic situation with "triple pressure". The meeting pointed out that all departments "must shoulder the responsibility of stabilizing the macro-economy, and all parties should actively introduce policies conducive to economic stability, the policy force should be appropriately advanced, the counter-cyclical policy should be strengthened, and the cross-cycle policy should be corrected and adjusted." This means that "steady growth" has once again become the focus of policy. In the special year of 2022 (the Olympic Games at the beginning of the year and the important conference at the end of the year), the significance of "steady growth" is even stronger.
Among them, it includes the adjustment of real estate policies. For example, supporting the development of long-term rental housing and meeting reasonable housing needs, these demand-side incentive policies that have not been mentioned for a long time have been proposed again. Moreover, at the "2021-2022 China Economic Annual Conference" of the Central Economic Work Conference, Ning Jizhe, deputy director of the National Development and Reform Commission and director of the National Bureau of Statistics, proposed that "real estate is a pillar industry".
Table: The country's previous statements on the status of "real estate pillar industry"
Also at this meeting, Han Wenxiu, deputy director of the Office of the Central Financial and Economic Commission in charge of daily work, pointed out that "the real estate industry is large in scale, long in chain, and involves a wide range of aspects, and occupies a fairly high share in the national economy, in the investment in fixed assets in the whole society, local fiscal revenue and the total loan volume of financial institutions, which has an important systemic impact on economic and financial stability and risk prevention." ”
This is a commentary on the status of real estate pillars. It is worth noting that for the statement of real estate policy, there have been obvious changes recently, especially the "pillar status" has been clarified again, which is quite unexpected, exceeding market expectations, why is this happening?
02.
Demand contraction, supply shock, and weak expectations, this figurative economic downturn "triple pressure" logic, in the real estate field is clearly reflected, and further with the real economy to form a transmission. For example, under the recent stress test of real estate de-bubble through long-term mechanism, developers, supply chains, banks, residents, local governments, etc., confidence and trust in real estate are declining.
A decline in confidence means that demand contracts, and the supply side is naturally impacted. It is manifested in the following aspects:
First, the risk expectations of banks have increased significantly, and they are no longer willing to increase loan delivery, and regulators have actively shouted to increase development loans, but banks have been slow to perform;
Second, the general contractor and supplier are no longer willing to be indefinitely defaulted by the developer, and there has been a large-scale shutdown;
Third, many buyers are no longer willing to buy off-plan houses pre-sold by developers, even brand developers, may be unreliable.
Fourth, local governments no longer condone developers to misappropriate pre-sale funds in violation of regulations, fearing that after the project is broken, the risk of maintaining stability will be thrown to the local government.
The real estate supply chain cycle is not smooth, and the supply side has been greatly impacted. Developers cut back to get land and start construction, and the back end "sells houses at a discount" and drops the completion to defend cash flow, which in turn exacerbates pessimistic expectations, and market confidence continues to weaken, which in turn further worsens developer funds. As a result, the whole chain of real estate has declined, and there has been double-digit negative growth in a single month for land acquisition, construction and sales. In June, the price of new houses in only 12 cities in 70 cities fell, and in November, the prices of new homes in 52 cities fell.
Table: First-hand house price index of 70 cities across the country
In the past, the expressions of real estate in various important meetings were placed in people's livelihood and social security, or in risk prevention. This central economic work conference put real estate in the "third item" of the 7 economic stability policies next year - structural policies should focus on smoothing the national economic cycle. In this way, it is not difficult to understand why the pillar status of real estate is once again emphasized. Judging from the detailed annotations of the leaders of the Central Financial and Economic Commission on this, the logic is very clear, and the real estate cycle drives the national economic cycle.
Obviously, under the unprecedentedly severe and complex international situation, in the context of the "special year" of 2022, whether based on political logic or economic logic, the importance of stability cannot be overemphasized. To "keep the word steady", the domestic cycle must be smoothed. Relying on China's huge market scope, huge Internet network, and upward momentum, any negative problems will be eliminated.
Whether it is empirical judgment or urgent situation, in order to smooth the national economic cycle, real estate must achieve a virtuous circle. So, about the virtuous circle of real estate, in less than a month, emphasized three times. The context is very clear, that is, to break through the blockage of the industry's supply and demand constraints, open up all aspects of production, distribution, circulation and consumption, smooth the whole chain of "land acquisition, financing, construction, construction, sales, and completion", and help open up the second pulse of the national economic cycle with a strong industrial chain.
03.
Governance of real estate, on the one hand, is the governance of the "high leverage, high land prices, high house prices" cycle formed by the paper drunken gold fans, bubble enjoyment of the distorted development, the result of which is "one industry prosperity, a hundred industries decline", the property owners "lie to win", young people, new citizens helplessly "lie flat", to create a domestic demand engine and common prosperity of the transformation goal gradually drifted away. This is what is being done right now.
On the other hand, it is to treat real estate as a normal industry, and after the mediocrity of industry income, the logical potential of the industry operation that should be there will be stimulated, which is the long industrial chain, strong driving force, and the chinese people's eternal pursuit and enthusiasm for a better and peaceful residence. This is what the meeting proposed to "adhere to the combination of rent and purchase, accelerate the development of the long-term rental housing market, and promote the construction of affordable housing."
It can be seen that in 2022, the market system and the guarantee system should be promoted simultaneously, the former is to help "stabilize the word", and the latter highlights the "steady progress". Explore new development models, such as multi-subject supply (non-developer monopoly), multi-channel supply (non-new land supply), micro-transformation and renewal of stock (to make up for the shortcomings of public services), and vigorously develop affordable rental housing.
The dialectical unity of steady words and steady progress is, in fact, the unity of short-term and long-term, long-term concentration, short-term strategy; the unity of steady growth and risk prevention, do not care that "one pool and one city" are all determined to win, but can be controlled locally. The disadvantages of real estate "frozen three feet" are not a day's cold, can not be fully committed to a battle, rely on pure political wisdom, dissolved in the long-term invisible.
Real estate is the biggest systemic risk we are facing at the moment, if it is not good, it may cause a chain of crisis response model, how can we avoid this crisis? The recent liquidation of the financial order is a good reference, and it can also be described as a stress test of the targeted blasting of real estate risks, but it also exposes the complexity and arduousness of real estate risks. At present, real estate is like a herd of elephants dancing on the roof, and the house itself is the economic fundamental, how to prevent the collapse of the house, the death and injury of the elephant?
On the one hand, we have to slim down the elephants, and on the other hand, we have to tamp down the heaviness of the roof. Now, the problem is that the elephants are heavy and want to be heavier; the roof is not as impenetrable as it seems. In recent field experiments on directional blasting risks, credit crunch, financial storms, and rapid declines in risk contagion and market expectations have been rapidly emerging, and negative feedback has been formed.
04.
When risk-oriented explosions occur simultaneously with "real estate taxes" in the context of common prosperity, great anticipation instability is created. Fortunately, we are strong-willed, wise in governance, strategic and circuitous. Future real estate policies should follow this logic:
First, risk is visualized. Whoever is sick gives medicine to whom, breaks the systemic risk into pieces, and feeds it piece by piece to the mouth of every adulterer. For example, the enterprises that have recently thunderstorm first clearly understood their own home chassis, the repayment of the repayment; those who are willing to take over the market, and then repay after the takeover; the difficult to revitalize, under the premise of macro-prudential, financial resources will be appropriately injected.
This treatment is called "five horses splitting the body". The division is very wise, it is divided into zeros, each has its own place, and after separation, the pain of each piece is very small, and the impact is small. Investors, stakeholders, all have to take responsibility, Evergrande Hong Kong stock price fell from more than a dozen Hong Kong dollars to 2 Hong Kong dollars, Liu Da had to cut meat to sell, this is the result of betting on "rigid payment", the past bet is right, the present and the future is not right.
To say this is to tell everyone, each subject, to be responsible for his own actions. Because the main responsibility is not illusory, it must be figurative. If the main responsibility is illusory, it is that the law does not blame the public, it must be "too big to fall", and the kidnapping policy.
Second, open the main door and block the crooked door. Under the huge political will, the government is in harmony with people and government decrees, and the first clear housing security system (public rental housing, guaranteed rental housing, and co-ownership) will be rapidly landed, and long-term rental housing will also be supported, and with affordable housing and co-ownership, build a housing supply system for new citizens and young people, which can be rented and sold. Its purpose is to unload the pressure of people's livelihood endured by the post-80s and post-90s "post-wave young people", whether it is "three mountains" or "five mountains".
Finally, the normalization of the real estate industry does not mean that it is possible to imagine a "new cycle", imagining that house prices will rebound, and the opportunity to "lie to earn" and "lie to win" has come again. If you think so, and once again stimulate the adrenaline and dopamine of speculation, then the buyer is conceited, and like the group of investors who follow Evergrande's damage, there is no regret in the future. Although there has been a round of property market recovery after the epidemic, second-hand house prices in many cities are still lying there, which is the future trend, and smashing in the hands may be the norm.
In the face of the patriarchs, "housing is not fried" repeatedly emphasized, but you do not listen, you have to moths to put out the fire, who can blame? At this time, you will know that property taxes can be detoured. Wayward entry, buying at the current high price, but forced to hold in the hand, the effect of this property tax is the same. The policy is very clear, encouraging reasonable demand, and the real estate entity part is the pillar industry. The virtuous circle of real estate that the state wants to promote is a cycle of reasonable demand, a cycle of affordable housing, and if you want to come in, it is the denominator.
This article originated from the financial world