Key takeaways:
Since 2004, the mainland real estate market has basically entered a stable cycle. With real estate development investment as the symbol, we can divide these 9 years into 3 cycles, with an average of about 3 years per cycle. During this period, the real estate trend has a high correlation with policy regulation, the basic house price is high, the risk is large, and the people's livelihood is affected, and the tightening regulation and control is carried out. In order to develop the economy and ensure people's livelihood, expansionary regulation and control has been carried out.
This article combines the specific content of the regulatory policies in each period with the real estate trend.
Risk Warning: The reference materials are not comprehensive enough
Cyclical cycle (2004–2013)
Figure 1.1.1: A cycle of about 3 years
Source: Wind South China Studies
【2004-2008】
Because the rapid rise in housing prices directly affects the improvement of the housing conditions of urban residents, affects financial security and social stability, and even affects the healthy operation of the entire national economy, so the regulation and control policies related to real estate are also on the agenda.
From the perspective of time, in fact, the regulation of real estate has begun to appear since June 2003. At that time, the cumulative amount of real estate development investment was rising year-on-year, up to more than 30%, and the house price was also rising steadily, and the national housing sales price index reached 105 (in hindsight, this house price increase was not high). At this time, the People's Bank of China issued the "Notice on Further Strengthening the Management of Real Estate Credit Business", which began to tighten funds from both enterprises and residents. On the enterprise side, the enterprise's own funds shall not be less than 30% of the total investment in the development project, and the mortgage loan shall be issued to the land reserve institution, and the loan amount shall not exceed 70% of the assessed value of the acquired land, nor shall it issue a loan for the payment of the land transfer fee. On the resident side, the down payment ratio of the first suite is still maintained at 20%, the down payment ratio of the second suite is increased, the credit ratio of personal commercial housing loans shall not exceed 60%, and the loan term shall not exceed 10 years. But in hindsight, these initiatives only stabilized house prices for about three months, and starting in September 2003, house prices began a crazy round of growth.
Figure 1.2.1: Real estate investment and house prices at the time of the initial regulation in June 2003
In March 2005, the "Eight Articles of the State" was born, and stable housing prices rose to a political height for the first time. From the perspective of specific measures, the "Eight Articles of the State" mainly start from the two aspects of supply and demand. On the supply side, increase the area of land supply. There is a lot of ink on the demand side, mainly to control passive housing demand and limit unreasonable demand. In order to achieve better results, the "Eight Articles of the State" even require local governments to effectively assume the responsibility of stabilizing housing prices. Later, in June, the detailed rules of the seven ministries and commissions for strengthening the regulation and control were issued, which paid more attention to improving the housing supply structure, regulating and meeting the construction needs of low- and medium-priced ordinary commodity housing and affordable housing, and also adjusting the business tax policy in the housing transfer link from the perspective of taxation to limit speculative demand. In August, CBRC Document No. 212 tightened the threshold for the issuance of real estate trusts, imposing strict restrictions on the threshold for the issuance of real estate trusts. In October, the State Administration of Taxation once again emphasized the taxation of second-hand housing transactions, when transferring the property, it is necessary to achieve the unified management of various taxes, not only responsible for the collection of deed tax, other taxes such as business tax, urban construction tax, education surcharge, personal income tax, land value-added tax, stamp duty must also be collected at the same time.
Since the beginning of the "Eight Articles of the State", there has been a significant decline in both housing prices and real estate development investment. At the end of 2005, the national housing sales price index fell from 110.8 at the end of 2014 to 106.5, and the cumulative amount of real estate development investment completed fell from 28.1% at the end of 2014 to 20.9% year-on-year. Although there has been a sharp decline, in fact, in the long run, the relevant data is still extraordinary.
Figure 1.2.2: The real estate market has been declining significantly since 2005
In 2006, regulation continued. In May, the State Council's "Six-Point Opinions on Promoting the Healthy Development of the Real Estate Industry" was released, but from the content point of view, it is only a repetition of the previous policy, and it is not new. Subsequently, the "Opinions on Adjusting the Housing Supply Structure and Stabilizing Housing Prices" of the nine major ministries and commissions was forwarded by the State Council to continue to adjust the housing supply structure, such as the proportion of housing area under 90 square meters of the set building area needs to reach more than 70% of the total area of development and construction, and also suppress the demand from the perspective of tax and housing purchase funds, such as from June 1, 2006, the full amount of business tax is levied on the purchase of housing for less than 5 years when the transaction is transferred, and if the transaction is changed for more than 5 years (including 5 years), the sales tax is exempted from business tax. For the purchase of non-ordinary housing for more than 5 years (including 5 years), the sales tax will be levied according to the difference between the income from the sale of the house minus the price of the house purchased, and from June 1, 2006, the down payment ratio of personal housing mortgage loan shall not be less than 30%, but the down payment ratio of 20% shall still be implemented for the purchase of self-occupied housing with a building area of 90 square meters or less. In addition, increase the disposal of idle land, land idle for 2 years will be recovered the right to use, urge all localities to establish a low-rent housing system within the year, and reiterate that real estate enterprises that do not have loans such as 35% of the project capital ratio are not allowed to lend.
Under various regulatory measures, although the growth rate of real estate is still high, it has at least begun to stabilize downwards, but after entering 2007, whether it is the year-on-year growth rate of real estate development investment completion or housing prices, it has turned upwards. In September 2007, regulatory measures appeared again, this time, the People's Bank of China issued the "Notice on Strengthening the Credit Management of Commercial Real Estate", which has more specific provisions on the down payment for the purchase of houses, compared with the previous regulations, mainly the down payment of two suites (including) and above housing is increased to 40%, and the down payment of commercial and residential loans and commercial housing loans is also required. In December, the People's Bank of China issued a supplementary notice clarifying the number of mortgages to be determined on the basis of the borrower's family (including the borrower, spouse and minor children). At the same time, for families who have used bank loans/provident fund loans to purchase their first self-occupied housing, if their per capita housing area is lower than the local average, and apply for housing loans from commercial banks again, they can follow the first self-housing loan policy.
Table 1.2.1: Real Estate Regulation Policies for the Period 2003-2008
Source: Public Information South China Studies
【2008-2010】
The 2008 international financial crisis broke the upward trend that was difficult to suppress in the domestic real estate market. In September 2007, the cumulative sales area of commercial housing peaked year-on-year, in February 2008, the cumulative growth rate of newly started housing area, construction area and completed area peaked year-on-year, in March 2008, the national housing price index peaked, and in June, the cumulative growth rate of real estate development investment peaked year-on-year. Since then, real estate-related indicators have fallen across the board.
Under the influence of the financial crisis, imports and exports fell in a shock-like manner, followed by real estate investment, manufacturing investment and consumption, and the income and GDP of urban residents continued to decline after peaking in March and June 2007, respectively. At the end of 2008, real GDP grew by only 7.1% year-on-year in the quarter, down more than half from its peak of 15%.
In response to the economic downturn, while significantly increasing infrastructure investment, the real estate policy was changed from suppression to support. Specifically, the policy mainly starts from the two dimensions of supply and demand. On the demand side, the real lending rate will be reduced, while tax relief will be reduced. On the supply side, it is to broaden the financing channels for real estate enterprises.
In December 2008, the sales area and completed area of commercial housing bottomed out, in February 2009, the area of new construction reached the bottom, and the construction area bottomed out in May. The cumulative amount of overall real estate development investment completed bottomed out in March 2009. Since then, the real estate industry has entered a recovery mode, and the annual investment growth rate of real estate development investment in 2009 was 16.1%.
Table 1.3.1: Real Estate Support Policies for 2008
【2010-2013】
With the recovery of real estate investment, house prices have also begun to rise significantly, and at the end of 2009, the national housing price index has reached 105.8. Under the pressure of rising housing prices, on December 14, 2009, Premier Wen Jiabao presided over the executive meeting of the State Council to study and improve the policies and measures to promote the healthy development of the real estate market ("Four Articles of the State"), requiring appropriate increases in the supply of land for medium and low prices, small and medium-sized sets of ordinary commodity housing and public rental housing, improving the efficiency of land supply and use, curbing investment speculative housing purchases, improving the system of land bidding, auctioning and listing and pre-sale of commercial housing, and promoting the construction of affordable housing projects on a large scale. After the emergence of the "Four Articles of the State", the market expects that the policy may be tightened, but due to the relatively general content of the "Four Articles of the State", the market generally believes that there will be detailed rules.
In January 2010, the issuance of the Notice of the State Council on Promoting the Stable and Healthy Development of the Real Estate Market meant the promulgation of the detailed rules. From the content point of view, it is mainly to adjust the preferential policies in 2008, and for the two suites, there is no longer a distinction between improved or non-improved, and the down payment is 40%. Other parts basically require the strict implementation of the previous policies, and really strong regulatory measures have not appeared.
In March 2010, the national housing sales price index has reached 110.6, and the house price increase once again challenged the previous peak. On April 14, the National Standing Committee upgraded the regulation and upgrading, clarifying that the down payment ratio of the second suite was increased to 50%, and the down payment of the first suite was higher than 90 square meters. Subsequently, on the 17th, the State Council issued the "Notice on Resolutely Curbing the Excessive Rise in Housing Prices in Some Cities", which continued to increase the weight on the basis of the policy of the National Standing Committee, and required commercial banks to significantly increase the three-suite housing loan while implementing the assessment mechanism, or even not issue it. For the first time, it was proposed that local people's governments may take temporary measures to limit the number of house purchases within a certain period of time [1]. Accelerate the study and formulation of tax policies to guide individuals' reasonable housing consumption and regulate personal real estate income, laying the foundation for real estate tax pilots in Shanghai and Chongqing. In addition, it is also required to increase the effective supply of housing, adhere to and improve the land bidding, auction and listing system, and strengthen market supervision.
In January 2011, the Notice on Issues Related to Further Improving the Regulation and Control of the Real Estate Market was issued, and the regulation was upgraded again, increasing the down payment ratio of the second suite to 60%, which continues to this day. At the same time, the previously vague local purchase restriction policy was officially introduced, clarifying that local households are limited to 2 suites, and non-local household registration resident families that can provide local tax payment certificates or social insurance payment certificates are limited to 1 set of housing (including newly built commercial housing and second-hand housing).
Under various policies, the real estate market has gradually cooled, in June 2012, the cumulative investment in real estate development fell from 38.1% in June 2010 to 16.6% year-on-year, and the average price of 100 cities fell to -2.41% year-on-year in the same period.
Figure 1.4.1: In 2012, the real estate market cooled significantly
Under economic pressure, on June 8, 2012, the central bank began to cut interest rates, the real estate market also ushered in a rebound, and house prices began to rebound significantly. Under the pressure of housing prices, in order to avoid re-taking the old road, real estate regulation and control policies have been introduced again. On February 20, 2013, the executive meeting of the State Council clarified five specific policy measures, mainly requiring all localities to formulate and publish annual price control targets for newly built commercial housing. Once again, we will adhere to the implementation of the regulation and control policy with purchase restrictions and loan restrictions as the core, resolutely crack down on speculative housing purchases, and once again after 2011, we have again proposed to require all localities to announce annual housing price control targets. In March 2013, the State Council issued the Notice on Continuing to Do a Good Job in Regulating the Real Estate Market, which is basically a refinement of the content of the previous National Standing Committee, and emphasizes that the purchase restriction area should cover all administrative areas of the city.
Figure 1.4.2: 2011 ushered in a rate cut cycle
Table 1.4.1: Real estate regulation and control policies from 2010 to 2013
[1] Shenzhen introduced specific purchase restriction rules in September, limiting the purchase of 2 suites for local households and 1 set for foreign households, and requiring more than 1 year to pay social security or personal tax certificates. Subsequently, Beijing, Shanghai, Guangzhou, Shenzhen and other cities have successively issued "purchase restriction orders".
Author: South China Futures Research Institute Dai Chaosheng Z0014822
Disclaimer: The Content is for communication purposes only and does not constitute any investment advice. Investment is risky, and you need to be cautious when entering the market.