Today, I try to summarize how Zhang Wuchang answered the following questions: 1. Can house prices be predicted; 2. Is the collapse of the Japanese property market a tulip bubble? 3. How harmful is tulip foam? 4. Will Chinese housing prices repeat the mistakes of Japan?
Note: This article mainly refers to Zhang Wuchang's Economic Interpretations 2014 Revised Edition, Volume III, Chapter 1: The Nature of Market Prices.
1. Can house prices be predicted?
His answer was, no.
1.1, the nature of housing prices
The price of the building is the so-called market price, which is essentially a commission price, and the market price is the relative price when trading in the market.
Let's first look at the example of apples, for example, an apple sells for 2.5 yuan, 2.5 yuan is the price, 1 is the "quantity", what is the amount, the apple has the size, sugar and other qualities, then Zhang Wu often calls this amount the entrusted amount (size and sweetness entrust "one" This measure is priced).
There are relatively few factors that affect the market price of Apple, that is, freight, supply at that time, and the market price of other alternative items. In other words, Apple's transaction fees are relatively small.
Not to mention, the land, years, lots, etc. are all entrusted to a square to be priced, and the house, as an asset, will contain many transaction costs (such as property rights definition fees, measurement fees, information costs, legal and contract fees, etc.), whether the price is high or low, no one can predict.
1.2, the impact of cost and momentum on housing prices
First of all, I understand that the easiest items to be built, such as real estate, art, and then stocks and bitcoins (have been speculated to more than $60,000 / a piece, the "speculation" here is the cost).
Easy-to-build items have such characteristics: durable and can be sold again. The items listed above are in line with these two characteristics, so they are easy to cost.
I'm not going to list the developers' means of costing, but here I want to talk about why they can build the cost.
We all have two concepts: 1, the price is high quality, 2, the price is high, the demand is high. Note: The price is high quality, generally speaking, it is right, but it is not necessarily right.
These two factors can be used by cost and momentum, but the second factor is high in price and demand, occupying a larger ratio, which is Zhang Wuchang's view.
1.3, the purpose of cost and momentum is to increase demand
For "increasing demand" and "increasing demand", we should distinguish between two different concepts.
"Increased demand" means increasing demand by lowering prices, while "increasing demand" means increasing demand through other means that do not adjust prices.
In other words, "increasing demand" is the usual price reduction promotion of merchants, using the law of demand, and "increasing demand" is the marketing of the brand, so that more people understand the brand, and the demand increases, rather than through price means.
1.4. House prices break through the constraints of rent-to-sales ratio
One factor in analyzing house prices is to look at the rent-to-sales ratio, if only from the current rent-to-sales ratio of house prices, it is no longer suitable for buying a house (in August, I wrote an article "China is still suitable for buying a house!"). " is mentioned).
The analysis of the rent-to-sales ratio is actually to calculate whether the house price is too high or too low by converting the current price of the asset, and the discount is to convert the amount of the future house rented into the current market price through the current interest rate (which belongs to the category of Fisher and Friedman's interest theory). However, people who need to buy a house do not care about the existing rental value discount, but look at the discount of the expected rental value, and even they do not care about the rental value, but the house price is expected to appreciate. In other words, discounting does not constrain the demand for house prices affected by cost.
Is the collapse of the Japanese property market a tulip bubble?
No.
The main reason for the tulip bubble is that the citizens of the Netherlands in the past did not know that the cultivation of these rare tulip varieties was actually not so difficult.
The cause of the collapse of the Japanese property market was that Japan banned the import of agricultural products that year, and in 1975, in Tokyo, tomatoes retailed for $5 / catty. Banning the import of agricultural products has the effect of greatly increasing land prices. Eventually, in the early 1980s, due to the urgent need for funds, the borrowing soared, and by 1986, property prices had plummeted by more than 80%.
In other words, Japan's housing bubble is mainly the result of the inflation of borrowing brought about by monetary policy.
Third, how harmful is tulip foam?
Not big, is a local effect.
Several history books say that the tulip crisis was a decontamination hazard to the Dutch economy at the time.
Economist Warren Scoville conducted in-depth research in the 1960s and concluded that the price of tulips in the Netherlands rose and fell sharply that year, but there was no economic crisis.
In other words, the tulip bubble is not caused by borrowing inflation, and the impact on the overall economy is only partial.
Will Chinese housing prices repeat the mistakes of Japan?
Zhang Wuchang's answer was, no, but worry about the bubble of the cattle's intuition.
China did not have the problem of borrowing inflation caused by Monetary Policy like Japan 10 years ago, and since 2017, China has also successively leveraged in finance. What he said was worried that the herds would intuitively bubble.
Recently, many writers have said that there are two suites to be careful, and the property price will fall. This is very similar to before 2008, China's house prices rose by about 4 times, fell by 1/4 before the crackdown, and some people began to shout to save the property market.
Back to the bubble of herd intuition, the main reason for this is that there is insufficient information. It means that like the intuition of the herd, blindly, in a swarm of follow-up to buy or sell, there will be a herd intuition bubble. This is a common occurrence in the stock market, especially in an asset market like Bitcoin. Houses don't have a herd-gut bubble like the stock market or Bitcoin.
This is related to the cost and momentum of the first subsection I mentioned earlier, that is, the cost and momentum still use insufficient information to promote the emergence of the cattle intuitive bubble, thereby increasing demand.
Therefore, for preventing the emergence of a herd of intuitive bubbles in the property market, Zhang Wuchang has three suggestions: 1. Publish the vacancy rate of buildings every three months by region; 2, publish the average monthly rent by region and every six months; 3, publish the number of new buildings by region and every six months.
We look back at Zhang Wuchang's analysis through the perspective of hindsight, we still basically correct, I hope that everyone will not blindly believe the predictions of these writers, I said that all predictions of the future will fall into the mud pit of the future! Because in 2010, some media asked Zhang Wuchang whether there was a bubble in the property market, and his answer was: I don't know. And the headline given by the media is: Zhang Wu often said that there is no bubble in the property market!