With the booming development of China's real estate market in recent years, mortgages, developers and urban investment have become the three pillars of the domestic economy. However, borrowing in these three areas has totaled $173 trillion, more than three times China's GDP. Where exactly is such a huge debt?
Let's start with mortgages. China's real estate market has maintained rapid development, and people are keen to invest in real estate. In order to meet the housing needs of the general public, a large number of home buyers have applied for housing loans from banks. According to statistics, the total amount of housing loans in China has reached 73 trillion yuan. Where did this huge debt go?
Some believe they flowed into the real estate market and fueled the boom in the market. But there are also concerns that such high mortgage debt also increases financial risks. If the market adjusts and homebuyers fail to repay their loans on time, there will be a ripple effect that will lead to instability in the financial system.
Developer debt has also become a problem in the economy. Due to the boom in the real estate market, developers have invested heavily in buying land, building houses, etc. According to statistics, the current debt of developers has reached 40 trillion yuan. Where does this huge debt go?
On the one hand, developers borrow debt to buy land and create new real estate projects; On the other hand, they also have to invest in housing construction and marketing. At the same time, developers also need to bear the pressure brought by some real estate market control policies, such as purchase restrictions and loan restrictions. It is these pressures that allow developers to accumulate debt. If there is a sharp correction in the real estate market, developers will face huge financial pressures and even a wave of closures.
Urban investment debt is also a suspense in the economic field. With the advancement of China's urbanization process, local governments have carried out large-scale urban construction and infrastructure construction, so urban investment liabilities have also increased significantly, and now reach 60 trillion yuan. Most of this debt is used for land acquisition, infrastructure construction, public services, etc. However, some local governments and urban investment projects have adopted excessive borrowing and improper investment, resulting in excessive debt and difficulty in repayment. In this case, it not only puts pressure on local government finances, but also brings risks to the entire financial system.
In order to solve these problems, the government should take a series of measures. First of all, strengthen the regulation and control of the real estate market and curb the phenomenon of excessive investment and excessive borrowing. Second, promote cooperation and information sharing among financial institutions and improve the level of risk management. At the same time, the government should also encourage enterprises to carry out technological innovation and industrial upgrading, and promote the transformation and upgrading of the economic structure.
For ordinary consumers, it is also necessary to pay attention to risk control when buying a house. First of all, we must choose the appropriate purchase method and time according to your own economic strength. Secondly, when signing the purchase contract, carefully read the terms and consult professionals. Finally, make timely payments when it comes to mortgage payments and maintain a good credit history.
Recently, the property market ushered in the traditional "Golden Nine" sales season, but the national market is still running at low temperatures. In order to promote sales and drive payment collection, many developers are implementing the "price reduction promotion" strategy on a large scale. According to the first financial report, 12 of the top 20 housing companies have reduced their prices. Industry insiders revealed that in order to win the battle of gold nine silver ten to seize cash flow, the top 100 developers are basically stepping up the formulation of promotional plans. This means that in the next two months, the new home market sales will be dominated by "price reduction".
Not only that, many cities have also made major changes in order to cooperate with developers to sell houses at reduced prices. The first-tier city of Guangzhou has adjusted the reduction in the filing price of new homes for developers from the previous 6% to 20%. This means that the maximum amount that developers are allowed to reduce prices is 20%. As long as the developer wants, it can now be sold at 20% off. Small and medium-sized cities are more unscrupulous, and many third- and fourth-tier cities have relaxed the "fall restriction order", and there are no clear regulations for developers to reduce prices. This means that the "fall restriction order" has already existed in name only.
Why do places do this? The reason is simple: reducing the strength of the fall limit is mainly to give developers room to operate, because the limit limit limit limit the space for developers to "exchange price for volume". For the vast majority of developers, the priority is to quickly sell their homes for life-saving money. However, does the price reduction work? Useful, but not very useful. According to data from the Bureau of Statistics, commercial housing sales in August rose 4.9% month-on-month. However, from January to August, commercial housing sales still fell by 27.9% year-on-year.
Some people say that residential housing loans increased by 256.8 billion yuan in August, and 148.6 billion yuan in July, which is a very obvious rebound signal. But we need to pay attention to two points: First, in the context of the central bank's unexpected interest rate cut, liquidity is very large, and there will always be capital flowing to the property market. From the perspective of residential transaction types, these new mortgages are all from the wealthy group, and the transaction volume of more than 10 million real estate in the main 10 cities in the country in August increased significantly month-on-month; Second, mortgages rose sharply month-on-month in August, but still fell year-on-year. And personal housing loans accounted for new loans (21% in August), which has not returned to more than 25% for more than a year. Therefore, the signal is clear, the confidence of ordinary buyers who just need to buy a house is still very low, and the property market is mainly supported by rich people.
This year, the number of property market regulation and control has reached the point where the statistics are not clear. But one thing is certain: this year's property market regulation has set a historical record and entered the annals of real estate history. Regulation comes and goes, but residents' willingness to buy a house just can't be mentioned, what is the reason behind this? Why are people reluctant to buy a house now?
Personally, I believe that there are mainly the following reasons:
The first reason: the state-defined unemployment must meet four conditions: ability to work, employment requirements, unemployed, and registered as unemployed. Compared with this standard, it is not difficult to find that many unemployed people around them are actually unaccounted for, and the unemployment rate actually reflects the real status quo of the current society, economy, enterprises, and residents' savings. Frankly speaking, due to repeated epidemics, poor global environment, supply chain problems, etc., the vast majority of people have lived in a difficult life in the past two years - unemployment, layoffs, and wage cuts have led to a sharp decline in household income, and natural consumption has also been downgraded. Basic life is affected, not to mention tens of millions of consumer spending on housing purchases?
The second reason is that the myth that house prices only rise but not fall has been completely broken, and buying a house is no longer a stable business. Since the second half of last year, house prices have fallen in countless cities. We won't talk about small cities and small counties. Only look at the first and second tiers, provincial capitals, national central cities, and economically strong cities. City Finance and Economics compared the housing price trends of 70 large and medium-sized cities in the past four years and concluded that in August, 22 of the 27 provincial capitals fell and 12 returned to at least three or four years ago. The housing prices of provincial capitals have fallen through, not to mention the low-level cities whose populations have been siphon all year round.
A severe reversal in house price expectations has disappeared with the confidence of buyers, which is more important than gold. Not only that, in many cities with large housing prices in the past two years, the plot of "supply cut" is vividly staged. In the past two years, the number of cases of banks suing for mortgage defaults and supply cuts has increased significantly, and the number of foreclosure houses has skyrocketed, from 500,000 units in 2019 to more than 1.6 million units in 2021. Somehow, the data for 2022 is no longer visible, and websites such as Ali Foreclosure no longer show real-time data.
The third reason is: residents really can't increase leverage and are still actively reducing leverage, and there is a situation of early repayment of housing loans in many places. In addition to the above-mentioned factors such as the insecurity of off-plan delivery, the uncertainty of the epidemic, and the reversal of house price expectations, I personally believe that another major reason for the significant decrease in the enthusiasm of the residential sector to buy houses in the past two years is that the leverage ratio of residents has peaked and cannot be leveraged.
According to data from the Bank for International Settlements (BIS), at the end of 2020, the leverage ratio of the mainland residential sector was 72.44%, and the total debt of residents exceeded 73 trillion yuan. According to this data and the discrepancy released by the central bank, China's macro leverage ratio fell by 6.3% in 2021, from 270.1% at the end of 2020 to 263.8%, of which the leverage ratio of the residential sector remained unchanged from the end of 2020 at 62.2%.
It is worth mentioning that the leverage ratio of the mainland residential sector is the fastest climbing rate among all sectors, from less than 5% in 2000 to 62.2% at present. On average over the past two years, the residential leverage ratio has still maintained an annual growth rate of about 3 percentage points. However, things are changing after entering 2022: the NIFD Quarterly Report released by the National Finance and Development Laboratory shows that the leverage ratio of the residential sector fell by 0.1 percentage points in the first quarter of 2022, from 62.2% at the end of 2021 to 62.1%.
In short, under the current economic situation in China, the huge debt problems of housing loans, developers and urban investment companies need to be paid attention to and solved. The government, financial institutions, market entities and consumers should all work together to safeguard the healthy development of China's economy.