The third- and fourth-tier property market can't go back!

Author: Yu Fei

01

Encourage college students to buy a home

In the context of poor market conditions, cities are struggling to sell houses. Since last year, some people have mobilized migrant workers to buy houses in the city, some have mobilized public officials to buy houses, and some have encouraged college students to buy houses.

For example, in Shenyang, it is clear that full-time students and new graduates of colleges and secondary vocational schools (within 5 years of graduation) will be given a full deed tax subsidy for the purchase of newly built commercial housing, of which the current students will be given a house purchase subsidy of 200 yuan/square meter.

Hohhot, fresh graduates with ordinary full-time bachelor's degree or above (within 3 years in the previous session), meet certain conditions, can buy a house at half price.

These are still aimed at graduates, and Zhoukou, Henan Province, has recently reached out to current students.

Henan has been in the past few days with controversial news, Zhengzhou is still in the whirlpool, and Zhoukou's new policy on the college students' provident fund has been pushed to the hot search again.

On November 20, the Zhoukou Provident Fund Management Center issued a new policy:

In order to further attract and retain college graduates to start a business and work in Zhoukou, and enhance their sense of gain, happiness and security in urban development, the Municipal Housing Provident Fund Management Center has launched a prepaid housing provident fund policy for college students, and college students who prepay the housing provident fund will enjoy the policy of 600,000 yuan in the upper limit of the loan amount for talent introduction if they buy the first self-owned house in Zhoukou City within five years after graduation.

In addition, Zhoukou City also said:

After opening a personal account, college students need to pay 1,008 yuan in advance every month, and pay for more than half a year, and can enjoy the preferential policy of the upper limit of 600,000 yuan in loan amount within five years after graduation.

It is said to enhance the sense of gain, happiness and security of college students in urban development. In fact, there are only two purposes:

First, guide college students to buy houses in Zhoukou.

Second, use the provident fund to pay to retain college students to work in Zhoukou.

According to public information, in 2017, when Wuhan launched a war to grab people and proposed the "One Million College Students to Study in Han" plan, similar measures were also introduced for piloting, proposing to allow college students to contribute to the housing provident fund in a voluntary way.

However, due to the controversy, it was finally stopped after three years of piloting.

The controversy is in three areas:

First of all, everyone thinks that students' vocation is to study, and they should not think about buying a house too early.

Secondly, encouraging college students to pay provident fund is to pressure parents, similar to openly encouraging gnawing at the elderly.

Finally, no matter how bleak the real estate market is, you shouldn't reach for the campus.

02

How much pressure is there at the mouth of the circumference

The three points of controversy are very reasonable, and I raise my hands in favor of them. I don't know how long Zhoukou's new deal can last.

It doesn't work either. According to the Zhoukou Municipal Bureau of Statistics, at the end of 2022, there were 4 higher education schools in Zhoukou, with 22,600 graduates and 78,700 students

But controversy aside, what we need to see is the pressure behind Zhou's strategy.

Zhoukou is a microcosm of most of the country's third- and fourth-tier cities, with weak industries, weak economies, continuous population outflows, and a downturn in the real estate market.

Like the trend of housing prices in most cities, under the pull of the last round of destocking and currency reform, Zhoukou housing prices have also risen rapidly.

In 2015, most of the housing prices in Zhoukou were still about 3,000 yuan, and in 2017, the average price exceeded 8,000 yuan, and some real estate prices even exceeded 10,000 yuan, or even 20,000 yuan.

Later, with the tightening of the shed reform, the housing price trend in Zhoukou was also the same as most third- and fourth-tier cities, all the way down, and the current average price fell to about 5,500 yuan, but in the shell, there are still some communities with a listing price of more than 20,000 yuan.

However, the listing price is all imaginary, and it is only meaningful if it can be traded. Such a listing price, in the current market, is purely a coffin to wipe powder to save face.

According to the Zhoukou Municipal Bureau of Statistics:

From January to October 2023, the decline in real estate investment in Zhoukou City narrowed, but it was still in a downward trend, and the city's real estate development investment fell by 22.0% year-on-year, 1.2 percentage points narrower than that from January to September. Among them, the sales area of commercial housing increased by 4.1%, and the sales of commercial housing decreased by 2.0%.

Zhoukou is a semi-industrial city, and its industrial strength is not strong enough, but its agricultural strength is more prominent. As a large output province in Henan, Zhoukou is the main responsibility, and Zhoukou's grain production ranks first in Henan.

The tertiary industry accounted for 17.4% of the primary industry (agriculture, forestry, sideline animal husbandry and fishery), 40.3% of the secondary industry (generalized industry), and 44.3% of the tertiary industry (generalized service industry).

In the first three quarters of this year, the industry, which was not thick enough, suffered a contraction in operating income and profit. Profits for large-scale industries fell 12% year-on-year in the first eight months.

Coupled with the decline in imports and exports and the sharp drop in real estate development investment, Zhoukou's GDP growth rate in the first three quarters significantly underperformed the national average growth rate of 5.2%, only 3.8%.

Source: Zhoukou Municipal Bureau of Statistics

In fact, in the first three quarters, the entire Henan Province was obviously deficient except for Zhengzhou's good performance.

Henan Province's GDP growth rate in the first three quarters was 3.8%, ranking fourth from the bottom among the 31 provincial-level administrative regions in the mainland, only slightly better than Shaanxi, Heilongjiang and Jiangxi.

Graphics: City Finance and Economics, Data: Statistical Bureaus of Provinces, Municipalities and Autonomous Regions

In addition, the population of Zhoukou is also declining. During this period, the population increased during the Qipu period, but continued to decline after the Qipu, with a decrease of 165,700 permanent residents in 2021 and 41,000 last year.

Graphics: City Finance and Economics, Data: Zhoukou Municipal Bureau of Statistics

Under the pressure of multiple pressures, the property market in Zhoukou basically has no prospects at all, and it is difficult to turn back housing prices.

In fact, this is the case in most third- and fourth-tier cities, as there is a saying circulating on the Internet that "there is no property market in third- and fourth-tier cities".

At present, housing prices in almost all third- and fourth-tier cities are being adjusted. According to the November data disclosed by the Weifang Research Institute, three

Latitude housing index of third-tier cities

Fourth-tier city latitude housing index

03

The fate of the third- and fourth-tier property market

The reason why most third- and fourth-tier cities do not have a property market is because the three cornerstones that determine a city's property market are industry, economy and population.

If the three are strong, the property market will inevitably be strong, and if the three are weak, there will be no property market at all. In most third- and fourth-tier cities, all three are disadvantages.

First, the industry is weak and the economy is weak.

China's urban development is largely policy-dependent, and in the past decade or two, good policies have been given to central cities. More importantly, provinces and autonomous regions such as Sichuan, Hubei, Hunan, Anhui, Henan, Shaanxi, Guangxi, Jilin, and Heilongjiang have opened the model of strong provincial capitals.

Good industries are given priority to provincial capitals, and high-quality education, medical care, public transportation and other resources are also given priority to provincial capitals. Ordinary third- and fourth-tier cities can't get a piece of the pie at all.

In the case of Sichuan Province, the GDP of Chengdu, the provincial capital, exceeds 2 trillion yuan, accounting for more than one-third of the GDP of Sichuan Province and 5.7 times that of the second city of Mianyang. It can be said that there are 21 cities in Sichuan, and the remaining 20 cities are the foil of Chengdu.

Graphics: City Finance and Economics, Data: Sichuan Provincial Bureau of Statistics

Hubei is slightly better, with Wuhan's GDP of 1.89 trillion yuan, and Xiangyang and Yichang, two cities with a level of more than 550 billion.

Graphics: City Finance and Economics, Data: Hubei Provincial Bureau of Statistics

It only makes sense for real estate to thrive under the prosperity of the economy. Conversely, the boom in real estate leads to a boom in the economy, and it is a false boom.

In other words, the property market without industrial and economic support is a dream, and sooner or later there will be a time to wake up from the dream.

Second, the influx of population.

Of the 286 cities that have released population data for 2022, only 128 cities have seen population growth, two are the same, and 156 cities are experiencing population decline.

More than half of the cities are in decline, and the vast majority of them are third- and fourth-tier cities.

Mapping: City Finance and Economics, Data: City Statistical Bureaus

In addition to the fluctuations in industry, economy, and population, there are also large negative factors for third- and fourth-tier cities, as well as a large amount of inventory.

Third, the daily inventory.

In the past few decades, real estate has grown at full speed, with residential buildings in first, second, third, fourth and fifth-tier cities springing up.

Huang Qifan once revealed that there is a serious surplus of houses in China, there is no need to continue to build, and there is no demand. 20% of the population has built 50% of the world's houses.

In March this year, the Ministry of Housing and Urban-Rural Development released a set of data, showing that there are 600 million buildings in the country.

Although these buildings include residential housing, factories, office buildings, government agencies, etc., generally speaking, urban residential buildings (commercial housing, residential buildings, small property rights, industrial dormitories) account for more than half, and the vast majority of rural buildings are residential.

Based on this estimate, there should be about 400 million houses that belong to the residential nature, which is an astronomical number when converted into a complete set. And most of these redundant houses are concentrated in the vast third- and fourth-tier cities.

The industry and economy are weak, the population is decreasing, and the inventory cannot be digested, how to solve this knot?

Therefore, this number has been emphasizing: more and more third- and fourth-tier cities, housing prices will be "Hegang", unstoppable.