The government is leading the housing trade-in policy

Deng Haozhi taught to buy a house

2024-04-08 18:52Published in Guangdong Knowledge Officer, Real Estate Economist, Director of the All-China Economic Federation

Text: Deng Haozhi

Recently, various localities have begun to implement the "trade-in" of housing, which is a new and explosive policy. It has been said for more than ten years that houses can be "traded-in", but in the past it was all just a gimmick. The main body of the promotion of "trade-in" is basically real estate enterprises. Essentially, it's just that the buyer hands over the old house that is ready to be sold to a third party for consignment. Is it possible to sell, and at what price? There is no rigid constraint. In the past, the "old for the new" basically had no practical effect, and it was just an eye-catching propaganda method. This time it was completely different.

On April 2, the "trade-in" policy for commercial housing in Hai'an City, Jiangsu Province was officially implemented, and the first batch of 15 owners successfully realized housing replacement. It is understood that Hai'an implements the "old for new" policy in the core area of the city. This year, it is planned to implement 100 sets of "trade-in". Up to now, more than 400 groups have signed up for the event. According to the regulations, the recovered property will be operated by a specially established asset management company and can be used for rent, sale or as a financing tool. In addition, the government will give priority to the use of these properties for talent apartments, rental housing for migrant workers, or inclusion in the affordable rental housing system.

Recently, many places across the country have successively carried out trade-in pilots. For example, the Housing Management Bureau of Zhengzhou City, Henan Province and other departments jointly issued the "Zhengzhou City to Promote the Real Estate Market "Sell the Old and Buy the New, Trade in the Old for the New" Work Plan (Trial)" (hereinafter referred to as the "Plan"), which proposes that in 2024, Zhengzhou plans to complete the second-hand housing "sell the old and buy the new, and trade in the old for the new". Among them, through the acquisition of Zhengzhou Urban Development Group Co., Ltd. (hereinafter referred to as Zhengzhou Urban Development Group), 500 units of "house exchange" will be completed in the pilot stage of the program, and 5,000 units are planned to be completed throughout the year, and 5,000 units are planned to be completed throughout the year through market-oriented free transactions. The plan also proposes that all people who purchase newly built commercial housing through "trade-in" in 2024 can enjoy a 30% discount on the deed tax subsidy. According to the data of the Zhengzhou Housing Management Bureau, in 2023, the second-hand housing market in Zhengzhou will be 11.33 million square meters, and 102,000 units will be traded throughout the year. This also means that if the second-hand housing transaction volume in Zhengzhou this year remains at the level of 2023, the target scale of second-hand housing "trade-in" accounts for about 1/10 of the annual transaction volume.

Can the "trade-in" policy stimulate the recovery of the real estate market? I think it can definitely play a positive role.

First of all, the current real estate market has entered a market dominated by improvement. The biggest feature of this market is that existing customers want to change to a new house with a higher level of comfort. There is a large demand to sell the old and buy the new. The overall market size is huge.

Secondly, due to the downturn in the property market in the past two years, especially the large increase in the number of second-hand listings, the sales rate has slowed down, resulting in many customers who need to sell one and buy one because the old house cannot be sold, and cannot replace the new house. This, in turn, has lowered the sales of new homes. And the above-mentioned "trade-in" policy just solves this pain point. Therefore, it will definitely be welcomed by the market, and it can also stimulate new home sales and revitalize the second-hand housing market.

However, it should be noted that this time, the local government-led trade-in is that the government's asset management department actually collects the old house and pays the corresponding amount to the customer. There is uncertainty about whether the house can be rented, whether it can be sold, and at what price. This will also mean that the risks will be borne by government-owned enterprises. This has both the risk of subsequent sale and uncertain lease. There is also a risk that the appraisal price will be inaccurate and the subsequent housing prices will continue to fall, resulting in the loss of state-owned assets. Therefore, it can be said that this time the trade-in policy of buying a house, the local government really showed sincerity, but it also took a big risk.

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Personal opinion, for reference only