Recently, Goldman Sachs released a forecast for the direction of the real estate market: domestic house prices will fall by 40% by 2027. And Goldman Sachs' forecast has sparked controversy in all walks of life. Some people believe that Goldman Sachs' prediction of the trend of A-shares is quite accurate, and it will certainly not be groundless to make a prediction of China's housing prices. At the same time, some people believe that Goldman Sachs lacks understanding of China's property market, but in fact, China's property market will be affected by policies to some extent. If the policy does not allow housing prices to fall sharply, housing prices will not fall at all.
In fact, there are three reasons given by those who think that Goldman Sachs' forecast is unreliable: first, many families in China now have a down payment ratio of 30%, and if China's housing prices fall by 40%, then buyers are likely to choose to cut off their payments. Second, many families in China are now betting their assets on real estate, and if housing prices fall by 40%, it will be impossible for many families to accept this reality. Third, if housing prices fall sharply, it will affect economic and financial stability, and governments at all levels will not ignore it and will come to the rescue.
It should be said that the above three reasons are indeed very convincing. But if you think about it carefully, it is full of loopholes: first, for families who just need it, they buy a house for their own use, and even if the house price falls by 40%, most of them will not choose to cut off the payment. Housing prices in the Beijing property market have fallen by 60-70% from their highs, and there is no large-scale supply interruption.
In addition, many families do bet their assets on real estate, but this does not mean that housing prices can only rise, not fall. If housing prices can only rise, not fall, then it does not conform to the objective law. Just like a stockholder who bets all his property on the stock market, if he encounters a bear market, he can only blame himself for seeing the wrong trend and admitting defeat.
In the end, if housing prices really fall by 40%, the government will introduce a bailout policy, so housing prices will not fall. In fact, the bailout policy can only delay the adjustment process of real estate in the short term and avoid big ups and downs in the real estate market, but it cannot change the general trend of housing prices. Housing prices in Wenzhou have fallen by 40% in the past two years, and there is no way to see that the bailout policy can hold up the high housing prices.
In fact, Goldman Sachs predicts a decline in domestic housing prices, not that all domestic city prices will fall by 40%. For example, in Zhuozhou, Yanjiao, Langfang and other property markets around Beijing, housing prices have fallen by more than 60%-70%, and it is not realistic to fall by another 40%. In addition, there are some third- and fourth-tier cities where housing prices are only 4-5,000 yuan per square meter, and the bubble is not large, and it is unlikely that there will be a 40% decline.
However, due to the existence of large real estate bubbles in first-tier cities such as Beijing, Shanghai and Shenzhen, as well as some second-tier cities, housing prices have been far out of the purchasing power of local residents. It is not impossible for house prices to fall by more than 40% in the next few years. Taking Shanghai as an example, the housing prices in the central city in 2021 were more than 100,000 yuan per square meter, and now they have fallen to 60,000-70,000 yuan per square meter. House prices have fallen by 30-40% from their peak. This has also debunked the myth that some people have said that housing prices in the core areas of first- and second-tier cities will only go up and not fall.
In fact, there is a trend in the rise and fall of domestic housing prices. Housing prices have been rising before, and even the introduction of various regulatory policies cannot curb their upward trend in the short term. At present, housing prices are generally trending downward, and it is difficult to completely reverse this trend. There is a high probability that there will be a correction in house prices in the future:
First, due to the impact of the epidemic, the income of domestic people has decreased or become unemployed, and the ability to buy houses has been seriously weakened, which can no longer support the current high housing prices. Therefore, the adjustment of housing prices in the next few years is a high probability thing. In addition, after experiencing the epidemic, people are now more and more rational and will decide whether to buy a house according to their actual situation, and will no longer buy a house impulsively as in the past.
Second, the mainland has now entered an era of moderate aging, with more and more elderly people and fewer and fewer young people. Older people already have a house and don't need to buy another one. At the same time, marriage and fertility rates continue to fall. Imagine that young people are not married, and the demand for buying a wedding house will decrease in the future. The decline in the fertility rate also means that the number of second- and third-child families will decrease, and the demand for improved housing will also decrease in the future.
Third, the rapid decline in new home sales and the rapid surge in second-hand home listings all indicate that there is increasing pressure on house prices to fall in the future. In March this year, the sales amount of the top 100 real estate companies in the country was only 358.3 billion. This means that this year, compared with last year, sales fell by 45.8%, halved the level.
At the same time, in March 2024, the number of new listings of second-hand homes nationwide increased by 35.6% month-on-month compared to February. Obviously, both new and second-hand houses are in the process of squeezing the bubble. There is still room for house prices to fall in the future.
Goldman Sachs' prediction that China's housing prices will fall by 40% has caused controversy? So, this possibility cannot be ruled out. The main reasons are: 1. The decline in residents' income cannot support high housing prices; 2. The mainland has entered a moderately aging society, and the demand for young people to buy houses is getting less and less; 3. Now the sales of new houses have fallen, and the number of second-hand housing listings has risen. This also indicates that domestic housing prices may continue to adjust in the future. Therefore, everyone should take Goldman Sachs' forecast as an important reference indicator, treat it with caution, and do not take it lightly.