The three major policies are very lively, but the magnitude is not enough to stabilize the property market

Ding Jiangang real estate

2024-04-24 11:48Posted in Zhejiang real estate creators

The three major policies are very lively, but the magnitude is not enough to stabilize the property market

Recently, there have been rumors in the market that the national level will take major measures to solve the real estate problem, or the acquisition of unfinished buildings in various places will be converted into affordable housing, which will be sold or rented out.

As soon as the news came out, it aroused heated discussions from all walks of life, and some people thought that this was a feasible new idea, which not only solved the problem of unfinished buildings, but also did not need to build additional affordable housing.

Some people also expressed concerns, which unfinished building to receive, what price to receive, and how to digest the unfinished building received?

Recently, many policies have been implemented in various places to stabilize the property market:

More than 30 cities, including Zhengzhou, Nanjing, Nantong, Zibo, Ningbo, Yancheng and Jinan, expressed their support for housing "trade-in";

Zhejiang Province has issued the country's first guiding opinions on promoting the independent renewal of old urban communities.

Among the economic data for the first quarter of 2024, the real estate data was the most dismal.

In the first quarter, the national real estate development investment decreased by 9.5 percent year-on-year, the sales area of newly built commercial buildings decreased by 19.4 percent year-on-year, the sales volume decreased by 27.6 percent year-on-year, and the funds in place for real estate development enterprises decreased by 26.0 percent year-on-year.

The real estate development prosperity index continued to fall, reaching 92.07 in March, and the index has been below 93 for three consecutive months.

Except for a few first- and second-tier cities, the vast majority of cities in the country have fully liberalized purchase restrictions or greatly relaxed purchase restrictions, and the purchase channel is unimpeded, but in terms of recent property market performance, only a small number of cities have ushered in a weak "small spring", and most of the city's new and second-hand housing transactions are flat.

There is no doubt that real estate remains the biggest drag on the economy as a whole, and it is also the source of systemic financial risk and local debt risk.

If the policy of acquiring unfinished buildings for affordable housing is introduced, coupled with the "three major policies" of housing "trade-in" and independent renewal of old communities, can the property market be stabilized?

State-owned enterprises will collect second-hand houses?

More than 30 cities push housing "trade-in"

Many people have participated in the "trade-in" activity of household appliances, but are you willing to try the "trade-in" of housing?

On April 1, Zhengzhou announced that it plans to complete 10,000 second-hand housing units by 2024, of which 5,000 units will be collected and stored by the government.

According to incomplete statistics, since 2023, more than 30 cities across the country have introduced the policy of "exchanging the old for the new" for housing. In addition to the conventional deed tax incentives or housing purchase subsidies, there are also two new models of "trade-in".

1. Consignment model.

The so-called consignment sale is to build a platform through linkage with real estate enterprises + intermediaries to help sell old houses.

Buyers, real estate companies, intermediaries sign a tripartite agreement, buyers first pay the new house subscription money to lock in the house, and the intermediary agency concentrates resources to give priority to the sale of the buyer's old house, if the old house is sold within a certain period of time, the new house can be purchased according to the process, if the old house is not sold, the real estate company will refund the new house subscription money.

Nanjing, Nantong, Zibo, Ningbo, Yancheng, Jinan and other cities have launched this model.

2. Acquisition model.

That is, state-owned enterprises or urban investment companies will buy old houses.

State-owned enterprises have formulated a plan for the acquisition of second-hand houses, and the old houses that meet certain conditions can be replaced with the new houses launched by the state-owned enterprises, and after third-party evaluation, the old house prices will be used to offset part of the new housing payment;

In September 2023, Taicang, Jiangsu Province took the lead in adopting this model, and since then, Yangzhou and Wuxi Liangxi District have followed suit.

The idea of "trade-in" housing is beautiful, but in practice it is difficult.

If it is a consignment model, all the intermediary can do is to concentrate resources on promoting the buyer's old house, but whether it can be successfully sold in the end depends on the market.

The acquisition model brings a huge test to the financial strength of the implementing entity, and the issues such as which people's houses are collected, how to price them, and where the funds for the acquisition come from need to be clarified.

Who will determine the fair price?

If you buy an old house at the market price, of course the owner is willing. However, if the local government buys the house at the market price to make affordable housing, it will be a high-cost affordable housing, and the local government can afford this cost?

If it is bought at a price significantly lower than the market price, why doesn't the owner sell it on the market himself?

How to save the "old and dilapidated" in the city center?

Zhejiang supports the independent renewal of old communities

On April 11, the Zhejiang Provincial Department of Construction held a press briefing to clarify the relevant processes and support policies on the "Guiding Opinions on Steadily Promoting the Pilot Work of Independent Renewal of Old Urban Communities (Trial)".

The pilot object is the "Implementation Opinions of the General Office of the People's Government of Zhejiang Province on Comprehensively Promoting the Transformation of Old Urban Communities" (Zhe Zheng Ban Fa [2020] No. 62) that is clear in the demolition and relocation combination of residential communities, that is, old urban communities with large safety hazards in housing structures, incomplete use functions, and poor repairability, and some or all of the houses can be demolished and rebuilt in accordance with the law.

Independent renewal, simply put, means that the owners of old communities are self-conscious and pay for the renovation out of their own pockets.

Previously, Yong'anli in Jiangshan City, Quzhou, and Zhegong New Village in Gongshu District, Hangzhou have adopted the independent renewal model.

But frankly, it's very difficult to update autonomously.

1. It is difficult to unify the opinions of the owners.

In the matter of self-renewal, the owner has 100% of the property rights.

According to the property law, the owner has the legal property right, and no one else can make decisions for the owner himself, and the owners' general meeting and the owners' committee are autonomous organizations, and no one can force any owner, but if one household does not agree, it is difficult to carry out the reconstruction work.

2. Where does the money come from?

Although since 1998, the welfare housing has ended, and the history of housing marketization has begun.

But there are still many people who have not changed their minds, and do not really know and understand that the house is their private property.

In particular, many of the owners who live in old communities have changed their houses from their original units or public housing. Some people naturally believe that the renovation of the house should be the government's business, and expect the government to pay for demolition or renovation.

3. It is difficult to promote.

There are many interests of the owners who coordinate, and it is difficult to unify these opinions on lighting, house design, indoor area, shared area, etc.

In addition, the design of the new community also involves issues such as planning and public facilities, which need to be solved one by one, and then go through various approval and bidding processes, which is very difficult to promote.

The successful demolition and construction of the 548-household Zhegong New Village is only a case, and it has lasted for 10 years, and it is still extremely difficult to promote and replicate as a model. For those old communities with thousands of households, it can be expected that the difficulty will only be greater.

Aerial view of Zhegong New Village before renovation

Source: Zhejiang Construction

Perhaps it is still necessary to learn from Shenzhen's market-oriented, rule-of-law, and updated subject model.

Shenzhen has relatively mature practice and exploration, and the "Shenzhen Special Economic Zone Urban Renewal Regulations", as a local law and regulation, has been implemented for more than three years.

There is the main body of urban organic renewal, market-oriented operation, and financial balance.

At the same time, important jurisprudential principles are followed: obey the majority and protect the minority.

For example, the redevelopment of an old community requires 95% of the owners, and if 95% of the area and 95% of the population agree, the government can intervene (which has been revised to double 85%).

Will the government buy unfinished buildings for affordable housing?

In recent years, a large number of private real estate enterprises have been thunderstormed, and even though various localities are actively promoting the "guaranteed delivery of buildings", there are still some unfinished buildings waiting to be solved.

But when the government buys unfinished buildings, who will they collect, at what price, and what will they do......

It is not known how many unfinished buildings there are, what the price is for acquiring them, and whether the official can afford them.

Even if the unfinished buildings are collected, those buildings are originally developed and built by thunderous real estate companies in accordance with the development of commercial housing, and the construction standards and unit area may not match the affordable housing, and there is a big problem in how to change to affordable housing.

These three property market policies sound very good, but in practice, each policy is full of difficulties.

Even if these three policies can be smoothly promoted, the impact on the overall market and the restoration and stability of people's confidence will not be enough.

The real estate market is still waiting for a blockbuster bailout policy at the central government level.

In the past 20 years, in the process of regulating and controlling the property market, the national eight, the sixth, the new eight, and the five have also emerged one after another.

Even with the National Nine Articles, A-shares have been in the battle to defend 3,000 points.

It may be time for the central government to come up with a policy package, but even if it will be able to stabilize the property market, it is uncertain.

The fundamental purpose of the bailout is to restore the hematopoietic function of the market itself, that is, to restore the normal market sales and flow rate, including commercial housing and second-hand housing, and any other expedient measures are only delaying time.

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