Can the abolition of housing purchase restrictions save real estate?

Xie Yifeng

2024-05-11 17:48Posted in Guangdong China Urban Real Estate Research Institute, President of the real estate field creator

Text/Xie Yifeng

When Lao Han recently participated in the official online symposium on the current real estate situation and a new round of destocking and policy suggestions, he proposed that the housing purchase restrictions in 18 cities and counties in first-tier cities, Tianjin, Zhuhai and Hainan should be canceled in a timely manner, and a consensus has been formed.

It is expected that the first-tier cities in Beijing, Shanghai, Guangzhou and Shenzhen are expected to be fully canceled within the year (around the Golden September and Silver Ten), or the housing purchase restrictions will be canceled on a large scale, and the 18 cities and counties of Tianjin, Zhuhai and Hainan will fully cancel the housing purchase restrictions in the near future, which means that they will bid farewell to the era of no housing purchase restrictions.

Don't hesitate, it is urgent to cancel the restrictions on housing purchase in first-tier cities, Tianjin, Zhuhai, and Hainan (18 cities and counties). Avoid the real estate adjustment more and more sluggish, dragging down the economy.

First, why should the remaining first-tier cities, Tianjin, Zhuhai, and Hainan 18 cities and counties be destocked to cancel the housing purchase restrictions?

The main thing is that the timing is right, and the time has come to cancel. That is, the top priority is to open a new round of destocking, the speculation has been cleared, to avoid another accidental injury to improve demand, so that real estate can return to the market.

The siphoning effect of the so-called first-tier cities on the purchasing power of the surrounding markets after the lifting of purchase restrictions is no longer the focus of consideration, because the purchasing power, payment capacity, and income level of improvement demand and rigid demand are limited and the threshold is high.

First of all, don't worry about housing prices going up sharply. The short-term trend of market adjustment is the short-term trend of market adjustment, and the new round of destocking and alleviating debt pressure will promote the expectation of housing price increases.

Again, don't worry about a real estate bubble. The best strategy to curb the deterioration of real estate expectations is to stabilize housing prices, increase home buyers' confidence and asset appreciation, and turn banks' cautious lending into liberalization.

Finally, there is no need to be afraid of the lifting of housing purchase restrictions in first-tier cities. The abolition of housing purchase restrictions in first-tier cities is conducive to the rise of housing buying sentiment, the revitalization of the downturn in the property market, the release of improvement and the demand for multiple housing units, and the guarantee of housing delivery.

Second, why did such a housing demand side, the financing supply side of real estate enterprises, the housing system of simultaneous housing purchase and rent, the three major projects, and the policy of destocking not save real estate?

From the perspective of the mechanism for dealing with real estate risks and the ability to respond to real estate risks, the real estate has always lacked a mechanism for dealing with real estate risks, and it is impossible to predict real estate risks in advance, and to start the mechanism to prevent them, basically relying on meetings.

In the face of real estate risks, either a one-size-fits-all policy to save real estate, or printing money to solve real estate, the result is to leave sequelae, and the real estate market problem is not really solved from the supply side.

From the perspective of the timing of the introduction of the rescue real estate policy, it is basically behind the market for half a year to more than a year and a half, mainly because of the lack of risk and measures to deal with real estate risks, all of which rely on top-down promotion and lack of local initiative.

Judging from the scope and intensity of a series of stimulus policies on the housing demand side in the early stage, they are all squeezed toothpaste-type, limited policy scope and intensity, which is a small fight for the revitalization of real estate, and it is difficult to make the market recover and stabilize.

Judging from the scope and intensity of a series of supply-side policies for the financing of real estate enterprises in the early stage, they are all targeted and restrictive in scope and intensity, which requires huge funds to resolve the debts of real estate enterprises and enterprises, and to deliver buildings, which is a drop in the bucket.

Judging from the frequent and practical stimulus policies at both ends of supply and demand in the early stage, it can be called a big policy every quarter and a small policy at sunrise, which has a very limited impact on the real estate market, because the strength is limited and cannot be implemented.

The most critical policy at both ends of supply and demand is the source of funds and the difficulty of implementation, followed by the lack of supervision mechanism for policy implementation, the third is that financial institutions have their own implementation ideas for policy implementation, and finally the local government has no initiative.

Third, from the perspective of evaluating the effect of canceling and optimizing the destocking policy of cities with housing purchase restrictions, why can't we get rid of the weak market?

Judging from the effect of the cancellation of housing purchase restrictions in 36 cities such as Xiamen, Suzhou, Changsha, Chengdu, Hangzhou, and Xi'an, and the optimization of housing purchase restrictions in 14 cities such as Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Zhuhai, and Hainan (9 cities and counties).

Overall, the sustainability is poor, the transaction cannot meet expectations, the market can not get rid of the downturn, the effect is limited, the short-term property market is heating up, the supply is rising, and the sales transaction is rising slightly. After a brief period of resurgence, it was a stalemate.

Specifically, it is difficult to sell houses in real estate companies, and buyers only look at them but do not buy them. The number of people looking at new homes and inquiring about new homes and the number of listings have increased dramatically, but they have not been able to translate into transactions, and inventories have risen faster than sales.

As long as we can't break the negative cycle of real estate fundamentals, we can't get rid of the market weakness. The first is the change in the expectations of home buyers (toothpaste policy and housing price decline expectations, real estate companies are out of insurance, delivery, unfinished buildings and wait-and-see sentiment).

The second is the change in the reputation of developers (changes in buyers' expectations, resulting in sluggish sales transactions and depletion of sales collections, continued debt defaults, and overdue delivery, resulting in operational problems, financing difficulties and tight cash flow).

Finally, there is the expected change of financial institutions (declining sales and debt defaults, late delivery and falling house prices, and asset depreciation, leading financial institutions to be cautious in lending, which has formed a negative cycle of home buyers-real estate companies-financial institutions).

Fourth, can the cancellation of housing purchase restrictions save real estate, can housing prices rise, and can buyers buy houses?

It remains to be seen whether the new round of destocking and the lifting of housing purchase restrictions can save real estate, whether housing prices will rise, and whether buyers can buy houses. Because of the current lack of policies to support the real estate market, the cancellation of purchase restrictions alone will not save real estate, and housing prices will not rise sharply.

Don't imagine that the cancellation of purchase restrictions can save real estate, and housing prices will rise sharply, unless the real estate rescue policy in 2008-2009 and 2014-2017 comes back, or it is similar to the real estate de-inventory policy in 2014-2017, that is, the policy of supporting the real estate market.

For example, from 2008 to 2009, the four trillion yuan economic plan (monetized resettlement of affordable housing and shantytown reform) and the three lows (low down payment, low interest rates, low taxes) and sky-high credit (real estate enterprise loans, personal housing loans), and the capital ratio of real estate projects fell by 5%-10%.

For example, from 2014 to 2017, the cancellation of property market restrictions and the three lows (low down payment, low interest rates, low taxes) and sky-high credit (real estate enterprise loans, personal housing loans), shantytown reform and monetization resettlement of more than 4 trillion yuan (PSL's bank loans, finance, corporate bonds), and the proportion of real estate project capital decreased by 5%.

Fifth, what is this round of policies that support the overall market of China's real estate market and how to operate them?

Lowering house prices is not a good way to stimulate the desire to buy a house, because the stock market tells us that buying up and killing down is an iron law. The statement of reducing housing prices and destocking is actually to encourage real estate companies to adopt reasonable marketing strategies to respond to market changes, and timely adjust measures such as products, prices, advertising, and sales channels.

It is not to encourage all real estate companies to reduce house prices and sell houses, which is a misunderstanding of reducing house prices and destocking. In fact, many cities are currently reducing prices, and some have dropped to no profit, and they can't be sold, mainly because of restrictive policies, such as restricting buying, selling, trading, down payments and other restrictive policies.

From the perspective of policies to support the overall market of China's real estate market, it is now necessary to promote the implementation of the three major projects (affordable housing and urban village renovation and dual-use public infrastructure) and the demand side to destock, cancel restrictive measures, and blood transfusion on the financing side.

The first is to suspend the implementation of the three red lines and the centralized system of real estate loans, adjust the indicators of the internal assessment system of financial institutions, and let financial institutions lend to real estate enterprises. At present, it will take time for the balance sheets of real estate companies to shrink, and the most dangerous thing in terms of real estate clearance (debt, inventory, mortgage and vacant land) is still debt and inventory.

The three red lines, the centralized system of real estate loans, the financial prudential system and the financial internal assessment system have made financial institutions cautious, coupled with the expectation of market downturn, falling housing prices, unable to sell houses, and asset depreciation, financial institutions have not dared to lend to real estate.

Second, the state issued a document requiring financial institutions to extend the financial bonds of real estate enterprises for 5 years, and hold real estate enterprise bonds for 3-5 years to ensure the normal operation and delivery of real estate enterprises, exempt and reduce taxes and fees for real estate enterprises, reduce the loan interest of financial bonds, alleviate debt risk expectations, and exchange time for space.

The third is to urge financial institutions and local governments to implement the "16 financial measures" and "four sharp arrows to extend", "three not less than" and operating property mortgage loans and revise the rules for development loans and personal loans for real estate enterprise financing and blood transfusion, and gradually resolve the debt risk of real estate enterprises.

Fourth, banks and localities must be urged to put in place a letter of guarantee to replace the pre-sale funds of commercial housing, guarantee special loans for the delivery of buildings, increase the implementation of merger and acquisition loans by asset management companies, and expand the scale of the white list of real estate projects and the blood transfusion policy of project financing of real estate enterprises, so as to gradually solve the problem of handing over buildings.

Fifth, the acquisition of commercial housing inventory, second-hand housing into affordable housing. For the affordable housing in the three major projects, the monetization solution will be fully implemented, and the inventory of commercial housing and second-hand housing will be purchased through state-owned enterprises, central enterprises, and urban investment platforms, and transformed into affordable housing (rental housing, public rental housing, co-ownership housing, talent housing, and affordable housing).

It can not only quickly solve the problems of difficult sales collection of real estate enterprises, resolve the problems of real estate enterprise debt, delivery of buildings, and high inventory of commercial housing, but also quickly form the establishment of an affordable housing system, build a dual-track system of commercial housing and affordable housing and a housing supply system, and implement a housing system that combines purchase and rent.

Affordable housing is fully monetized and transformed into a source of funds for affordable housing through PSL (policy bank loans), national and local finance (appropriations, land transfer fund expenditures), corporate bonds (bond issuance), special loans, special funds, special treasury bonds, asset securitization, and third-party funds.

In the long run, the right way is to set up a China Housing Bank and convert it into affordable housing by purchasing unsellable commercial housing inventory, undeveloped land, and mortgaged land through the China Housing Bank. The overall caliber of affordable housing is to start construction, and only the completed house is the real affordable housing.

Sixth, the transformation of urban villages implements housing tickets and monetized resettlement. For the transformation of urban villages in the three major projects, the full implementation of housing tickets, monetized resettlement solutions, by increasing the amount of housing tickets, compensation standards, or increasing monetary compensation, in the demolition project area to choose to buy new houses, can quickly form market purchasing power.

The sources of funds for the implementation of housing tickets and monetized resettlement in urban villages can be through PSL (policy bank loans), national and local finance (appropriations), corporate bonds (bond issuance), special loans, special loans, special funds, asset securitization, special treasury bonds, and third-party funds.

Seventh, all property market restrictions such as purchase restrictions in the market will be lifted, including the cancellation of housing purchase restrictions in first-tier cities, Tianjin, Zhuhai, and Hainan (18 cities and counties). Cancel restrictive measures such as purchase restrictions, loan restrictions, sales restrictions, price restrictions, signature restrictions, departure restrictions, enterprise restrictions, area and unit restrictions, second-hand housing guide prices, and lottery sales.

Eighth, RRR and interest rate cuts. Restart the policy of reducing the capital ratio of real estate projects by 5%-10% in 2008-2008 and 2014-2017 (low down payment, low interest rate, low taxes and fees for primary and second-hand transactions), and the third and fourth home loans and sky-high credit (real estate enterprise loans, personal housing loans) and real estate projects.

Ninth, on the demand side, it is necessary to increase financial subsidies for talents and farmers to buy houses in the city and settle down in houses, extend the term of housing loans for commercial banks and provident funds, increase the amount of provident fund loans and provident fund loans in other places, and adjust the standards of ordinary housing. On the supply side, the supply of new housing and land is suspended, the 90/70 and plot ratio and land transfer rules are adjusted, and the use is changed.

There is no doubt that in order to achieve a reversal in real estate, we must first increase financing and blood transfusion to solve the debt of real estate enterprises. Secondly, increase the implementation of policies and solve the problem of ensuring the delivery of buildings. Intensify destocking efforts again to solve cash flow. Finally, the expectation of reversing the expectation of buying a house and the wait-and-see sentiment of buying a house and the market downturn and the decline in housing prices and asset depreciation are broken.

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Personal opinion, for reference only