The property market, is it really going to be a "king bomb"?

UBM Finance

2024-05-16 21:45Posted on the official account of Guangdong Shenzhen Tiantian Saying Money Investment Consulting Co., Ltd

Original Liu Xiaobo

In recent days, both the real estate sector of A-shares and Hong Kong stocks have risen significantly.

Needless to say, there are little demon stocks, which have risen by 300% in one day. Even large-cap H shares like Vanke have risen by nearly 60% in a few days!

The chart below is the Shanghai Composite Real Estate Index, which has risen by 18% in about 1 month, and you can feel the hot atmosphere of the market.

As for the Hang Seng Property Index, it has risen by about 27% in about one month.

Why are real estate stocks soaring? Because the "430 important meeting" put forward the strategy of destocking, the second-tier cities have completely canceled the purchase restrictions; Recently, there has been a strong news that the state is going to collect storage rooms!

Although this news has not been fully confirmed, yesterday Hangzhou Lin'an District has "fired the first shot", which makes people have to believe the news again.

Tianfeng Securities Research Institute also published relevant research reports.

According to the research report, if the housing de-conversion cycle is reduced to less than 18 months in accordance with national requirements (including new houses and second-hand houses), it will need to net compress the de-housing cycle by 7.4 months, and correspondingly need to digest 770 million square meters of inventory. It is estimated that about 7 trillion yuan will be needed.

However, the conclusion of the Tianfeng Securities research report is that if it really takes out 7 trillion yuan to acquire the stock of housing, it may exacerbate the debt pressure of local governments and urban investment companies, so that their capital turnover rate will decline, so this is a "low winning rate, high odds event".

So, is it possible for the state to purchase stock housing on a large scale for affordable housing? What are the implications of doing so?

My judgment is that this year, the government will definitely increase the amount of "housing collection and storage", which is significantly higher than last year. But to spend 7 trillion to acquire, it is a bit fantastical, and it is difficult to do.

You must know that the issuance of special treasury bonds for two consecutive years last year and this year is only 1 trillion yuan per year.

The storage capacity can be leveraged, that is, the use of loans. Theoretically, a 20% down payment can be made. If you issue 1.4 trillion yuan of local special bonds as the principal and borrow 5.6 trillion yuan, you can buy a house of 7 trillion yuan.

But in fact, it's very difficult. You'll find out if you do the math.

Rental yields in most cities are currently less than 2%. Even if it is calculated at 2%, assuming that the house price is discounted by 6% at the time of acquisition, the rate of return can theoretically reach 3.33%.

But you have to know that the above rate of return is at the market rental level. After the government buys it, it is used for affordable housing, and its rent level may not even be one-third of the market price. Even if calculated at 50%, the return is only 1.67%.

What is the interest on the loan? At present, the LPR for more than 5 years is 3.95%, assuming that this public welfare behavior can be reduced by 20 basis points, and the interest rate is as high as 3.75%.

What if you use policy loans? That is, PSL (Supplemental Mortgage).

The current interest rate for PSL loans is 2.4% per annum. Note that this is the interest rate given by the central bank to the policy bank, and the policy bank will give the local government, plus the operating cost is at least 2.5%.

Assuming that the interest rate of PSL falls to 2.0% in the future, then it will be 2.1% to lend out.

Therefore, no matter how you calculate, the local government (or entrusting the urban investment company) to collect and store commercial housing as affordable housing cannot have positive returns, and can only lose money.

How big can a business that loses money be?

During the period when the three major projects were said, it only emphasized the need to promote the construction of affordable housing in super-large and mega-cities.

This shows that the top management understands that there are fewer and fewer cities with significant population increases, that is, thirty or forty large cities, and the capacity can be expanded to a maximum of 50.

In addition to the 50 central cities, if other cities build new affordable housing in batches, it is likely to cause waste.

In other words, only about 50 central cities will be able to rent out and not vacate in the future. In most ordinary prefecture-level cities, county-level cities, and county seats, the collection and storage is equivalent to transferring inventory from the hands of enterprises to the hands of the government, and then rotting.

Therefore, my judgment is that the scale of large-scale storage of commercial housing is not as large as the market expects.

There are many self-media who say that this big move is a "king bomb", which is comparable to the currency shed reform from 2016 to 2017, which is actually thinking too much, or just to harvest traffic.

To be honest, the effect of storage and currency reform is incomparable. Monetary shantytown reform is to demolish a number of houses, reduce the total housing in the city, artificially create demand, and issue cash and housing vouchers as a means of payment. If the currency shed reform is carried out on a large scale, it can indeed be called a nuclear bomb on the property market.

However, the collection of storage houses does not reduce the number of houses in the market, but only transfers the debt to the government, allows enterprises to recover cash, and solves the triangular debt in the society.

The currency shed reform is still being done in various places, and the way has become "house ticket shed reform", which means the same. The reason why we didn't see much impact was also because of the limited funding and the limited number of projects that were actually implemented.

Why not carry out a large-scale currency shed reform? In addition to the problem of funding, there has been an inflection point in population growth and the urbanization rate has reached a high level, and the official is worried that the sequelae of using this drastic drug will be too serious.

The local government's collection of storage houses will also bring significant sequelae, which is the above analysis, which will exacerbate the pressure on local debts, slow down the operation of local money, and even be trapped.

The advantage is that it can save a number of real estate companies, so that they can obtain valuable cash flow, so as to solve a number of triangular debts. Even if this kind of debt is eventually transferred to the government, it is actually of positive significance, so there is no problem in making a batch appropriately.

It is estimated that it is mainly done by high-level cities with population growth and low debt ratio, and even if ordinary third-, fourth- and fifth-tier cities do it, it is symbolic.

So this policy will still exacerbate the Matthew effect between cities, which is equivalent to the large cities getting incremental funding.

The property market has come to this day, in fact, there is no fatal "king bomb", and only comprehensive measures can be implemented.

What policy space is there for the future? Here are some things to consider.

1. Under the condition that the LPR interest rate remains unchanged for the time being, continue to cut interest rates for the property market. In the next two years, except for a few large cities, the mortgage will no longer distinguish between the first home, the second house, and the third house, and the loan will be issued according to the down payment ratio and interest rate of the first home.

2. Reduce the deed tax, value-added tax and personal income tax on second-hand housing transactions when buying and selling houses, and increase government subsidies for home buyers.

3. To further cancel the restrictions on the property market, Guangzhou, Tianjin, and Hainan should fully cancel the purchase restrictions as soon as possible, Shanghai and Shenzhen can consider canceling the purchase restrictions in the suburbs, and Shanghai and Shenzhen can also fully cancel the purchase restrictions on residential buildings of more than 120 square meters.

4. At present, the interest rate of the first home commercial loan in some cities is the same as the interest rate of the provident fund loan, and the interest rate of the provident fund loan should be reduced as soon as possible.

5. Select a group of private real estate companies with safe financial indicators, let major banks sign contracts with them, issue loans and credits, and publicize them widely.

6. After the Fed starts the interest rate cut cycle, accelerate the pace of interest rate cuts in China. Aim to have the weighted average mortgage rate fall below 3% this year or in the first quarter of next year, and below 2.5% by the middle of next year.

7. Establish a dynamic adjustment mechanism for existing housing loans, which can carry out additional discounts on the second and third rounds of stock housing interest rates, and benefit all existing housing loans.

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