I don't know if you've noticed a phenomenon that deserves your thoughts:
China has thousands of years of agricultural civilization, with the in-depth development of reform and opening up, the rapid process of Urbanization in China, social history is undergoing unprecedented changes, from the past arable land-based population gathering rural areas, the transition to industry-based population gathering cities.
This population migration has changed the fixed social relations of traditional clans and villages, transitioned to dynamic and loose social relations based on industry, and has created the rapid development of gold in the real estate market for more than 20 years, which carries the main family wealth and also involves the children's schooling, marriage, and the grand plan of living and working in peace and contentment.
1
Why are house price forecasts inaccurate?
Predictions according to Western economic theory will not work
China's economy is a socialist market economy with Chinese characteristics, which is different from the Western free market economy, and the theories of contemporary economics come from the practical summary of the Western free economy for hundreds of years. Therefore, it is extremely difficult to accurately predict China's real estate market according to Western economic theory.
In the past, many experts have been controversial for frequent mistakes in predicting the real estate market, among which the famous economist Xu Dianqing once apologized to the public in 2008 for predicting shenzhen housing prices.
Although experts can analyze and predict from different dimensions, from the house price-to-income ratio, the rent-to-sales ratio, the comparison of Chinese and foreign development laws, or the comparison with Japan, which is also Asia, no matter which dimension can draw the collapse theory of China's real estate market, but in the collapse theory of more than a decade, the real estate market has been running wild, or at most halfway to pause for a while to rise again.
Why their predictions are frequently wrong, mainly to apply metaphysical economic theory, or subjective speculation of a certain dimension, rather than revealing the development law of the essence of things through complex appearances, that is, grasping the internal causes of the development and change of things and inferring according to careful logical relations.
The following is to start from the essential attributes of the real estate market, remove the fog, and truly analyze the development trend of the real estate market from the bottom logic.
2
The immutability of land
Determines the regional differences in the real estate market
Clothing, food, shelter and transportation are the basic material conditions of human life, and when you return to live in the interior, you will find that the prices of clothing, food and transportation are similar in the developed areas in the central and western regions and the eastern regions, because these elements can flow.
If the price of meat in the developed coastal areas is 30 yuan per kilogram, and the mainland is 10 yuan, soon the traders will sell the pork in the interior, and the price will immediately rise to a price point that is only different from the logistics and appropriate profitability in the developed areas, and it is unlikely that the price deviation will be doubled, but the housing is different, and the house price in Shenzhen is ten times that of some cities in the mainland.
Why?
Because mainland real estate cannot be flowed to Shenzhen like pork. Therefore, the immedibility of land determines the regional differences in the real estate market.
From the perspective of the use of real estate, the house is inhabited, and the person is built wherever the house is, but it cannot be where the house is to determine where the person is. For example, building a house in the desert area, it is estimated that no one will live there, vacant there. But if there is a group of people who work in the desert for a long time, where they plant trees and control the desert, they will definitely build houses to live there, at least there will be simple board houses. Therefore, it can be concluded that the house is built with people, and the logic of where people build the house is established.
Man wants to make a living and to find employment, so wherever the industry is, man is there. Non-laborers such as the elderly and children will also flow with the gathering of industries, and the left-behind elderly and children are temporary phenomena due to insufficient conditions, and will eventually reach the gathering place of industry. Therefore, in essence, it is the industry that determines the development of the real estate market.
In summary, it can be concluded that industrial agglomeration drives population agglomeration, thereby driving the development of the real estate market, and industrial capacity determines real estate capacity.
3
The underlying logic behind the rise and fall of house prices
Essentially, it is determined by population increases and land supply
Real estate as a commodity has all the attributes of a commodity, and its basic law is that the price is affected by supply and demand, that is, the price of supply exceeds demand falls, and the price of supply exceeds demand rises. From the perspective of the non-regional mobility of real estate, its supply factors are mainly land supply, rather than the attachments above it, such as reinforced concrete, because these can flow freely across regions, and the regional differences are not large, so I will not repeat them here.
Therefore, the relationship between real estate demand and land supply in the region is the most essential factor that determines the price of real estate, that is, whether the increase in population and the increase in land supply are proportional to each other.
The price that affects real estate is mainly composed of five forces, namely: government, developer, just demand, speculation, and finance.
As the sole land supplier and the formulator of real estate policy, the government's impact on real estate is the most volatile of the five forces. When macroeconomic growth declines, the government usually encourages the development of the real estate market as a way to stimulate economic development, but when the real estate market is overheated, affecting stability or may lead to financial system risks, the government will take measures to suppress the real estate market, it can be said that the main factor in the fluctuation of the real estate market is related to the government's regulation and control policies on the market.
Developers are profit-seeking, and investment expands when the market is booming, but shrinks when the market cools. So, developers are just a force that fuels the waves.
The amount of just needed is related to the regional housing population and the population increase. When the just need is large, the price has support, when the just need is hourly, the price lacks support, and the just need will evolve into an investment just demand, it can be said that the just demand force is the decisive factor in the real estate price, when there is no just need to support, the real estate in the region may fall freely.
Speculators are the expected growth income of the real estate market, objectively speaking, it is also determined by just need, why the lowest real estate network red city hegang did not speculate, because there is a lack of just need to support, and the supply is far more than demand.
Finance is mainly two aspects, one is the domestic financial related policies, financial regulation of the real estate industry; on the other hand, related to inflation expectations, especially the Fed's several rounds of quantitative easing, may lead to imported inflation, so that the real estate market generally rises.
From the above analysis of the five forces affecting real estate prices, it is concluded that the long-term impact is the inflow of population and the amount of just needed, the short-term impact is the supply of land, and the short-term impact is the relevant government policies and finance. The inflow of population is related to the aggregation of industries, so the investment value of real estate is closely related to the development of local industries, which is the most essential logical relationship.
4
The underlying logic behind the regulation of the property market
Industrial agglomeration drives population agglomeration to form an imbalance between supply and demand in the market
The above has been deduced from the land can not cross the regional liquidity of the real estate market is very different, and it has been concluded that the government has implemented measures according to the city, so the analysis and judgment of the real estate market can only focus on the region, and there is no unified law, which is the most essential difference between the real estate market and other markets.
The above figure is divided into different regions according to the heat of the real estate market, the core is the hottest, representing the first-tier cities in the north, Shanghai, Shenzhen and Guangzhou, which is the most supported place for housing prices, and it can also be seen that the core area of a certain city is divided into decreasing demand levels with the surrounding areas.
The population as a whole is to the core area of the flow, the formation of siphon effect, the strong Hengqiang, in essence, the industrial agglomeration of the formation of the population, resulting in the accumulation of the real estate market increment, and the land stock is the opposite, the more the core area, the more scarce the land, the more the supply of land, there is a huge contradiction between demand and supply, both the greater the demand, the less the supply, which is the root cause of the serious differentiation of the real estate market area.
The following chart illustrates the characteristics of the real estate market in different regions:
From the above analysis and comparison, we conclude:
The overall increase in the real estate market is gradually decreasing, there are few places with more people, there are fewer people, and the imbalance between supply and demand will exist for a long time; the 1 district just needs the largest, the price is supported, but the short-term government controls the price; the 2 districts just need the second, the price is sub-support, the short-term government price control is second; the demand in the 3 and 4 districts is overdrawn, the lack of industrial support, the separation of people and houses, the vacancy rate is high, which is caused by the spillover effect of demand in areas 1 and 2, and the risk is also the greatest.
5
Analysis of 4 misunderstandings in the real estate market
Clear the fog for you and see the essence of real estate
1. Misunderstanding of Chinese and foreign comparisons
When many people analyze the development trend of the real estate market, they often compare China with Western developed countries, the per capita income of the United States is four times that of China, but the housing prices in developed areas such as New York and London in the United Kingdom are much lower than those in China's first-tier cities, which leads to the fact that there is a big bubble in the real estate in these places, and the risk is very large.
In reaching this conclusion, three important factors were overlooked.
First, the nature of the country, China is a socialist country with characteristics, the land is public ownership, the financial lifeline is also state control, and systemic financial risks are not allowed due to real estate;
The second is the population base, China has a population of 1.4 billion, the Population of the United States is less than one-third of China's, but the land area is comparable to That of China;
It can be said that the degree of economic development in China from east to west is basically arranged according to the gradient of Europe, Asia and Africa, so that the development of the region is uneven, resulting in the influx of a huge number of people to large cities. From the perspective of population base, India is comparable to China, and the regional development is unbalanced, so the house price in Mumbai, India, is also calculated in RMB from 70,000 to 120,000 yuan, which will not be lower than Shenzhen and Shanghai, and the house price in New Delhi will not be lower than that in Beijing.
2. Misunderstanding of the ratio of house price to income
The biggest misunderstanding of the housing price-to-income ratio to measure the real estate market bubble is to ignore the liquidity of purchasing power, as well as the low cost of real estate holding in China, it is precisely because of the imbalance in regional development that the rich are concentrated in the first line to buy houses, and it is a common phenomenon for rich people in districts 3 and 4 to buy houses in district 1 for their children. Therefore, the purchasing power of real estate, especially in first- and second-tier cities, is not the purchasing power of local employment groups, plus some gray income is also an important purchasing force through the purchase of real estate, which legalizes income.
3. Misunderstanding of the rent-to-sales ratio of house prices
If you look at it purely from the perspective of the rent-to-sales ratio, the rental income of real estate in first- and second-tier cities is far from being as high as the income of bank deposits. But from a value-added perspective, holding a property is more tempting than holding a deposit. Real estate has an important non-financial attribute, that is, social and cultural attributes, China is a traditional agricultural civilization country, the idea of living and working in peace and contentment is rooted in the hearts of the Chinese people, having their own housing has a sense of belonging, and then the degree of the big city is tense, and the points of housing are the highest, you can have a high-quality degree, these factors are far more driven than the driving force of finance.
4. Misunderstandings in real estate investment analysis
Traditional real estate investment analysis usually takes the local population, economic income, transportation, supporting facilities, school districts, real estate prices, and the dematerialization rate of properties for sale as important reference factors to measure the value of location investment, but does not take the industrial development trend as an important value indicator.
A competent real estate general manager should not be a professional worker, because the contribution rate of the worker's civil construction in the real estate value is very low, the location is good, and then how to build can also sell a good price, on the contrary, the location is not good, no matter how carefully carved, it is also determined by the land value, and the land value is determined by industrial development, so the competent general manager should be an investment expert familiar with the industry and an economic analysis expert.
Many housing enterprises include top 100, many do not include industrial trends in the main analysis of investment value, the reason for the surge in Dongguan Songshan Lake, in essence, is not speculation, is because Huawei's terminal base migrated to this, driving a large number of upstream and downstream industrial chains in Songshan Lake cluster, it can be said that the future Songshan Lake may become a "Silicon Valley" in China.
All in all, the value of real estate investment is in accordance with the development of gold- silver - brass - black iron in different periods of development showing a decreasing trend in the return on asset investment, regional differentiation is serious, the current first-tier cities or silver period, the second-tier silver is about to enter the brass period, the third and fourth lines have entered the black iron period, basically there is not much investment value.
The overall growth of the real estate market has been from quantity to quality, from positive to negative, profits from high to low, from incremental to stock transformation, the industry from dispersion to concentration, the formation of a multi-level market supply pattern of products, especially the future real estate supply in first-tier cities will be based on residential commercial housing, affordable economic and practical housing, low-cost housing, it can be said that the era of real estate profiteering is basically over, has been from asset appreciation to the era of asset operation, real estate management from extensive to comprehensive and refined era, Real estate carries the main wealth of the Chinese people in the socialist market economy with Chinese characteristics.
Disclaimer: Wen/Xiong Yungui, Zhengrui Consulting. The author is a doctor of management, an independent economist, this article is the author's original, without permission may not be reproduced or copied.