At the Politburo meeting held on Monday (December 6, 2021), the latest expression of the real estate industry was “promoting the healthy development and virtuous cycle of the real estate industry”. In this regard, it was proposed to “promote the construction of affordable housing” and “support the commercial housing market to better meet the reasonable housing needs of buyers” These two requirements. Since the statement did not appear in the Political Bureau meeting in April and July this year on the positioning of “housing without speculation”, the above new expression inevitably gives people the illusion of new changes in real estate regulation. This paper attempts to explore the policy meaning behind this new formulation.
First of all, “promoting the healthy development and virtuous cycle of the real estate industry” is not a new formulation. In the signed article “must achieve high-quality development” by Vice Premier Liu He on November 24, 2021, the expression of the real estate industry used “promoting the stable and healthy development and virtuous cycle of the real estate industry”, but the word “stability” was deleted from the expression of this Politburo meeting. Therefore, in the context of the current downturn in the real estate market, the government does not tolerate this “instability”, but hopes that this downturn will not affect the healthy development of the real estate industry.
How to promote the healthy development and virtuous circle of the real estate industry in the downward process? This requires some backing and hedging in the policy of real estate regulation.
First of all, we can look at how policies underpin and how real estate stabilizes in history? Since 2008, the real estate has experienced three rounds of obvious bottom rebound. We can summarize and analyze from the policy response and the stabilization order of real estate indicators:
How did the policy change? The policy inflation of stabilizing real estate is concentrated on the demand side. The people’s Bank of China often takes the lead in reducing the reserve requirement or interest rate, and relaxing the sales and purchase restrictions in some places. Supporting real estate financing, reducing the down payment ratio and reducing housing transaction taxes and fees are important signs of comprehensive relaxation.
How to stabilize real estate? The year-on-year growth rate of commercial housing sales is often the first to stabilize. New construction bottoms out within two quarters after the sales stabilize, and real estate development investment and land purchase will gradually pick up within three quarters after the sales stabilize. This may be related to the fact that real estate sales are an important source of funds for real estate enterprises, and enterprises will gradually increase investment only after confirming the recovery of demand through sales.
What’s the difference this time? This meeting ranked “promoting the construction of affordable housing” first, that is, the construction of affordable housing may replace the construction of commercial housing and gradually become an important starting point for the growth of real estate investment. For example, during the 14th Five Year Plan period, Shanghai plans to build more than 470000 sets (rooms) of indemnificatory rental housing, accounting for more than 40% of the total new housing supply in the same period. Therefore, the policy may support the acquisition of some troubled developer projects and convert them into the construction of indemnificatory housing after the acquisition.
“Supporting the commercial housing market to better meet the reasonable housing needs of buyers” means that for commercial housing, guarantee sales is the first. Only when the sales of commercial houses are stable can we help those developers in trouble supplement cash flow and build market confidence. At the same time, it is worth noting that real estate sales is an important pillar of the real estate industry (service industry), and the proportion of real estate GDP in GDP has reached 7.3% in 2020. Therefore, in addition to the relaxation of financing since the fourth quarter of 2021, local governments should successively introduce some deregulation policies on the sales side.
Thus, we believe that the latest statement on the real estate industry at the Politburo meeting is intended to stabilize market confidence rather than turn to comprehensive stimulus. Moreover, from the experience of 2018 and 2019, the expression of “housing without speculation” often appears in the central economic work conference in December, rather than the meeting of the Political Bureau. In the follow-up, we can pay attention to the setting tone of the central economic work conference for real estate.
last week (November 29-3, 2021) market review: the Shanghai Composite Index rose by 1.22%, rising for four weeks in a row; the Shenzhen Composite Index rose by 0.78%, rising for five weeks in a row; the gem index rose by 0.28%. The cumulative net purchase of northbound funds this week exceeded 15 billion yuan, and the building decoration industry was favored by northbound funds, with the largest month on month increase. Affected by the risk aversion in overseas markets and the tightening expectation of the Federal Reserve policy, the Hong Kong stock market continued to weaken and continue to grow The health index fell 1.3% this week; The Hang Seng technology index fell 3.68% this week.
Risk tip: the spread of the epidemic exceeded expectations, and the monetary policy of the Federal Reserve tightened more than expected
