“Last year, housing prices declined, real estate bubble, monetization problems have fundamentally reversed, the property market is not as active as before.” On the eve of the two sessions, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at the press conference of the state information office that the real estate price adjustment is good for the financial industry, but he doesn’t want the adjustment to be too drastic, so it should be transformed smoothly.
Since the fourth quarter of last year, there has been constant news about the real estate market. Among them, there is the voice of supervision for the whole industry, and there are also regional adjustments made by local governments; There are default dynamics of real estate enterprises and new M & A financing; There are loose bank mortgages and poor property market sales data. In this “ups and downs”, the market is waiting for the next policy. Recently, Zhengzhou, Henan Province, took the lead in releasing the “big move” – at the same time, loosening the purchase and loan restrictions, and starting the monetized resettlement of shed reform again, which is regarded as a symbolic signal by the industry and outside the industry.
Under the principle of housing without speculation, how can the regulation means achieve a balance between steady growth and risk prevention? Under the downward pressure of economic growth, where will real estate, which is no longer a short-term means of stimulating the economy, go? What are the future variables of the industry? On the eve of the two sessions, China first finance and economics made a detailed review and Prospect of China’s real estate market.
destocking sharp weapon restarted
On the first day of March, the notice on promoting the virtuous circle and healthy development of the real estate industry (hereinafter referred to as the notice) issued by the general office of Zhengzhou municipal government was swiped. The notice puts forward 19 measures of “stabilizing land prices, house prices and expectations”, canceling the “house and loan recognition” and restarting the monetized resettlement of shed reform, a sharp tool for destocking. Compared with physical resettlement, monetary resettlement can help digest the inventory of urban commercial housing, alleviate the financial pressure of local governments, and promote shed reform by means of credit support.
This gives the “cold” market a glimmer of hope. According to the latest data released by Kerui, the monthly sales amount of the top 50 real estate enterprises in February was 355.2 billion yuan, a month on month decrease of 23.1% compared with January and a sharp decrease of 45% compared with the same period last year. This has been a sharp decline in the sales of real estate enterprises for seven consecutive months, with a year-on-year decline reaching a record low.
In order to support reasonable housing demand, the notice of Zhengzhou not only breaks through the number of family houses from 2 to 3 through “relatives can buy a new house for the elderly”, but also clearly proposes to implement the three-year action of resettlement housing construction on the supply side, and insists on monetary resettlement.
Many securities companies believe that the first action of Zhengzhou may indicate that more cities will follow the supporting policies of entering and leaving the Taiwan property market due to the implementation of urban policies. According to Shenwan Hongyuan Group Co.Ltd(000166) statistics, at least 52 city has issued policy support from demand side since last year, including not only the down payment and interest rate of mortgage loans, the increase of housing provident fund loan amount, cancellation or reduction registered residence restrictions, etc.
A new round of real estate regulation accelerated in the first half of last year. In the middle of the year, with the second-hand housing guidance price mechanism in some cities, the cooling of housing speculation in school districts and the tightening of housing loan business entering a climax, market transactions fell to the “freezing point” in the “thunder explosion” of developers and the lack of confidence of buyers. Some employees of head intermediaries in Beijing once disclosed to China first finance and economics that from August to November last year, the second-hand housing market in Beijing was almost in the state of “zero transaction”.
With the regulatory correction of financing policies and the encouragement of mergers and acquisitions, and the implementation of policies on the demand side, the market at both ends of supply and demand has obviously warmed up, but why is the data still lower than the market expectation Chen Li, real estate director of Zhongtai Securities Co.Ltd(600918) Research Institute, believes that the current decline in mortgage interest rate reflects more the decline in loan interest rate caused by insufficient new demand after the completion of the early backlog of mortgage loans, which is the result rather than the driving factor. Some real estate agents in Jiangsu and Zhejiang said frankly that the key problem in their city is not the down payment ratio and mortgage interest rate, “as long as the purchase restriction is relaxed, the market will become active immediately”.
Guotai Junan Securities Co.Ltd(601211) pointed out that the main risk in 2022 is not simply the risk of the capital chain of real estate enterprises, but the risk of the decline in the hematopoietic capacity of real estate enterprises caused by the downward demand. Over the past few months, the easing of various cities has mostly focused on the banking system to increase credit supply, but its role is relatively limited under the background of declining demand. The market is expected to need stronger policies to delay the decline of the real estate market, but there are some differences on the launch rhythm. As the provincial capital city, Zhengzhou’s policies exceed expectations in time and intensity, It has a strong signal significance to other cities in the country.
what is the new development model
Changjiang Securities Company Limited(000783) chief economist Wu Ge said in the research report a few days ago that the current decline in real estate sales and investment is larger and faster than in the past. Even if it is no longer used as a “short-term means to stimulate the economy”, in the face of the severe situation of steady growth, the policy strength may not be too small.
This round of regulation is accompanied by the frequent explosion of real estate enterprises and the special pressure of stable macroeconomic growth in the post epidemic era. From the perspective of most institutions, everyone is paying attention to the follow-up policy statements and actions, and the expectation of the regulation effect is constantly adjusted.
Moody’s recent research report shows that trust companies, as financial institutions with large exposure to the real estate industry, will have 352 billion yuan of trust assets related to real estate due in the first nine months of 2022, which is under great pressure under the supervision of “two pressures and one reduction”.
Guo Shuqing said at the press conference of the State Council Information Office held on March 2 that the change in demand structure brought about by the real estate price adjustment is a good thing for the financial industry, “but we don’t want to adjust too violently and have too much impact on the economy, so we should make a smooth transition.”
So, what is the “new development model”? First finance and economics noted that the affordable rental housing and long-term rental housing market have become the key words of policy guidelines. It can be seen from the report on the renewal of housing security in 31 provinces and cities in China in 2021. Recently, the Ministry of housing and urban rural development has put forward specific goals in this regard: by 2022, it will be able to build and raise 2.4 million affordable rental houses, 100000 new public rental houses and 1.2 million shantytowns, which will accelerate the construction of the long-term rental housing market.
At the latest meeting of the Political Bureau of the CPC Central Committee held on February 25, it was stressed that this year’s work should still adhere to the principle of stability and seek progress while maintaining stability, and strengthen the implementation of macro policies to stabilize the overall economic market; We should firmly implement the strategy of expanding domestic demand and promote coordinated regional development and new urbanization. “The increment of the real estate market during the 14th Five Year Plan period will mainly come from rental housing.” Citic Securities Company Limited(600030) chief economist Ming Ming believes that “simultaneous rent and purchase” is a new development model of the real estate market in the future, and the government will actively explore and accelerate the construction of affordable rental housing.
Following the monetary policy implementation report in the fourth quarter of last year, the Ministry of housing and urban rural development recently stressed again that “real estate should not be used as a tool and means to stimulate the economy in the short term”. Mingming said that while maintaining the steady and healthy development of the real estate market, the main tone of the policy has not changed. “Real estate is not fried” and “real estate is not used as a means to stimulate the economy in the short term” mean that the attitude of this round of regulation towards commercial real estate is entrusted rather than promoted.
future variables
Regardless of the current situation, the purpose of regulatory correction is to form a balanced situation of healthy development and virtuous circle of real estate. Mingming believes that the policy environment faced by real estate this year is still relatively friendly, and the market environment will gradually improve. Chen Li believes that there will be three major changes in the business ideas of real estate enterprises in the future: from land to cash, from the pursuit of scale to stability, and from national expansion to regional deep cultivation.
For the factors affecting the real estate industry in the future, population, land and Finance (monetary policy, etc.) are still the main variables.
The central economic work conference at the end of last year pointed out that China’s economic development is facing triple pressures of shrinking demand, supply shock and weakening expectations. Future policies need to be proactive, active fiscal policies need to improve efficiency, and prudent monetary policies need to be flexible and appropriate.
“We all know that the bubble of real estate can no longer blow, so even if the real estate policy is slightly relaxed, it will only give some enterprises a breather and will not fully release water. We believe that real estate financing will not become the main force of monetary expansion in the future.” Jiang Chao, chief investment officer of China Thailand asset management, believes that housing without speculation is still the bottom line in the future. Mingming also said that this year’s economic policy is intended to stabilize growth rather than strong stimulus.
In addition, according to the data of the world bank for settlements, by the end of June 2021, the nominal leverage ratio (debt / GDP) of China’s residential sector had risen to 61%, nearly doubling compared with that in 2015 (38.9%).
According to China’s financial stability report 2021 issued by the central bank, combined with the loans of non bank financial sectors to residents, the residents’ leverage ratio has reached 72.5%.
