Why did China try its best to stabilize the real estate market instead of following the example of the United States and Japan?
At present, the country has made a series of actions against the real estate, all for one purpose: to stabilize the real estate.In fact, the word “stable real estate” is also a word with high frequency in the real estate industry in recent years.However, in the opinion of the vast majority of people, what we should do for the real estate is not to “stabilize”, but to “let it decline”. The fundamental reason why many people have this idea is that they realize that the real estate bubble in China is huge.Of course, there are also some people who believe that “we should learn from the US and Japan to take the initiative to burst the real estate bubble”.In the eyes of hundreds of millions of people, real estate has a big bubble, but in the eyes of a number of experts, real estate is not a bubble.For example, expert Lu Jun, economist Fan Gang, and so on, believe that China’s real estate industry without bubble.Fan Gang, in particular, recently made a shocking remark that “the increase of people’s salary income is higher than the increase of housing prices”, which was ridiculed and lambasted by netizens.Is there really no bubble in China’s real estate market?We believe that before making a conclusion, we should make a rational analysis. As the saying goes, the real knowledge comes from scientific practice.As a matter of fact, as influential experts and scholars, they should get rid of the faults of shooting at the target without any aim and making irresponsible remarks. They should proceed from reality and make scientific analysis based on facts, which is the trait most needed for learning.Internationally, it is usually necessary to analyze four indicators to judge whether there is a real estate bubble in a certain country or region: housing supply and demand relationship, housing price to income ratio, reasonable housing rental to sales ratio, and housing vacancy.First, housing supply and demand: According to e-House Real Estate Research Institute, China’s average supply of new homes in the past three years is around 10 million units, but the annual demand is only 7 million units.In other words, the total surplus of new housing supply every year is 3 million units, or nearly 200 million square meters.In addition, easy house 2019 research is clear, 2020 China’s new home market has entered the “oversupply” situation.It is worth mentioning that the research content of E-House Research Institute has also been the focus of the central media Xinhua News Agency, economic Daily.In terms of the second-hand housing market, by the end of November 2021, the total number of second-hand houses listed in 30 key cities reached 3 million, up 23.5% year on year.During the same period, the turnover of second-hand housing is less than 1.8 million units, that is to say, the second-hand housing market also exists the problem of “oversupply”;Second, the price-to-income ratio.Institutional research shows that the average price-to-income ratio in 100 cities in 2020 was 13.2, which is still beyond the reasonable range, although it is down from 13.74 in 2019.Especially in anshan, Ordos, Zhuzhou and other cities, not only the housing price income ratio is seriously high, but also the outflow of population is serious, and the economic development is relatively backward. In other words, the endogenous factors of the city cannot support the existing high housing price.In other words, these cities are more expensive.Moreover, housing rental ratio.Property tycoon Pan Shiyi has said the price-to-rent ratio is one of the most important indicators of the property market.In his view, a normal rental return would be the bank lending rate plus 1 to 2 percent.At present, the bank lending base rate is 5%, so the rental return should be 6% or 7%.Now, in Beijing, for example, the return on residential rent is just 1%.Even if the rent were to quadruple again, the owner of the house would still lose money.In fact, according to the existing rent to sales ratio numerical analysis, it is not difficult to find that the rental income of 95% of urban properties in China can not even offset the annual mortgage interest expenditure.In other words, less than 5% of the country’s real estate has investment value.The remaining 95 percent of the real estate, after the purchase is not on the rent “make money”.Fourth, the housing vacancy situation.This is an old topic. How many houses have been built in the past few years? Some experts estimate that nearly 700 million houses have been built, with each house housing three people, enough to accommodate 2.1 billion people.Of course, not all of these houses are worth living in, as the vacancy rate in China’s urban areas was as high as 21.4% in 2017, according to research data from SwUFE.In other words, there are nearly 150 million vacant apartments in the country, and the empty houses alone occupy 10 trillion yuan of credit resources.In addition, it is worth mentioning that whether it is the first and second tier cities, or the third and fourth tier cities, the housing vacancy rate has reached the international standard of “vacancy danger zone”.In addition, the home ownership rate in China’s urban areas is as high as 96 percent, with each household owning 1.5 homes, according to the central bank report.According to liu Bo, a real estate expert, the figure is lower than the real figure, because many urban residents also have houses in their rural homes, which are obviously not included in the statistics.In the opinion of experts, if all the real estate statistics are recorded, China will probably be the first country in the world to achieve 100% home ownership rate.Based on the above analysis, it is not difficult to find that China’s real estate bubble is very big, especially in the third and fourth tier cities with backward economic development and serious population outflow, but the housing price has “over 10,000”, the bubble is even bigger.In view of this, the statement that “stabilizing real estate is better than lowering housing price” mentioned by most people at the beginning of the article is indeed much more reasonable. On the one hand, lowering housing price can meet the needs of more newly needed buyers and enable more people without houses to afford houses, and on the other hand, it can squeeze the real estate market.Let’s answer the first question: why is China doing all it can to stabilize the real estate market?Dong Fan, a professor at Beijing Normal University, gave a convincing answer to this question: from the national macro level, the stability of real estate is the best result.The fundamental reason is that the real estate industry supports the national economy, directly and indirectly determining about 100 million jobs, 65%-70% of local fiscal revenue and 30%-40% of national GDP growth.At present, no one can change this fact, change the real estate industry’s pillar, dominant and leading position of the three industries.Therefore, to achieve stable and high-quality economic development, the stability of real estate is the biggest prerequisite.In the view of economists, “stabilizing the real estate market” has another purpose: to protect the vital interests of home buyers.According to the report of the Central bank, the home ownership rate of urban households is as high as 96 percent. Therefore, stabilizing the real estate and housing prices is actually to protect the interests of more people.After all, the vast majority of households in China spend more than 80% of their income on down payments and mortgage payments, and allowing housing prices to fall means allowing 96% of households to lose their main asset.It is also said that the real estate industry lost its dominant position after the United States and Japan took the initiative to burst the bubble. Science and technology, real manufacturing industry, etc., were paid attention to again. The development of the United States and Japan was better later, and the real estate investment speculation almost disappeared.So for the long-term development of the economy, it is better to prick the bubble.Why not learn from the United States and Japan to take the initiative to burst the bubble, but to “stabilize the real estate”?Is that really the case?Why does China not learn from the United States and Japan to take the initiative to puncture the bubble?Experts believe that there are three fundamental reasons. First, there will be three “unbearable” consequences after the bursting of the real estate bubble.Secondly, a large number of enterprises will go bankrupt, including banks, financial institutions and even local governments. The fundamental reason is that economic development is stagnant and enterprises cannot function due to debt problems.Third, a large number of people will lose their jobs, especially those at the bottom of the scale, who are likely to live in a worse situation. These people always dream of buying a house after the housing price plunges, but they do not know that after the real bubble bursts, their daily life may not be able to sustain.Some say this is alarmist.Actually otherwise, the reference Japan, take the initiative to prick after a real estate bubble, the development of Japan into a “backward” actually, especially the housing bubble burst, prices fell, many people overnight millions from tens of millions of assets to liabilities, a lot of people can’t accept this fact, eventually abandon, moreover on the extreme path.Similarly, the collapse of Japan’s housing bubble has dealt a severe blow to its economy, hence the term “Japan’s lost 20 years”.Second, we have the ability and confidence to stabilize the real estate market, thanks to our two strengths.First, the “dual-track” regulation, such as LPR and financing policies, can completely regulate the real estate market independently.The LPR interest rate is separated from the benchmark interest rate and can even be changed every month, which provides strong support for the accurate regulation of credit in the property market.Second, the financing restrictions of real estate enterprises, the “three red lines” policy, not only let developers start to reduce the debt ratio, but also realize the rational allocation of credit resources, effectively prevent the disorderly expansion of capital, and realize the effective return of capital to the real economy.In addition, the purchase restriction and loan restriction measures limit investors’ selling time, and the guiding price of second-hand houses can stabilize the market price of second-hand houses, and inhibit real estate speculation to varying degrees.Third, we advocate a market economy. A market economy must have some competition, otherwise it will be meaningless. Competition is the most important thing to maintain market power.So, capital does not have monopolistic effect in our country.In the past two years, Internet finance has been cracked down, community group-buying involving tycoons halted, and off-campus training has been cleaned up.Based on this, it is impossible for the real estate in China to expand in disorder, which can be concluded from the capital control alone.In addition, the state is not unable to regulate the real estate, but do not want to, for the reason mentioned above, the real estate is an important pillar of China’s economy.The strategy adopted at the present stage is “time for space”.When the real estate long-term mechanism is really built, the real estate industry can return to normal.Finally, we would like to say that for China’s real estate industry, long-term stability can ensure social stability, which is more in line with the interests of the public.