Abstract After the fiery 2016, the real estate market is about to enter a downturn. Recently, China Merchants Securities and Southwest Securities all released the 2017 strategy report, pointing out that real estate investment, sales, construction and other indicators will all show a general decline in 2017, sales gold...
After the fiery 2016, the real estate market is about to enter a downturn. Recently, China Merchants Securities and Southwest Securities all released the 2017 strategy report, pointing out that real estate investment, sales, construction and other indicators will all fall in 2017, and the decline in sales may be around 10%. Both organizations have put forward the "cycle theory" view that the real estate market has entered a downward "small cycle."
However, the above institutions believe that there is no basis for a big drop in house prices. The cost pressures caused by high land prices and the background of a loose monetary environment will support future housing prices. This will cause a slight decline in house prices, rather than a large-scale adjustment.
Regulating aftermath
Affected by the regulatory policies, the decline in the property market turnover has continued for a month. According to the statistics of Centaline Property, in the first week of December (November 28-December 4), 57,400 sets of houses were signed in 54 cities across the country. Although it has warmed up compared with the previous week, the transaction volume has been below 60,000 sets for five consecutive weeks, which is nearly 20% lower than the average transaction level before November.
The direct cause of the market decline is the regulation of the three rounds of the property market this year.
The first round of regulation appeared at the beginning of this year. Due to the overheating phenomenon in first-tier cities such as Shanghai and Shenzhen, the two cities were headed for the work of maintaining the market order such as “down payment†and Beijing followed suit. During this period, cities such as Nanjing, Suzhou, and Xiamen also took control because of the rapid rise in housing prices and high prices. The main measures are reflected in the introduction of "limit orders" and a small increase in credit thresholds.
The second round focused on the National Day holiday, more than 20 cities across the country intensively introduced control measures, the policy content is concentrated in restrictions on purchases, price limits, increased supply and so on. Judging from the situation of the land acquisition of some cities, the tightening of funds has already begun.
The third round of regulation and control was concentrated in the middle and early November. Hangzhou, Shenzhen, Nanjing, Wuhan and other cities have further tightened the property market policy on the basis of previous measures, and focused on the monetary policy. At the end of the month, Shanghai, Tianjin, and Beijing also followed suit.
As of the 21st Century Business Herald, there is no new regulation and control policy in this month, but the impact of previous regulation is still continuing. Data show that as of the first week of December, the inventory of new homes in the top ten major cities nationwide was 334,400 sets, about 9000 sets higher than the level at the end of October. This is also the first time in recent years that hot spot stocks have risen.
Southwest Securities pointed out that from September 2010 to 2014, a total of 46 cities have introduced policies related to restrictions on purchases and loans. The overall intensity of this round of regulation, which began in 2016, is weaker than before, but there is a strict trend.
However, some institutions pointed out that although the number of cities regulated by the property market this year is not as good as before, from the perspective of policy means and enforcement, some cities' regulation and control policies have been called "the most stringent in history." From the perspective of the existing policy, the tight regulation will not end in the short term.
Qiu Baoxing, former deputy minister of the Ministry of Housing and Urban-Rural Development, said in the recent "The 14th China Financial and Economics List of the 7th Real Estate Finance Innovation Summit" that in the past two years, less than 20 of the 660 cities in the country have appeared. Real estate prices continue to rise. However, these 20 cities account for more than 50% of the national financial assets. Once the real estate asset bubble bursts, it will affect the country due to the transmission of modern finance. This statement also suggests that some cities' regulatory policies may not loosen in the short term.
Adjustment will be
In addition to the above policy implications, the cyclical nature of the real estate market itself also determines that its decline is inevitable.
Southwest Securities said that China's real estate industry has a small cycle. The complete small cycle is about 2-4 years, and the rising cycle is generally only about 1 year. Both 2015 and 2016 are in an upward cycle, mainly due to the relatively loose funding and industry policies. The decline in future demand will push the property market into a down cycle. It is expected that the growth rate of commercial housing sales and real estate development investment will decline in 2017.
China Merchants Securities also said, “After more than a decade of rapid development, the real estate industry has shown a strong cyclical nature.†The agency pointed out that this round of small-cycle recovery began with liquidity easing and industry-added leverage since the end of 2014. In 2015, the year of recovery; in 2016, the year of prosperity and turning, the hot cities gradually spread (from the first line to the strong second line, the weak second line and the strong third line, etc.), and the prices of some cities accelerated. It is estimated that the sales volume of first-hand houses will exceed 1.3 billion square meters this year (up 20% year-on-year), a record high.
The above-mentioned institutions pointed out that demand short-term overdraft and policy inflection point led to a small sales year in 2017, and it is expected that the sales volume of commercial housing in the whole year will drop by about 10%. But the absolute scale will still reach 1.3 billion to 140 million square meters, becoming the second highest point after 2016 (still higher than 2013).
In terms of housing prices, China Merchants Securities believes that the tightening of the developer's capital chain affects the supply rhythm. The land price affects the cost end and positive feedback on housing prices. Liquidity and inflation expectations constitute a certain support for housing prices by affecting investment demand. Therefore, there is no big drop in house prices in 2017. However, due to the large increase in potential supply in some second-tier cities, house prices have fallen.
Due to the downward pressure on both volume and price, other indicators in the real estate market will also be affected. China Merchants Securities expects that the new construction area of ​​real estate will decline by 5%-10% in 2017, and the growth rate of second-tier cities will be slightly larger; the growth rate of real estate investment will slow down, it is expected to increase by 0%-3% for the whole year, and the growth rate of third-tier cities is slightly lower.
Affected by this, real estate's pulling effect on the macro economy may decline. In the first three quarters of 2016, the contribution rate of real estate to economic growth was 8.02%, which was at a historical high. Southwest Securities pointed out that considering the many industries in the real estate industry chain, its actual pulling effect on economic growth may reach a contribution rate of 20%-30%. But this proportion may decline.
In the medium and long term, the situation is not optimistic. According to the analysis of Southwest Securities, the proportion of working-age population has started to decline since 2011, and the proportion of the main population of 20-49 years old has also declined. In addition, urbanization has entered the second half (the urbanization rate reached 56.10% at the end of 2015), and the demand for future housing will be gradually decreases.
Therefore, the real estate industry is moving towards a recession, from a short-term or long-term perspective. The mainstream view is that in the majority of third- and fourth-tier cities, the large inventory scale and the financial risks it brings will be further highlighted in the future.
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