China's Real Estate Market Is Being Baptized Into The Market Economy

Many have discussed a turning point for the Chinese real estate market, the point where prices stop rising and even begin falling. Beyond price, the rest of the market is changing as well, including regulation and finance. As the article below calls it, for the real estate industry this is a "market bapitism" as the industry moves from a government coddled industry to a industry that will have to adjust to market forces.

Once again Tangshan is an example, the most popular at the moment. From 2009 to 2012, developers built 17.4 million sqm of property in Tangshan. The annual sales rate over these four years was 1.46 million. Supply exceeds demand by 10 years and that is assuming the demand from 2009 to 2012 holds up. As the reporter notes, the supply numbers seem like a joke, but they are not.

Demand remains solid in Beijing, Shanghai, Guangzhou and Shenzhen according to Chen Yunfeng, general secretary of China Real Estate Managers Union, but some third- and fourth-tier cities have gone cold. However, he also pointed out that many people only look at the price drops in Zhejiang or Jiangsu, and the May Day holiday sales drop in Beijing, but ignore the rising sales in central China and the hot land sale market in Beijing. They look at the small price drops in some cities, but ignore that most cities have seen prices rise for 19 straight months.

Chen Yufeng went on to say that the current government is unlike the former. Whereas the former would issue monetary and rescue policies, this government is strict and deeply aware of risk. The real estate turning point and financial policy are closely related, such as the strict control over lending to developers and home buyers.

One area the government is stepping in is restricting land sales for housing development in areas with oversupply (although developers unwilling to buy is also a factor). Local government land sales are down sharply, with Changzhou down half from two years ago and one-third from last year. Banks are also more considerate of risk, assessing projects individually instead of simply looking at whether the company is one of the top 100 firms. Bank credit is also slowing, with yoy growth in Q1 2013 at 21.60%, down to a recent 7.6% growth (to say nothing of the drop off in trust fundraising). Mortgage rates are also higher, with the disappearance of discounts and 40% of banks now charging the highest allowed interest rates. Money supply is also slowing, this year's target is 13%, down from last year's 15%, but currently money supply is only growing at 12%.

May could see some price cutting emerge as some firms push to hit half-year targets, while small developers rush to recoup capital. Also, many businesses that entered the real estate market may exit and return to their core business.

The article closes with an anecdote from Beijing: a listed real estate firm's vice chairman revealed that whereas some high turnover developers were giving 1% discounts before, now they are giving 2 and 3%.

来了，不一样的房地产“拐点”

This "turning point" nor a "turning point." It is not the product of administrative regulation, but expected after differentiation, the market's self-healing results; but still came a bit surprised.

February 20 last year, "five countries" introduced so far, the central government issued no longer any real estate control policies, the real estate market is receiving an unprecedented "market baptism"?

However, in the occasion of the property market downward, on rescue calls rang again, and again went to the Chinese real estate market bailout or not the crossroads go left or right? This is a problem. Chinese real estate market can completely end up ten years of "policy market", the real test of self-regulating market acceptance and baptism.

Related to this local government, banks, businesses feeling the brunt of an unprecedented exams, simply put, this time facing the real estate inflection point, not simply the meaning of price changes, but by the executive-led initiative to market transformation of the configuration.

City differentiation

Housing prices in the internal executives speak a spread quite widely in Tangshan due to 100 months of inventory attracted the most attention, at present, the price is becoming the city's swelling antidote. "So ten thousand dollars per square meter of the house, now just six thousand!" Staff Tangshan Wanda Plaza Sales Center constantly urging, "Now is the clearance processing, you have to pay close attention to the shot."

Currently there are over 300 in the sale of Tangshan and sale of real estate, Vanke, Wanda, green and Hengda billion level housing prices have settled.

According to CCTV reported that from 2009 to 2012, housing construction in Tangshan City has a total area of ​​17.41 million square meters, but this four-year average annual sales of only 1.46 million square meters. If such a measure in accordance with the sales pace, Tangshan City, four years to digest this new building stock needs at least 10 years.

Tangshan huge inventory today seems like a joke, one of the developers reluctantly deep sigh, "are stuck to go." Tangshan same quagmire as there are a lot of real estate to adjust these markets is not limited to the price so simple. Once by Caofeidian, Beijing and Tianjin, and other advantages of wind resources very moment of Tangshan City is facing a go of stock exams. This is a fair game in the past decade more "run the ministries for money" successful city, the greater the burden faced by the moment, Shenyang, Lianyungang, Yingkou, Hui York and other cities are such situations. "Now one thousand two hundred thirty-four cities differentiation is more serious, we feel like the north, on the broad, deep real estate needs of these first-tier cities is quite clear, without a major change in the market, but the market in three or four lines to cool the situation does appear to . "China Real Estate Managers League Secretary-General Chen Yunfeng said. "Some people are only concerned that some real estate prices, trading volume and Beijing 'May' period of Jiangsu, Zhejiang decline in the central region did not see an increase in trading volume in the first quarter and Beijing land market alive; Some people only talk about 70 cities in a few cities housing prices down, but prices in most cities have been neglected for 19 consecutive months of increases. "Zhu, vice president of the China Real Estate Association, one stressed.

Local pressure

Crazy ever expanding cities are suffering the pains of foam extrusion. But with the 2004, 2008 and 2011 these three different real estate market downside is that, since the February 2013 "five countries" after the introduction of the Central does not introduce any real estate control policies. "This is the last session of the government and the government is not the same place, that is always on the next government to issue currency, bailout, but this term is quite strict government control, risk awareness more concentrated, which is closely related to the first point of inflection and financial policies such as development loans, and strictly control the purchase of mortgage loans. "Chen Yunfeng said. "Regulation of real estate is now the main place to do, there is no uniform policy center now five countries that do not have similar real estate control policies." Ministry of Housing officials, who declined to be named to the Economic Observer reported, "to the market market, increasing the supply in a tight place, the high prices of housing the city to explore the common property, solve the shortage of low and even middle-income group housing affordability problem. "

Recently, Anhui Tongling city government issued a document, the proportion of first-time buyers apply for individual housing provident fund loans down from 30% down to 20%, while giving the deed tax subsidies and other favorable policies.

Meanwhile, Nanning City Housing Authority issued a document allowing the Guangxi Beibu Gulf Economic Zone of Beihai, Fangchenggang, Qinzhou, Yulin, Chongzuo residence households in Nanning purchase.

Previously, the Wuxi municipal government also announced that from May 1, in Wuxi purchase of real estate (including second-hand house) of 60 square meters or more, and people in the city have a stable job, allowed himself, his spouse and minor children to Wuxi settled. "The new adjustment policies, in fact, for relatively scarce labor, by reducing the purchase settled threshold, to solve some of the native population of housing, children's education." Wuxi City, a Housing Authority of the Secretary to the Economic Observer reported, "60 square meters house, directly affecting the small size of the second-hand housing market second-hand housing market will be active, but the space is not great, from the original 70 square meters to 60 square meters, so a small strides rhythm. "

In addition, the Housing Authority Wuxi hair, more than 140 square meters of new housing will lift the restriction. After this the wind out of the sales of many projects greatly changed. A national brand developers villa project a month ago to sell one or two sets, 7-8 sets of recently sold within 10 days.

Market regulation in order to test public opinion more than the central government's determination, vice president of the China Real Estate Association Zhu, one sure to say: "To promote the sustainable development of the real estate market, if not face the current real estate market adjustment of courage and wisdom, not under pain Diagnosis and treatment of land revenue determination thirst, establish and improve the modern real estate market economies such as Stronghold in turn, mirror on the real estate industry in the ascendant transformation innovation will go back. "

Market test

Various market participants seem to have begun to accept the market test.

CIC Securities research report, "April, line better, worse or four lines, premium tier cities in April year on year surge of 123%, a slight increase of 10% second-tier, three or four lines fell by 20%." "The MLR is very clear, large areas of land supply, reducing the supply of residential land for construction. "Ministry of Housing and Construction Main Renqin Hong Urban Policy Research Center, said.

In some larger cities stock, developers no longer follow-up. A listed company secretaries explicitly told the Economic Observer newspaper reporter, "the company's future took only a second-tier cities in the heart to stop the continued investment in the previous several cities, even capital cities and municipalities, even in cities such as Tianjin, only six districts of the city to be able to get around the city in four districts do not fly. "

Ouyang Jie said, "There are some local governments have also been explicitly discussed, it is not for three years, the Changzhou last year for the previous year has been reduced to 1/2, this year on the basis of last year to reduce by 1/3."

Bank loans for the development of housing prices from the previous list management companies within the gradual shift hundred housing prices, in addition to implementation of regional and project-based management, "Even a hundred companies in second-tier cities in the project, if the project is not good There are risks, banks will be cautious. "

Huaxia Bank Guangzhou Branch of a person also introduced to the Economic Observer reported that the bank will only continue to support higher real estate companies to develop qualifications, good location, the project can be closed operation, type of project to focus on ordinary houses and apartments, in a prudent intervention Small real estate companies to develop commercial and office projects.

Number of banks on the Economic Observer newspaper who said that due to the short-term real estate market does not rule out the risk of localized, 2014 will continue to implement a strict policy of total development loans drop, and in 2013 on the basis of further stringent Commercial development loans City access standards, improve project capital ratio requirements, and strengthen key areas and project risk monitoring. "2014 first quarter financial institutions to invest in statistical reports" The data show an increase of real estate loans has slowed, real estate development loans in which four consecutive quarters of negative growth year on year increase, from 21.40% in the first quarter of 2013 fell in the first quarter of this year of 7.60%.

Meanwhile, in individual housing loans, since most of the second half of 2013 the bank canceled the first suite 85 discount rate, since April this year, the first suite of 10% or less extinct preferential interest rates, the highest individual banks go up 40%. "Since 2013, commercial banks were squeezed interest rate market and financial development of the Internet, the net interest margin narrowed, earnings growth rate decreased significantly in such a background, and then maintain the first suite of lending rate will be difficult cope with rising financing costs, cancel the prime rate is the inevitable choice under earnings pressure. "Commercial Bank of China City Fan Zhigang, deputy director of the Institute of Finance said. "Credit tightening earlier this year, and 20% of the deposit reserve ratio requirements for banks, mainly affected by last year's Internet bank financial impact is relatively large, resulting in a decrease in bank funds." Housing prices, a hundred billion to the Economic Observer newspaper executives said. "This year's money supply target is 13 percent to 15 percent last year, the issue now, only a 12.1% reduction in the money supply, coupled with the now out of the hotline increased, resulting in reduction of the entire banking market funds, which the real estate industry have a significant impact. "Ouyang Jie added. "Last year, many companies expand faster, early tightening of bank credit, we are to price change, mainly to solve cash flow problems." A billion-level executives of housing prices to the Economic Observer reported. "May may be some cases on the market price of the emergence, mainly some big sprint half-year results of listed companies, cash-strapped small businesses run sale of goods, as well as some of the main industry is non-real estate businesses shipping, return to the main business."

Vice president of Beijing revealed a listed room rate, much higher turnover of housing prices, "Now to the one-time payment discount is greatly increased, the original could only give one point, may now give two points, three points."