Yu Fenghui: What Does the February Home Price Wipeout Tell Us?

The drop in home prices in February was a surprise to industry insiders who have been talking up a rebound. Yu Fenghui discusses the reasons behind the drop. One of the distortions being pushed by the Chinese media and picked up by foreign media is the drop in sales due to Spring Festival. I couldn't find a specific source on it, but it was my impression that Spring Festival was generally a time for sales promotions due to people having time to visit properties. As Yu points out, workers traveling home for the holiday are sales targets, especially in smaller cities that have large amounts of residents working in first- or second-tier cities. The holiday was not a big sales period, but it also was not a time when people avoided looking at homes.

Is there a reasonable explanation. Spring factors leading to light volume seems to be a factor. February marks the Chinese New Year holiday sales season to enter the real estate. From the volume, the 70 cities new commercial housing sales dropped in February nearly 100,000 units. However, in the past the Spring Festival holiday was regarded as an opportunities for promotion. Third-tier cities during the Spring Festival ushered in the return home tidal wave, the decline in sales volume comparatively low, or even increase the sales volume of individual cities.
Yu goes on to discuss the reasons other than Spring Festival:
Spring influential factor, but not the fundamental reason for the expansion of price declines. For now exert tremendous pressure on the price trend or is fundamental, fatal factors, the first is the implementation of real property registration regulations. This is for all the buyers, who holds several sets of real estate constitute the effects. Especially eager to get rid of corrupt officials more suites and prevent it from becoming bald head lice, it's clearly a factor. Trying to think of new purchase to improve the type of housing who are affected real estate registration, many of which have close hand. This poses a serious pressure on housing demand.

Secondly, the mantis stalks the cicada, unaware of the oriole behind, followed by the implementation of the registration of real estate are property tax regulations and the arrival of even more drastic action to suppress prices. Urban working-class owners of multiple properties are considering selling as soon as possible, not to mention have no plans to purchase new housing.
One of the current debates in China is over the impact of the real name registration system. Many believe government officials will offload multiple properties before they become "lice on a bald man's head" to use Yu's analogy, triggering a corruption investigation. Better to dump all the excess housing before it brings trouble upon oneself. Second, behind the registration system is taxes. Most Chinese housing speculators are not renting property. Taxes will increase the costs of carrying empty apartments.

Finally, Yu goes on to argue that with the stock market booming, central bank injections of liquidity will flow into equities and cause more capital flow out of the property market. This gets to the heart of the matter: have Chinese investors soured on property investments? The stock market gained 80% in eight months and housing fell 5-10% over the same period. The government's efforts to promote equities has worked, but it may be the largest factor in thwarting efforts to revive the housing market.

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