Turn in Housing Expected as Regulators Plug Policy Holes

Chinese home prices have stabilized in some cities, but continued rising rapidly in others. The second half of the year is expected to see regulators plugging policy holes to squeeze speculation out of the market. This should (assuming credit growth doesn't start accelerating) work because eventually regulators will find the final straw that breaks the speculators' back.

One important (potential) counterpoint: booming land sales. This could be a case of making hay while the sun shines, but it could also be a sign cities and developers don't think regulations will be tightening for too much longer. Local governments usually overshoots on policy and when the controls lifted in the past, they came off rather quickly. Developers in this case might be rooting for an overshoot that causes short-term pain and official panic.

iFeng: 调控堵漏升级进入新阶段 下半年楼市或迎真拐点
The regulation of the current round of the property market can be described as a large scope, high frequency and strong intensity. Wherever there is overheating, there will be policies. According to statistics from the Central Plains Real Estate Research Center, the number of real estate regulation and control policies issued during the year has exceeded 180 times. According to further statistics from the Shell Research Institute, since the current round of regulation started in the fourth quarter of 2016, 73 cities across the country have been regulated, 135 purchase restrictions have been introduced, 176 loans have been restricted, and 15 cities have "know your customer" for loans. 51 Cities and Hainan provinces have imposed restrictions on sales. Among them, Beijing has issued a total of more than 30 regulatory policies. Hainan has issued 14 regulatory policies since last year.

The industry insiders interviewed by Securities Times believe that the property market regulation policy in the second half of the year is still tight. After the seven ministries and commissions such as the Ministry of Housing and Urban-Rural Development, the property market will tighten, and the real estate market will usher in a real turning point.
The outlook:
"The policy in the second half of the year is still tight, and some cities will gradually introduce policies to curb housing prices, including weak second-tier and third- and fourth-tier cities, as well as some popular second-tier cities and even first-tier cities where the original property market has not really cooled down. For example, Shenzhen and Guangzhou may also A small patch policy was introduced." Yang Hongxu told the Securities Times reporter that these patch policies include the purchase of a house into a restricted purchase, and the restriction of purchase within one or two years of divorce. In addition, some popular cities introduce a large number of college students and talents. It is estimated that they will study Chengdu and Changsha. They will set a threshold for new households and settle down to a certain level of talents. Otherwise, they will have to pay social security for one or two years to buy a house.

Yang Hongxu also believes that the seven ministries and commissions, such as the Ministry of Housing and Urban-Rural Development, will require local governments to issue detailed rules for the rectification of the real estate market chaos. Some local governments may reiterate and emphasize existing policies. Some local governments may add some content, such as already introduced in advance. In Changsha, the policy has increased “blocking” measures in terms of purchase restrictions, while Chongqing has basically reiterated its emphasis on the main. He predicted that most of the 30 cities in the next list will have rules. The cities with more obvious cooling in Shanghai and Beijing may not have the rules, and those cities that are not in the list of 30 cities will have a new deal if the market is overheated. It is expected that in the second half of the year, dozens of cities will introduce new policies or documents to reiterate that the market cooling pressure will increase.

In Xu Xiaole's view, the short-term regulatory control exit must meet three conditions, namely, the market has been basically stable, the leverage of residents' home purchases has been effectively controlled, and the long-term mechanism can be effectively linked. At present, these conditions are still not fully met. Therefore, the policy will remain tight in the second half of the year, and the administrative control of hot cities will remain. Possible policy options include strict control of credit entering real estate and strict restrictions on residents' excessive leverage; More cities may follow up the loopholes that prohibit enterprises from buying houses; the talent introduction policy is decoupled from the purchase qualifications, such as social security that requires a certain number of years; the price limit policy may gradually withdraw.

For the market expectation in the second half of the year, Xu Xiaole believes that from the perspective of capital flow, the factors supporting the short-term market are weakening, including the upward trend of residential end-user mortgage interest rates, corporate-side financing continues to be suppressed, and the sheds are monetized and the highs are slowing down. The stimulus effect of the talent introduction policy and the school district policy is attenuated. "From the experience of cities such as Chengdu and Tianjin, the release of market demand caused by the talent introduction policy is short-term, and the effect of policy is weakened. Tianjin is the most obvious. In the week when the 'Haihe Yingcai Plan' was released, the turnover of second-hand houses in Tianjin Chain House was compared. It has increased by 283%, and has since declined weekly, and has returned to the pre-release level of the talent policy.” He said, therefore, the downward pressure on the second- hand housing market in the second half of the year is slightly greater than the upward momentum, and the overall second-hand housing market is stabilizing or slightly downward.

"In the second half of this year, the market will usher in a real turning point. On the one hand, the sales growth rate of the new home market in the country will change from positive growth to negative growth. In addition, after the market order has been rectified, these hot cities will also include tightening funds for sheds. In the first half of the year, there will be a real market turning point." Yang Hongxu told reporters.

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