2018-07-15

Worries About Stagflation in 3rd and 4th-Tier Housing Markets

The government is also warning of inflation and stagflation risk in third- and fourth-tier city housing markets.

21st Century: 三四线楼市的“中场战事”:防止暴涨与滞涨考验调控尺度
Since the rate of increase in housing prices is somewhat faster than the growth of purchasing power of the third and fourth-tier residents, the third- and fourth-tier cities are digesting the inventory of the property market, and the time to restore market demand is also growing. How to establish the correct policy guidance direction in the upward cycle, Preventing the third- and fourth-tier property market from falling into a long-term "stagflation" state has become the focus of attention in the second half of the year.

...Zhang Wenwei’s experience has not been a case in the past year. Some researchers described the state of the property market in the first half of the year as "a big mess." It means that in the overall stable state of the property market, there are some “small chaos” in the third- and fourth-tier property market. Some hotspots in the third- and fourth-tier cities have been "cut in half" after severe controls were implemented; some third- and fourth-tier cities that have favorable policies at the national level under the influx of investment demand, house price increases continue to lead the country; and more third- and fourth-tier cities are ushered in the impact of core urban demand spillovers, urbanization acceleration, and shantytown reform policy stimulus. A new round of upswings that have been around for many years.

However, it should be noted that as the rate of increase in housing prices is somewhat faster than the growth of the purchasing power of the third and fourth tier residents, the time for the third and fourth tier cities to digest the property market and the recovery of market demand is also becoming longer. How to establish the correct cycle in the up cycle The direction of policy guidance will prevent the third- and fourth-tier property market from falling into a long-term "stagflation" state and become the focus of attention in the second half of the year.
It is feast or famine for smaller cities, with come collapsing and others soaring:
Under the control of this round, severe restrictions on purchases have caused the Beijing-Tianjin third- and fourth-tier property market to be hit hard. In the report of the above-mentioned Yiju Research Institute, the cities with the largest decline in the price of new houses were Xianghe, Dachang, Yanjiao, Langfang (urban) and Gu'an, which were all around Beijing.

At the beginning of July, the 21st Century Business Herald reporter saw in the main road in northern Gu'an that many of the intensive storefronts on the street had already gone to the empty space. In the past, the aunts who sent the leaflets to the intermediary stores on the streets had disappeared. A local real estate agent told reporters that under strict restrictions on purchase and control, Gu'an's house prices are close to the waist, and about one-third of the shops in the street are closed, and the volume of her store is from a dozen or so per month before the regulation. Set, suddenly fell to one or two sets per month.

Analysts pointed out that the cities around these big cities can still hope to rely on the spillover demand of first-tier cities to quickly recover their vitality after policy adjustment, but what is even more worrying is the ordinary third- and fourth-tier cities that have also risen significantly in this round. The follow-up development of its property market.
As for the shantytown renovations, the government says if the local inventory is high, bulldoze away:
On July 13, the Ministry of Housing and Urban-Rural Development stated that it is necessary to promote the monetization of sheds in accordance with local conditions. For places with insufficient commodity housing inventory and high housing price pressures, the shed-reform resettlement policy should be adjusted in a timely manner, and more new sheds should be adopted. The way to change the resettlement house; where the commodity housing stock is large, it can continue to promote the monetary resettlement of the shed.

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