2018-09-03

1st Tier Inventory-to-Sales Ratio Decouples From 2nd,3rd,4th Tier

iFeng: 二三四线城市与一线城市严重背离,这是什么信号?
In July 2018, the ratio of inventory and sales of new commercial housing in 100 cities on the first, second and third tiers was 13.6, 9.5 and 9.4 months respectively. Compared with the values ​​of 13.4, 9.7 and 9.6 months in June, the first-tier cities have a rebound in the ratio of deposits to sales, while the second-tier, third- and fourth-tier cities continue to narrow.

Due to the direction of the city's policy, from the second half of last year, there has been a trend of starting to deviate, the scissors are getting bigger and bigger, and the past years have been the same.

...There is also a new phenomenon, that is, the deposit and sales of first-tier cities are more than the second, third and fourth lines starting this year, and they are much longer. This has not existed for the past 30 years.
Why is this happening?

First, it is indeed because the first-tier cities first rose, Shenzhen started in 2015, followed by Shanghai, then Beijing, and finally Guangzhou, so the first-tier cities began to regulate, and too strict, Beijing and Shanghai's purchase threshold is too high People with strength can't buy, people without strength can't afford it, the concentration of improvement has changed a wave, and the rest just needs to be very hard, so from the demand point of view, there is a lot less, the supply gradually enters the market, slow down, save The sales ratio will continue to rise.
Second, the second-tier cities will be somewhat different. Most of them started in the second half of 2016, while the third- and fourth-tier cities will rise late, most of which will only start in 2017. The remote prefecture-level cities and county towns will only start this year. The policy adopted the policy of the city, very loose sheds to change the monetary resettlement, the effect is very obvious, accompanied by rising house prices, the speed of de-transformation is very fast.

Wang Yuling, president of the Wuhan Branch of the People's Bank of China, wrote in August that at the end of May 2018, the average digestive cycle of commercial housing in 79 cities and counties in Hubei Province can be broken into less than 6 months, 6-12 months, and 12 months, there are 29, 43 and 7 cities in each range.

Wang Yuling believes that the local government must not only limit housing prices, but also complete the task of shed reform. This dilemma is not conducive to its rational decision-making, and local governments can only take advantage of the two evils. Residents’ demands for physical resettlement have risen, and it is hoped that fewer residents will be demolished. As a means of de-stocking in this round, monetized resettlement has basically ended its task and should be considered for timely withdrawal.
The concern is the lower-tier cities are deviating greatly from first-tier control policies:
We will not know how much monetization will be reduced. But the regulation of third- and fourth-tier cities is still too gentle.

Then, what problem will arise?

Because the three-fourth line is too low in the ratio of deposits and sales, if the cities that have not yet regulated do not hurry to strengthen regulation and control, the market will rise irrationally, causing the bubble to be too large, repeating the mistakes of first- and second-tier cities.

Because the market is often when the inventory is too low, the market will cause panic because of the extreme lack of housing, grab the house, the price rises and can not hold back.
Highest and lowest inventory-to-sales ratios. Beijingm Xiamen and Tianjin are among the highest. Hangzhou, Dalian and Yangzhou among the lowest.
Under normal circumstances, the lower the ratio of deposits and sales, the greater the pressure of price increases, the higher the ratio of deposits and sales, the greater the downward pressure on prices.

However, what I need to point out is that under the control intervention, the ratio of deposits and sales is only a reference value, not an absolute value. There is also a bottom line for the rise and fall of housing prices. For example, in Hangzhou, the deposit-sale ratio is 2.9 months, which is very low, but the price of second-hand housing has now risen because the new home is limited to death and there is no room for growth.

Another example is Yanjiao, which has been in the 25-month period, but the price of Yanjiao has fallen by 40%. Now it is in a low-lying period. If the policy is not liberalized, the bottoming period may be long and long, but not necessarily too. More downside, because there is no new supply of new houses in the Yanjiao market. Since the regulation in March last year, it was purely just needed. The investors have already squeezed out. After the volume is stable, basically the price will stabilize.

Therefore, it is not possible to generalize in general, but also to analyze the specific situation.
The author of the piece says investors should get out while the smaller markets are still hot:
If you have a house in the third- and fourth-tier cities and want to sell it, my advice to you is to double the principle and sell it after doubled in 2016. When you arrive, don't be greedy, because the market cycle of third- and fourth-tier cities is relatively short.

There have been some fans of the third- and fourth-tier cities that have finished rising, and the local market has turned cold, and second-hand houses are not selling well.


The third- and fourth-tier cities themselves have fewer pick-ups, and everyone likes to buy new homes. If you don’t take advantage of the market when you’re crazy, it’s hard to sell. In case of a limited sale, it will be put out.

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