China Hinges on Credit Growth and Housing, Not Trade Deal

The 100-city housing survey from China Index Academy shows home prices rising at the same pace as July last month: 8月百城住宅均价平稳 环比微涨0.37%

According to the latest report released by the China Index Academy, the average price of residential houses in 100 cities (newly built) in August was 1,504 yuan per square meter, up 0.37% from the previous month, and the growth rate was narrowed by 0.01 percentage points from the previous month.

Huang Yu, executive vice president of China Index Research Institute and CEO of China National Index Holdings, told reporters that overall, the average price of residential properties in Baicheng remained at a low level, and the price fluctuations in most cities were in a stable range. She predicts that the real estate market as a whole will continue to be stable in the future, but the differentiation between cities will become more and more apparent, and some weak third- and fourth-tier cities will face adjustment pressure.

Another headline highlights a new record for housing controls.

iFeng: 创记录！前8月楼市调控高达367次 政策持续收紧

Statistics from the Central Plains Real Estate Research Center show that from January to August 2019, the national real estate regulation policy was as high as 367 times! Compared with 315 in January-August 2018, it rose by 17%. The cumulative number of times has refreshed the real estate control record. And in August alone, the real estate control policy was as many as 60 times. The number of adjustments from January to July was 68, 21, 15, 60, 41, 46, and 56, respectively.

...Since the beginning of this year, from the central government to the Banking Regulatory Commission, intensively strengthen the risk control of real estate finance. In particular, in July, for five consecutive real estate trusts and US dollar debts, they were all directed at real estate release policies. At the beginning of August, it was again clearly targeted at the 32-city inspection, which constrained the amount of real estate loans.

Recently, the notice issued by the Banking Regulatory Commission on the on-site inspection of some local small and medium-sized banking institutions shows that some local small and medium-sized banks have illegally provided financing for the “four certificates” of unrealized real estate projects, and some institutions have granted loans to real estate companies that have not obtained real estate development qualifications. It is used to pay compensation for demolition; in addition, illegal loans are issued to real estate projects with insufficient capital. Some real estate development loans issued by institutions have a serious shortage of project capital.

...Zhang Dawei believes that as long as the credit policy does not change significantly, the adjustment of other policies has a very limited impact on the property market. On the whole, the current real estate policy in 2019 is still more and more fine-tuned in addition to credit, but the overall policy fundamentals remain relatively tight.

The property market is strictly regulated, and the patching measures for rising house prices are still appearing. According to the report of Zhongxin Jingwei client, since the second half of 2019, at least 15 cities have introduced property market regulation policies and promoted the real estate market through a series of measures. healthy growth.

Zhang Dawei believes that in the second half of 2019, the national property market will still be two-way regulation, and cities with stable housing prices will not rule out easing policies, but as long as the rise is obvious, real estate regulation will definitely increase. In addition, from the perspective of credit interest rates, it is not excluded that interest rates for real estate will rise again.

To repeat: for the past 10 years, China has been unable to achieve a credit-induced increase in the GDP growth rate without spawning a bull market in housing. In some cases, housing was the cause of the increase in GDP, not a secondary effect. Real estate controls, bullish or bearish, have seldom worked when the credit impulse was contrary to them. If China achieves a burst of growth without spurring a speculative surge in housing, it will be a first. Moreover, speculators are counter-cyclical. They have been trained by repeated government failures to buy when restrictions are ratcheting up because eventual credit growth always breaks the controls.

The most important data point is Chinese credit growth. Until that increases, everything else it mute.