Real Estate Is Over, No Amount of Stimulus Will Work

The Chinese government has been contemplating rescue measures and analysts have been turning bullish on the sector in expectations of stimulus. There are still holdout bears though, one of which is Ren Zeping, chief economists of Guotai Junan Securities.

He sees the Chinese economy downshifting into a slower growth phase that will last 3 to 5 years, creating an L-shaped slowdown. He says this is an exciting time as the 30-year cycle is ending through reform and deregulation, a new 30-year period of growth can begin.

He says there will be no dividend from reforms without three years of labor pains. He's optimistic though:
This critical point in time, if we do not reform strategy and commit the wrong direction, I believe that China's transformation is a high probability event. We can see the success of these transition economies, Japan, South Korea, China Taiwan, Singapore, Hong Kong, China are in our vicinity.

As for real estate:
In the future, how you stimulate the real estate when this era is over. We can see that from 2014, the real estate investment from the previous 20% growth is now down to zero growth. Now we must study what are the characteristics of the real estate cycle after the population inflection point. I asked you a question, people continue to migrate to the big cities? Or return to small towns? Yes, migration to large cities and towns.

We did a study of more than 10 economies, this picture tells us that after the end of the demographic dividend, people continue to migrate to the big cities. Whether it is the United States, Japan and other economies are the same. Young, talented person net worth, the natural alternative to the big cities which, because only the big cities can give young people achieve the dream stage, only large cities that net wealth available to provide quality public resources.

So, people continue to go among the big cities. So, we can see that when people continue to migrate to the big cities, when first tier cities have no land, prices rise. No sales in third- and fourth-tier cities, land and inventories high.

Last year, I did a real estate prediction for China over the next 10 years, housing prices will double in the first-tier, third- and fourth-tier will have no change, zero growth in real estate investment. First- and second-tier core cities, together there are 10 cities, there are hundreds of third- and fourth-tier cities, they account for 80% of real estate investment. Third- and fourth-tier cities continue to decrease inventory, how do we re-stimulate the real estate when we cannot go back to the era of depending on steady growth in real estate. If you could stimulate third- and fourth-tier real estate ghost cities, you want to spend how much money? Not necessarily a good thing.

iFeng: 任泽平:房地产时代已结束 怎么刺激都没用

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