Guotai Junan Warns on Easy Money and Asset Bubbles

China is stuck in a quandary at the moment. Third- and fourth-tier cities struggle to reduce inventory, while first-tier prices are "skyrocketing". If history is any guide, easy money by the central bank will flow into speculative assets and the runaway prices in Shenzhen will repeat in Beijing, Shanghai and other cities.

The Guotai Junan report covers broad housing inventory (property for sale plus advance sales and construction). Narrow inventory of 720 million sqm is less than 7 months sales of 1.28 billion sqm in 2015, but the broad measure climbs above 8 billion sqm, or more than 6 years of inventory. Commercial property is in even worse shape, GJ estimates inventory will take 15.6 years to clear at the current pace of sales.

Estimates also put current sales demand at near 100%, raising the risk of rising inventories:
According to the National Research Center, Liu Shijin estimated peak value of housing demand is 12 to 13 million units, according to the count of 100 square meters each, residential peak demand of about 1.2 to 1.3 billion square meters in 2015, residential sales area was ​​1.12 billion square meters, which means that housing demand has limited room for growth.
The worst areas are as follows:
Generally higher in the west, northeast and Shanxi provinces, the third- and fourth-tier inventory-to-sales ratio relatively high, sales flexibility relatively low. Highest Shanxi 9.9 years, followed by Ningxia 8.4 years, Jilin, Liaoning and also ranked in the forefront, were 7.8 and 7.5 years. Stock highest capital city of Hohhot and Taiyuan were 16.1 years and 11.1 years.
Second-tier cities look stronger due to lower inventory and the potential for sales increases:
Second-tier cities moderate inventory levels, sales volume elastic moderate. Stock Minimum provinces were Jiangxi, Hunan, Hubei, Henan and Guangdong, generalized sales ratio was 4.4,4.5,4.5,4.8 and 5.0. Provincial capitals and major cities, Hefei, Wuhan, Nanchang, Xiamen and Nanjing minimum between 4.4 to 5.4. These are the major second-tier cities. There are also some second-tier cities high inventory levels, such as Hangzhou , Ningbo, sales ratio up to 9.4 and 10.2. Inventory and sales characteristics secondary cities, making its overall inventory problem is not, on the one hand there is a certain pressure, on the other hand there is the potential to solve and space.
First-tier cities are in the best shape thanks to strong sales. GJ has moved beyond bifurcation and is now describing the above as a three-track market.
On the whole, the regional real estate stock track tri-run trend. The four-tier cities significantly higher inventory levels, sales and low elasticity, inventory problems are most serious. The second-tier inventory level between them, but the first-tier cities sales high flexibility, small inventory pressure, moderate elasticity of second-tier cities sales, inventory pressure, but there is the potential to solve. 2015 first-tier cities prices rose, second-rier saw a small rise and third-tier down, highlighting the inventory problem in different regions.
GJ provides the case of Wenzhou as an example of inventory reduction.
(1) Wenzhou real estate stock was very impressive, beyond the current Shanxi

Wenzhou real estate stock was very high in 2011, with sales over Wenzhou area of ​​the construction area is 23.8 years, meaning that the prevailing sales pace, Wenzhou real estate stocks need about 24 years to digest is completed. Such a high sales ratio (generalized stock), far more than the current maximum stock Shanxi (sales ratio was 9.9 years).

(2) stock decreased, prices also rose

According to the Wenzhou Daily reported, Wenzhou city property stocks dropped significantly, to the period of the (narrow stock) by the end of 2014 to 15 months to 6 months of the end of 2015, exceeding market expectations. Wenzhou Cape Property Marketing Planning Co., Ltd. Deputy General Manager Chen earned that this year the urban inventory to faster than expected to shorten the period of 6-9 months.

Generalized stock, the 2015 ratio of Wenzhou area of ​​the construction area and sales dropped to 8.9 years, a substantial decline compared with 2011.

House prices, in February 2015 --12 months, Wenzhou prices continued to rise, the cumulative increase of 3.5%, which is the first time in 2011 continued to rise, to display the stock situation has improved.

(3) Wenzhou destocking experience

Full price adjustment, low house prices enhance the attractiveness of the house. Rate Wenzhou high inventory makes depth adjustment, beginning in 2012, Wenzhou house prices continued to fall. China Index Research Institute released data show that house prices in malls, Wenzhou sample residential average price in January 2012 from 2.1 yuan / square meter, in January 2015 fell to 1.3 yuan / square meter, down nearly 40%.

With the real estate policy stimulus, as well as the national real estate sales pick up, prices rise, since the previous adjustment Wenzhou more fully, is expected to turn for the better with the volume increase, to the velocity improved significantly.

Flexible market mechanism of supply and demand elasticity, help to improve the rate of change in inventories. Wenzhou private economic activity, the market mechanism more flexible, so the fluctuations in prices, sales and so on in the country at a high level, prices above us talked, sales, 2009-2015, Wenzhou real estate sales were 314,228,136, 203,350,418 and 525 million square meters, far exceeding the national average large fluctuations. Flexible market mechanisms, high elasticity of supply and demand, so that supply and demand balance in Wenzhou accelerate recovery time.

Policy support. April 2, 2015, Wenzhou issued "Opinions on Promoting the real estate market continues stable and healthy development," including "eight real estate New Deal", outsiders called "Wen eight." Highlights include:

First, the control supply. "Wen eight" in the first talk is to control the supply of land for housing supply obviously more under construction or residential land area size is too large, reducing the supply of residential land until suspended, suspended in particular it is very clear and firm .

Second, the demand for housing subsidies incentives. Between April 9, 2015 to 31 December 2015, the first individual to purchase new ordinary commodity housing, after obtaining housing all warrants, giving a mortgage subsidy of 0.6%.

Third, it allows developers to adjust the structure of housing condominiums, some units unreasonable to adjust to market demand. "Just be king, price change, propped up the entire Wenzhou property market." This is a Long Katherine (Wenzhou) Co., Ltd. real estate marketing features Wenzhou property market in 2012 are summarized, the company is the largest real estate marketing company in Wenzhou. Supporting Wenzhou property market turnover of several of the main real estate without exception, are the main push of 90 square meters just need a small apartment, and the price discount card played.

It is from the beginning of the introduction of the policy, superimposed State RRR rate cut support, Wenzhou house prices bottoming out in early 2015, sales also rose significantly, inventory to clear.
The report concludes by warning of the risks from government intervention:
Destocking during the greatest risk: excessive currency relax and structured asset price bubbles.

As the real estate of the monetary easing are more sensitive to the inventory process, there may be a tendency to over-reliance on monetary policy. But monetary policy more than a short sky, will solidify the economic structure, slow clearing, over-generous supply is not conducive to the overall situation of reform side.

China's current economic vulnerability enhance room real estate bubble burst once great harm, although the central discrimination measures taken (such as the continued implementation of the purchase, etc.), the 2015 first-tier cities still rose, need to guard against first-tier cities continued to rally, and spread to two lines city.

In addition, residents plus lever there are some risks. Although Chinese residents generally low level of leverage, but revenue growth has increased pressure drop and employment background, residents in lever may cause a sharp rise in social problems.
The above is only a slice of the entire report, which iFeng appears to have printed in its entirety. A lot of it is a summary of policies passed by the central government, local governments, and central banks over the past year or so.

iFeng: 中国楼市去库存需警惕两个现象 已经出现了

No comments:

Post a Comment