$10 Trillion Needed to Digest Housing Inventory, Equivalent to Past 25 Years of Sales

China needs 60 trillion yuan to absorb existing housing inventory. Where will it come from?

According to observers network columnist Jiuhua estimate the size of the current real estate inventory 8.63 billion m2, 60 trillion needed to digest all funds, then these funds come from? Consumption from the household sector alone, apparently not feasible.

Blue line: sales aream Red line: construction Gray line: inventory

By the end of 2015, Chinese real estate stocks 8.63 billion m2 (of which 720 million sale m2, under construction 7.36 billion m2, land to be developed 370 000 000 m2 floor area ratio of 1.5 times the count). It should be noted that this figure is underestimated. In previous years, construction delayed or half built buildings ceased construction are not included.

Even so, this figure is 6.7 times 2015 sales (in 2015 real estate sales area of ​​1.285 billion m2). The new construction area continued higher sales area, resulting in inventory every year.

Inventory Value 60 trillion = Sum of Annual Sales over the past 25 years

2015 National Sales 1,285,000,000 m2, total sales of 8.73 trillion, the average price of 6800 yuan / m2. In this calculation the total price of 8.63 billion square meters of 58.6 trillion. Taking into account the recent price increases in some cities is estimated at 60 trillion should not high.

This means that a 60 trillion to stock funds disk access. From 1991, the sum of 25 years of national real estate sales is 60 trillion.

...60 trillion yuan problem

Both paradox, is just beginning to face to the inventory problem. The real challenge is: Who will bear this 60 trillion?

The popular view is that the high debt ratio Chinese corporate sector, the need to deleverage. Low debt ratio of the household sector, you can add leverage. The government leverage in between the two. The figure is the Academy of Social Sciences estimated 2014 China's economic sector leverage (in which the central government is the 2013 data):

From the total point of view, the household sector's debt leverage does have the added space. But this seems inconsistent with our intuitive sense: people complaining about high prices has always been common, only a minority can easily buy a home in the city, and to carry the mortgages will put a big squeeze on personal consumption.

Where is the problem in the statistical data? I think I can be interpreted in two ways.

First, while residents' total assets reached 253.7 trillion, but 151 trillion is fixed assets (mainly houses), in fact, can not be utilized. Another 10.5 trillion insurance is difficult to cash. Disposable wealth, in fact, only 92.7 trillion (including cash, deposits, stocks, bonds, insurance, banking and wealth management).

Although the debt ratio may not be high, but the financial assets available for residents realized consumption has shrunk dramatically, long-term negative impact on the economy is self-evident. Wherein the full amount to buy all the stock is an extreme case, a great impact on purchasing power, can not happen in reality. The case of a mortgage to buy a house more realistic, the impact is small, but still on for long-term erosion of consumer capacity, just put the impact of the spending power allocated to it in the future.

Two solutions would be much faster wage growth or full blown wage inflation, which brings on a host of other problems, or a transfer of assets from the state sector to the private sector. Otherwise, the reality is consumption will fall as mortgages chew up disposable income, or other financial assets will be sold to fund home purchases. Or prices have to fall......


Sina: 房地产去库存：60万亿资金从哪儿来