2020-02-12

Will China Have One Final Melt-Up Before the Crack Up? Housing Policy Easing Expected

A week ago most analysts and economists paying attention to China were worried China was entering a binary moment. If the coronavirus spread further, the economic hit would be difficult to recover from in 2020 and it would have global implications. If the coronavirus has been contained, a quick recovery is possible in the second-half of the year.

Let me propose a new risk is emerging from the latter scenario: that China overreacts and eases too much, unleashing a crack-up boom housing and speculative assets. There is a perfect storm brewing with stimulus policies, easy credit policies and now potential policy easing in most speculative market: real estate. In this scenario, coronavirus costs are overestimated. Chinese companies take advantage of easy credit, tax breaks delays in loan repayment. With cash flow pressure alleviated they load up on speculative bets in markets such as real estate, betting that like every time before, policy easing eventually forces real estate prices sharply higher. A similar crack-up boom is underway in the United States thanks to the Federal Reserve in the middle of a raging bull market: That 1998-1999 Analog Again

iFeng: 10城成交面积下降56% ?房地产政策宽松预期加强
Policy easing is expected to strengthen

The market's expectations for loosening property policies in 2020 are strengthening.

On February 7th, the Wuhan Provident Fund Management Center issued the “Notice on Doing a Good Job in Housing Provident Fund Service Guarantee During Epidemic Prevention and Control”, which provides preferential use of housing provident fund for medical staff and staff involved in the prevention and control of the outbreak in Wuhan within a certain period. The policy will refer to the support policy of high-level leading talents in Wuhan City, increase the loanable amount by 20%, reduce the time limit for deposits, and the maximum loan amount is 840,000 yuan.

This move was intended to reflect the policy of caring for front-line workers in the prevention of the "epidemic", but it was also seen as a stimulus to the property market.

But Xiao Wenxiao, chief analyst of Kerer Guangzhou, took a negative attitude to this conjecture.

Xiao Wenxiao explained to Time Weekly reporters: "Overall, due to the impact of the epidemic, and considering the importance of the real estate upstream and downstream industries to the economy, the real estate industry will indeed have more policy opportunities for marginal relaxation due to urban policies. But Why, such a policy will not be introduced in February. Because the focus of all regions in February is still on fighting the epidemic. At this time, the introduction of loose property policies in the property market will have no effect at first and the second will be out of date. "

Regarding whether a certain degree of easing policy will be introduced in the future, many experts told Time Weekly reporters that easing is possible, but "housing and living is not speculative" and policy based on the city is still the policy tone and will not change.

"The real estate policy will generally continue the current policy, adhere to the policy of" housing and living without speculation, "according to the city. On the whole, there will be no possibility of substantial easing." Zou Linhua emphasized that in terms of city level, big cities due to the special market Nature and regulatory pressure, it is expected that the impact of the epidemic will be small, and policy easing is almost impossible. However, due to the greater impact of the epidemic, small and medium-sized cities may continue to adjust the property market policy based on the policy of the city.

At the same time, Xiao Wenxiao and Zhang Yuanwei, chief analyst of Zhongyuan Real Estate, believe that the subsequent satisfaction of self-occupied demand may be a tendency of loosening policies.

"Actually, many cities that can implement more lenient policies have taken action since last year, such as adjusting or even canceling price restrictions, sales restrictions, or marginal adjustments of purchase restrictions based on talents and settlement policies. In the traditional 'four limits', At present, the purchase and loan restrictions are relatively long-term policies. It is expected that they will be adhered to, and at most they will be fine-tuning restrictions. "Xiao Wenxiao said," In addition, the credit policy will give more support to reasonable self-occupation needs. There is still room for operation. "

Zhang Dawei also holds this view. "In terms of 'housing to live without speculation', because of the pressure on the property market in this round of regulation and control, the intensity is relatively strong. Among them, the demand for improved housing, including cracking down on second homes and 'selling one buy one', etc. The policy is over-tightened. Therefore, in the future, policy easing can consider how to meet the improvement needs on the basis of restraining investment speculation. "

In any case, the policy must follow the epidemic situation. Zhang Dawei concluded: "How strong the easing policy will be, the core is to see how long the epidemic will last. If the epidemic can be controlled at the end of February, then the policy adjustments we mentioned will be effective. But if the epidemic continues, how to save the market is not just real estate problem."
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