What do Japanese people who have experienced the housing market recession think of China's housing prices?
Wen/Ma Yuecheng
As for China's property market, people are always willing to compare it with that of Japan. This is mainly because there are many similarities between Japan and China at that time. Japan's economic aggregate at that time was the second largest in the world. Japanese products entered the United States on a large scale, which was besieged and blocked by the United States. Then Japanese capital directly entered the United States, manufacturing industries went to the United States to build factories, and Japan became the largest creditor country of the United States. There was a popular saying at that time that one district of Tokyo could buy the whole United States, which can be seen from the high house prices in Tokyo. How familiar are these situations to China today? Japan's economic bubble burst from the Plaza Agreement, which is very similar to today's Sino US trade war.
Therefore, people who are worried are more and more worried, and they seem more and more afraid. The other view is that China is China and Japan is Japan. The situation in China is structurally different from that in Japan, so the bursting of Japan's housing bubble will not happen in China. China's housing market is absolutely safe, and housing prices can survive any rise. And through several property market regulation in the past years, it seems that it was a false alarm, and finally all landed safely, and then took off again. Time and time again, never fail! These views, both positive and negative, are the views of the Chinese themselves after all. We may not have seen the real situation of Japan's property market in those years comprehensively, and our understanding is not necessarily accurate. From the perspective of Japanese, their experience must be different from our intuition. Let's take a look at the perspective of these Japanese people and how they view China's property market.
They believe that the housing prices in China's first tier cities have reached the bubble level, and the housing prices in Beijing, Shanghai and Shenzhen have reached more than 20 times the household income, which has exceeded that of Tokyo in the late 1980s during the real estate bubble era. The fundamental reason for the rise of housing prices in China is the rise of land prices. Under the current land system, local governments collect land from farmers, especially land around big cities, and sell it to developers at a low price. Then the difference between these two is a very important source of financial revenue for these local governments, The local government is very happy to maintain the high land price. In addition, in order to maintain a relatively high food self-sufficiency rate, the government has adopted a lower red line approach, which has led to the difficulty of converting agricultural land into other uses, and the supply of land needed for urbanization has been greatly restricted, thus further exacerbating the rise of land prices and house prices. This vicious circle has exacerbated the rise in prices.
The reason for the bubble rise of Japanese real estate (1985-1991) is that the signing of the Plaza Agreement between the United States and Japan led to export and economic recession. The Japanese government launched fiscal stimulus (6 trillion yuan) and monetary easing (five interest rate cuts), which led to the investment in real estate by the whole society. In particular, it seems that a large number of non real estate enterprises joined in land speculation and gave birth to the bubble. At that time, in Japan's bubble economy, Japan was in a situation of transitional loan issuance. In addition to real estate loans issued by banks, there were also non bank professional financial institutions, called residential professional financial institutions in Japan. I know that China also has the so-called shadow banking problem, which is similar to the past when Japanese banks or financial institutions other than banks provided a large number of asset loans, leading to the rise of land prices. In addition, in the 1980s, Japan was faced with the problem of labor shortage, which led to a significant decline in the potential growth rate. Today, China is also subject to the reduction of labor force, so the potential growth rate is also a significant decline. In addition, on the issue of currency liquidity, the situation and countermeasures of the two countries are quite consistent. Today's China may also face greater risks, mainly because China's shadow banks are completely independent of banks. If the real shadow banks in China go wrong and default, it is likely to bring greater impact to China's financial system than Japan at that time.
In Japan, there is a view that Japan has experienced three rounds of housing price inflation, and China's housing price inflation is equivalent to Japan's housing market in the 1970s. They believe that China is at the stage of Japan's second round of rise, which is characterized by the fact that the bubble can be defused through rapid economic development. This may be the reason why China's bubble is always crying out for breaking, and the result is always able to survive. The final reason for the bursting of the housing price bubble in Japan is that the capital market accelerated the flow of funds into the land market, and the land price further expanded, which eventually led to the rapid bursting of the housing price bubble.
Therefore, from the Japanese perspective, China today is very similar to Japan at that time! In the 1980s, Japan had a period of bubble boom. Both the stock market and the property market soared, and countless Japanese people swept through them. At that time, the Japanese firmly believed in two myths: land would not depreciate and house prices in Tokyo would not fall. They believe that China's real estate valuation is currently the highest in the world, and Sydney and Melbourne's real estate valuation is 10-11 times of income, which is the highest in developed countries. It's terrible. The housing price in China is 28-35 times the income of major cities. This situation is not the money of local people, but the money invested by rich people and foreign buyers. [This article was released by "Ma Yuecheng Account" on July 31, 2018]
