Article/Lin Caiyi, columnist of Sina Financial Opinion Leader (WeChat official account kopleader)
Whether from the perspective of demographic factors, income factors, monetary environment or credit policies, the conditions supporting the continuous rise of real estate prices in the future have disappeared. In this case, it is only a matter of time before the expectation of house price rise changes.
The ceiling of rent depends on income rather than house price
According to the statistics of major cities around the world, the rent accounts for 40-45% of the income of rental groups, which is the upper limit of the price that tenants can afford. In other words, if the rent exceeds 40% of their income, such groups will usually give up their existing houses and choose worse living conditions, such as living farther away, living in the basement, or sharing or even group rent. At present, there are mainly two types of urban rental groups: first, young people who have just entered the society and started work (including college, undergraduate, master and doctoral graduates); Second, although they have worked for many years, they are low-income people with low income and can not afford to buy houses, or very few foreign enterprise executives with strong job mobility.
According to the data of the National Bureau of Statistics, in 2017, the number of people living in private houses accounted for 67.3% of the floating population, with a total number of nearly 160 million. The survey statistics show that, in terms of education background, the proportion of undergraduate education background is the highest among the renters, about 52%, followed by college education background and master education background, accounting for 23% and 14% respectively. These three types of education background together account for about 90% of the renters, of which 78% are under the age of 30. It can be seen that the first kind of people, namely young people who have just entered the society and started work, are the main force of urban housing rental at present.
In the first tier cities, the average monthly income of these groups is about 5000-8000 yuan. From their average income level, it can be inferred that the ceiling of rent that most renters in the first tier cities in China can afford is about 2200-3600 yuan. Once the rent is higher than this level, they may choose to rent together or other poor living space. The rental income ratio is less than 30%, and only 16.8% of the people can afford higher rent.
Theoretically, the rent is determined by supply and demand in essence, but for the stock market, the change of rental demand is crucial, and the demand depends not only on the population renting houses, but also on the income level of tenants.
The ratio of rent to house price determines whether a large number of investors are willing to hold houses for a long time to obtain rental income
From the perspective of supply of rental housing, rental housing in the United States, Japan, Germany and other developed countries accounted for more than 35% of all residential housing, while China only accounted for 17%. On the one hand, the low proportion of rental housing is related to the fact that Chinese people attach importance to real estate. There is no second country in the world that likes houses more than traditional Chinese people and regards houses as the most important asset in life. On the other hand, the relatively low share of rental housing is related to the soaring house price since the commercialization of housing. When the rising house price becomes the main benefit or even the only benefit concerned, the rental income of housing is ignored for a long time.
Will the rental housing supply increase significantly in the future? In the long run, it depends on the ratio of rent to house price, that is, the return on capital of investment in real estate. For the incremental market, the change of housing supply is crucial, and the supply depends not only on investors' expectations of future housing prices, but also on the rent to price ratio. The rent to house price ratio is higher than the risk-free return, which is an important factor for landlords to be willing to hold investment residential buildings in a long-term and stable manner.
At present, the rental yield of the prime location in the center of Beijing and Shanghai is as low as 1.5% - 1.8%, which is seriously lower than the risk-free yield. Once the expectation of rising house prices is no longer expected, most investors will choose to sell the property and replace it with other assets with higher yield.
In short, from the current rent to house price ratio, the cash flow generated by real estate investment is not attractive to investors.
From the perspective of the growth rate of residents' disposable income, there is limited room for rent rise in first tier cities in the short term
In the past five years, with the slowdown of macroeconomic growth, the growth of disposable income of Chinese residents has also declined correspondingly, falling to 9% in 2014, and then declining year by year. It is estimated that the growth rate in 2018 will be 7.5%. It is not difficult to infer from the downward trend of income growth: The future rent growth is relatively limited.
As long as there is no serious inflation, there is a high probability that house prices will fall
First, from the perspective of population size, age structure, urbanization rate and other factors, the era of rapid population growth supporting simultaneous housing growth has ended. Since 2015, not only the married and home buyers aged 25-39 have begun to decline, but also the people aged 35-49 who buy houses to improve their living conditions. The decline in the natural growth rate of the population, coupled with the reduction of rural population flowing to cities, has significantly reduced the basic driving force for the growth of housing demand.
Secondly, in 2017, the proportion of total debt of residents in disposable income in China rose from 31% in 2008 to 79%. The sharp rise in the debt ratio of residents combined with the decline in the growth rate of disposable income led to a serious weakening of residents' purchasing power of housing.
Third, with the rise of interest rates and the end of housing credit preferential policies, the loose monetary environment supporting the continuous rise of house prices has disappeared.
Fourth, the purchase and loan restriction policies in the first and second tier cities severely restrict the demand for investment house purchase.
To sum up, no matter from the perspective of demographic factors, income factors, monetary environment or credit policies, the conditions supporting the continuous rise of real estate prices in the future are no longer there. In this case, it is only a matter of time before the expectation of house price rise changes.
From this we can expect: In the future of the first tier cities, the house price will fall, but the rent will not rise sharply.
(The author of this article introduces: Chief Economist of Hua'an Fund.)
