Opinion Leader | Luo Zhiheng
abstract
On May 17, four ministries and commissions issued new policies on real estate: First, reduce the down payment ratio, cancel the lower limit of housing loan interest rate, and lower the interest rate of provident fund loans; Second, the central bank provided 300 billion yuan of refinancing to support local governments to purchase part of the stock of commercial housing as affordable housing; Third, the financing "white list" should make every effort to meet the reasonable financing needs of projects under construction; Fourth, support the local government to properly dispose of the idle stock residential land that has been transferred by means of recovery, acquisition, etc., to help enterprises solve difficulties; The fifth is to find out the basis, classify the disposal, judicial support, establish a long-term mechanism, and fight the battle to ensure the delivery of housing.
The new policy is the implementation of the requirements of the 430 Political Bureau meeting on "overall research and digestion of existing property and optimization of incremental housing policies and measures", marking the start of a new round of real estate de stocking.
The new policy focuses on financial support. When local governments purchase stock commercial houses and idle land, they especially emphasize not to increase the implicit debt of local governments.
1、 This round of de stocking of real estate faces greater pressure
1) The cycle of commercial residential housing is longer, 23 months in the first quarter of 2024;
2) The sales and investment of real estate dropped even more. From January to April, the sales area and sales volume of commercial housing dropped 20.2% and 28.3% respectively year on year, and the real estate investment dropped 9.8% year on year;
3) The housing price has been depressed for a longer time, and has been negative for 25 consecutive months as of April 2024;
4) The debt of real estate enterprises and the risk of uncompleted pending housing have impacted residents' confidence in buying houses, and the sales of existing houses are significantly better than that of pending houses;
5) Significant changes have taken place in the relationship between supply and demand of real estate, and the peak value of new house sales has passed.
2、 Logical sorting of recent real estate support policies: ensuring supply, promoting demand, and stabilizing house prices
Recently, the central and local governments have launched a series of measures to ensure supply, promote demand and stabilize house prices. Among them, the key is to stimulate demand, stabilize housing prices and reverse the downward expectation of housing prices; To ensure supply is also to promote demand in a sense, because only when the risk of uncompleted residential buildings is removed, can residents dare to remove their worries about purchasing new houses.
1) The first focus of the policy is to expand the demand for housing purchase, which is the key to the de stocking of real estate, both to promote the demand of residents and to direct the government and state-owned enterprises. 1) Lower the threshold and cost of housing purchase, and stimulate the new demand of residents; 2) The government purchases commercial houses for sale from real estate enterprises to be used as affordable housing, which is an important supplement to the regular new demand; 3) Various housing "old for new" policies have been launched in various regions to speed up the circulation of old houses and activate the replacement demand of residents; 4) The government's monetary resettlement for the reconstruction of villages in cities and shantytowns will also generate replacement demand.
2) The second focus of the policy is that the supply side should do a good job in "ensuring the delivery of houses" to dispel the doubts of residents and boost the confidence in buying houses. For example, we should fight the battle of ensuring the delivery of commercial housing projects, further play the role of urban real estate financing coordination mechanism, and properly dispose of and revitalize the stock of land.
3、 What will be the effect of "government storage" destocking? What are the difficulties?
1) In terms of mode, It is expected that the government will mainly purchase and store new houses in stock, and the scale of second-hand houses is small; The purchased commercial houses will be mainly small apartments; It should not be spread on a large scale, and will be concentrated in cities and regions with high inventory and a large gap in affordable housing.
2) There are three policy difficulties: First, the cost benefit mismatch in some cities makes it difficult to promote the project, The return rate of rent in some cities is low, and the rent may not cover the interest expenses and operation and maintenance costs; The second is the mismatch between the demand for affordable housing and the inventory of commercial housing, The first and second tier cities have a large gap in affordable housing, while the third and fourth tier cities have a high urgency in de stocking commercial housing; Third, local finance is under great pressure, Although the current policy requires the local government to act within its capacity and not increase the implicit debt, whether it is to maintain the balance of project income and expenditure, or to de inventory the third and fourth tier cities, it probably needs the support of local finance.
3) The purchase and storage scale of 500 billion yuan is lower than the market estimate, but it is reasonable: First, at the initial stage of the policy launch, 500 billion yuan was relatively abundant; Second, if the government's collection and storage are smoothly and rapidly promoted, the policy quota can be added; Third, the government's collection and storage has a driving effect, and the effect of improving the imbalance between supply and demand may be more than 500 billion yuan.
4) Expected effect: First, accelerate the de stocking of commercial housing stocks and improve the imbalance between supply and demand in the real estate market; Second, accelerate the supply of affordable housing to better meet the housing needs of wage earners; The third is to help ensure the delivery of buildings and the "white list" mechanism to speed up the withdrawal of funds from real estate enterprises. However, subject to the three policy difficulties mentioned above, the effect of this round of government inventory may not be as good as that of the previous round of shed reform monetization, but correspondingly, it is unlikely to cause the side effects of overheated real estate and soaring house prices.
4、 What measures should we continue to take in the future to further support the stability of the real estate market?
1) In terms of purchase restrictions, it is necessary for the first tier cities to further relax, such as releasing purchase restrictions in the suburbs and increasing the purchase index throughout the city;
2) In terms of housing loans, on the basis of "implementing policies based on the city", all localities timely adjusted the down payment ratio and housing loan interest rate, boosted residents' willingness and confidence to purchase houses, and avoided the wait-and-see mood caused by the policy of squeezing toothpaste;
3) In terms of government collection and storage, increase the support of the central finance to local governments, ease the pressure of local finance, and promote the smooth progress of collection and storage;
4) In terms of supply, we transferred high-quality land plots, cancelled unreasonable planning restrictions, and modified some commercial land in core areas into residential land to meet the needs of residents for good areas and high-quality commercial housing.
Risk warning: The downturn of the real estate market exceeded expectations, and the property stabilization policy exceeded expectations
catalog
1、 This round of de stocking of real estate faces greater pressure
2、 Logical sorting of recent real estate support policies: ensuring supply, promoting demand, and stabilizing house prices
3、 What will be the effect of "government storage" destocking? What are the difficulties?
（1） Collection and storage mode
（2） There are three policy difficulties
（3） Is the storage scale of 500 billion yuan sufficient?
（4） Expected effect
4、 What measures should we continue to take in the future to further support the stability of the real estate market?
text
1、 This round of de stocking of real estate faces greater pressure
First, the cycle of commercial residential housing is longer. Affected by the continuous downturn of the real estate market, the national commercial residential deconstruction cycle continued to rise, reaching 23 months in the first quarter of 2024, 21 months higher than the previous peak in 2015.
Second, real estate sales and investment declined more. From January to April, the sales area and sales volume of commercial housing decreased by 20.2% and 28.3% respectively year on year, and the real estate investment decreased by 9.8% year on year. The downturn in real estate sales has exacerbated the financial strain and debt pressure on real estate enterprises. From January to April, the total sales of the top 100 real estate enterprises fell by 47.9% year on year.
Third, housing prices have been depressed for a longer time. In the last round of destocking cycle, the house price of new houses had a negative growth for 15 consecutive months on a year-on-year basis, while as of April 2024, it has been negative growth for 25 consecutive months. Downward housing prices will weaken residents' willingness and confidence to buy houses, forming a vicious circle of "downward housing prices - residents' wait-and-see - demand contraction - further downward housing prices".
Fourth, the debt of real estate enterprises and the risk of uncompleted pending housing have impacted residents' confidence in buying houses. After the last round of real estate destocking, a large number of real estate enterprises over leveraged and expanded in disorder, causing a series of risk events, seriously damaging the legitimate rights and interests of property buyers, and impacting market confidence. Pending housing sales declined significantly, while existing housing sales increased significantly.
Fifth, significant changes have taken place in the relationship between supply and demand of real estate. The 724 meeting of the Political Bureau in 2023 clearly proposed that "the relationship between supply and demand in China's real estate market has undergone significant changes". In 2015, China's urbanization rate was 57.3%, rising to 66.2% in 2023. In 2022, the national population began to decline, and the real estate market has entered a stage of decline after the peak of new housing.
2、 Logical sorting of recent real estate support policies: ensuring supply, promoting demand, and stabilizing house prices
Expanding house purchase demand is the key to de stocking real estate. According to whether the sale of old houses is involved, the demand for houses can be divided into New demand and replacement demand ； At the same time, new demand and replacement demand can be further divided into Residents led and government led 。 Therefore, the real estate demand side policy focuses on the deployment and development of these four types of needs.
First, the first, second and third houses purchased by residents for living or investment purposes are the main source of new demand. The focus of the policy is to reduce the threshold and cost of housing purchase, including easing purchase restrictions, reducing the down payment ratio and mortgage interest rate, and providing subsidies for housing purchase. Up to now, except Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin and Hainan Province, purchase restrictions have been completely lifted in all regions; On May 17, the relevant departments announced that they would reduce the minimum down payment ratio of the first house and the second house to 15% and 25% respectively, cancel the lower limit of the national mortgage interest rate for the first house and the second house, and cut the provident fund loan interest rate by 0.25 percentage points.
Second, the government purchases commercial houses for sale from real estate enterprises to be used as affordable housing, which is an important supplement to the regular new demand. The government bears the dual responsibility of stimulating the demand for housing purchase and increasing the supply of affordable housing. It simply opens up the supply and demand sides, and the government will digest some of the stock of commercial housing and transform it into affordable housing. On May 17, He Lifeng, Vice Premier of the State Council, proposed: "In cities with a large inventory of commercial housing, the government can purchase some commercial housing at a reasonable price as appropriate for affordable housing." The Central Bank will set up 300 billion yuan of affordable housing refinancing, encourage and guide financial institutions to follow the principles of marketization and rule of law, Local state-owned enterprises will be supported to purchase the completed but unsold commercial housing at a reasonable price and use it as affordable housing for allotment or rent distribution, which is expected to drive bank loans of 500 billion yuan.
Third, under the background of weak rigid housing purchase demand of residents, the improved replacement demand of "old for new" is valued. In the replacement chain, policies such as "house recognition without loan recognition" and "replacement subsidy" have lowered the threshold and cost of new house purchase, but the difficulty and blocking point is whether the old house can be sold smoothly. In order to speed up the circulation of old houses and activate the demand for replacement, various housing "old for new" policies have been introduced. First, intermediaries help sell goods on a commission basis, Residents, intermediaries and real estate enterprises cooperate to sell old houses and lock up the source of new houses simultaneously. Intermediaries give priority to selling old houses. If they fail to sell successfully, the real estate enterprise agrees to unconditionally return the house; Second, the marketable exchange of old houses, First, the housing enterprises purchase the second-hand houses of the residents, and then the residents purchase the new houses of the housing enterprises; Third, the government repurchases and collects deposits, The state-owned asset platform purchases the second-hand houses of residents for use as affordable housing or resale, and requires residents to purchase new houses within the designated range.
Fourthly, if the monetization resettlement is implemented for the reconstruction of villages in cities and shantytowns, there will also be replacement demand, which will only change the supply of second-hand housing in the current period into the supply of new housing in the future. In monetized resettlement, after the demolition of the old houses of residents, first, the government provides demolition funds or room tickets, and the residents can buy new houses independently; Second, the government purchases commercial houses for sale from real estate enterprises for demolition and resettlement.
In addition to the demand side, the supply side should also do a good job in "housing guarantee" to dispel the doubts of residents and boost the confidence in buying houses. On May 17, relevant departments announced that: First, We will fight hard to ensure the delivery of commercial housing projects and prevent the risk of uncompleted tail. In accordance with the principles of marketization and rule of law, the commercial housing projects under construction that have been sold but not delivered shall be disposed by category, the project construction delivery shall be promoted, and the legitimate rights and interests of house buyers shall be effectively guaranteed. Second, Further play the role of urban real estate financing coordination mechanism to meet the reasonable financing needs of real estate projects. The city government promotes projects that meet the requirements of the "white list" to "make progress as much as possible", and commercial banks "make full use of loans" for projects that meet the requirements of the "white list" to meet the reasonable financing needs of projects under construction. Third, Properly dispose of and revitalize the existing land. The existing land that has not yet been developed or has been started but not completed should be properly disposed and revitalized through government acquisition, market circulation transfer, enterprise continued development and other ways to promote real estate enterprises to ease difficulties and reduce debt, and promote the efficient use of land resources.
3、 What will be the effect of "government storage" destocking? What are the difficulties?
（1） Storage mode
At present, the government reserves are mainly divided into two categories:
First, purchase of new houses in stock, supported by the central policy. According to the idea of "government led and market-oriented operation", the People's Bank of China will provide low-cost refinancing funds, encourage 21 national banking institutions to grant loans to local state-owned enterprises selected by the city government in accordance with the principle of marketization, and support the purchase of commercial houses that have been built but not sold at a reasonable price as affordable housing.
The second is to purchase second-hand housing, which is independently introduced by the local government. In order to unblock the replacement chain of "selling the old and buying the new", the local government will purchase some second-hand houses from the state-owned asset platform to be used as affordable housing or resold. The sources of funds include local finance and self raised funds of urban investment platform.
It is expected that the government will mainly purchase and store new houses in stock, while the scale of second-hand houses is small. In terms of fund source, The purchase and storage of new housing is supported by the central bank's indemnificatory housing refinancing, while the purchase and storage of second-hand housing is more dependent on local finance; In terms of early storage and subsequent management, New houses are convenient for centralized acquisition and unified management, while second-hand houses need to be disposed in a decentralized manner, which is more complex; In terms of accountability risk, The purchase and storage of new houses can be carried out according to the standardized process, and the independent operation space of the purchase and storage of second-hand houses is large, which is easy to cause the problem of benefit transmission.
Since the government's purchase and storage is used as affordable housing, and affordable housing is to meet the rigid housing needs of wage earners, the purchased commercial housing will be mainly small family; It should not be spread on a large scale, but should be concentrated in cities and regions with high inventory and a large gap in affordable housing.
（2） There are three policy difficulties
First, the cost benefit mismatch in some cities makes it difficult to promote the project. The policy requires that the purchase and storage of new houses should be operated according to the market-oriented principle, and the premise of market-oriented operation is that the cost and income should at least be roughly matched.
The principle of allotment type indemnificatory housing is "break even and meager profit". If the government buys new houses from real estate enterprises, and then allocates them to the protected groups at affordable prices, it requires that the purchase price be discounted from the market price. Otherwise, the government will lose money or the price will be too high to be attractive.
The rent rate of return and capital cost should be compared for affordable housing with rent allocation. The policy interest rate of affordable housing refinancing is 1.75%, the term is one year, and it can be extended four times. The People's Bank of China will issue refinancing at 60% of the loan principal, so the loan interest rate of the acquisition subject is higher. However, in April 2024, the rental return rate of second-hand housing in Shanghai, Shenzhen, Guangzhou and Beijing will be only 1.75%, 1.61%, 1.58% and 1.43%, respectively, and the rent cannot cover the interest expenses and operation and maintenance costs.
In February 2023, the Central Bank created a loan support plan for rental housing, Pilot projects were carried out in 8 cities including Chongqing, Jinan, Zhengzhou, Changchun, Chengdu, Fuzhou, Qingdao and Tianjin, We will support market-based mass purchase of existing housing and expand the supply of rental housing. However, as of March 2024, only 2 billion yuan has been used for the quota of 100 billion yuan, which reflects the difficulties faced by the government in implementing the collection and storage.
Second, the mismatch between the demand for affordable housing and the inventory of commercial housing. The first and second tier cities have a large gap in affordable housing, while the third and fourth tier cities have a high urgency in destocking commercial housing.
Third, local finance is under great pressure. Although the current policy requires the local government to act within its capacity and not increase the implicit debt, whether it is to maintain the balance of project income and expenditure, or to de inventory the third and fourth tier cities, it probably needs the support of local finance.
（3） Is the storage scale of 500 billion yuan sufficient?
The refinancing of affordable housing of 300 billion yuan will be granted at 60% of the loan principal, which can drive bank loans of 500 billion yuan. However, the market generally believes that the purchase and storage scale of the digested stock of commercial housing should reach more than one trillion yuan. For example, the Kelui Research Center estimates that the funds needed may exceed five trillion yuan.
First of all, at the initial stage of the policy launch, the purchase and storage scale of 500 billion yuan was relatively abundant. As mentioned above, the government collection and storage will not be carried out on a large scale like the previous monetization of the shed reform, but will be concentrated in cities and regions with high inventory and a large gap in affordable housing; At the same time, the marketization of government storage faces some difficulties, which may be relatively slow.
Secondly, if the government's collection and storage is smoothly and rapidly promoted, the policy quota can be added. For example, in 2023, the central bank will add 500 billion yuan of PSL (supplementary mortgage loans) to support the construction of "three major projects" such as affordable housing.
Finally, the government's collection and storage has a driving effect, and the effect of improving the imbalance between supply and demand may be more than 500 billion yuan. It is expected to be self fulfilling, just because the market expects that there will be a strong policy to stabilize the real estate. From April 25 to May 17, the A-share real estate index rebounded 26.7%. If the government purchases and stores steadily, it can effectively boost market confidence and expectations while digesting some of the stock of commercial housing, and it may not even need to use up all the quota.
（4） Expected effect
one side, The government's purchase and storage will bring positive effects: first, speed up the de stocking of commercial housing stocks and improve the imbalance between supply and demand in the real estate market; Second, accelerate the supply of affordable housing to better meet the housing needs of wage earners; The third is to help ensure the delivery of buildings and the "white list" mechanism to speed up the withdrawal of funds from real estate enterprises.
on the other hand, Subject to the three policy difficulties mentioned above, the effect of this round of government storage and destocking may not be as good as that of the previous round of shed to monetization, but correspondingly, it will not lead to the side effects of overheated real estate and soaring house prices.
4、 What measures should we continue to take in the future to further support the stability of the real estate market?
First, in terms of purchase restrictions, it is necessary for first tier cities to further relax, such as releasing purchase restrictions in suburban areas, and increasing house purchase indicators throughout the city;
Second, in terms of housing loans, on the basis of "implementing policies based on the city", local governments timely adjusted the down payment ratio and housing loan interest rate to boost residents' willingness and confidence to buy houses and avoid the wait-and-see mood caused by the policy of squeezing toothpaste;
Third, in terms of the government's collection and storage, we should increase the support of the central finance to local governments, ease the pressure on local finance, and promote the smooth progress of the collection and storage work;
Fourth, in terms of supply, we will transfer high-quality land plots, cancel unreasonable planning restrictions, and modify some commercial land in core areas into residential land to meet the needs of residents for good areas and high-quality commercial housing.
(The author of this article introduces: Vice President of Yuekai Securities Research Institute, Chief Macro Researcher, Certified Public Accountant, Doctor of Finance of China Academy of Financial Sciences, and the third best macroeconomic analyst of New Fortune (team). Research direction: macroeconomic, fiscal theory and policy.)
