Cross-posted from Investing in Chinese Stocks.
The drop in home prices in February was a surprise to industry insiders who have been talking up a rebound. Yu Fenghui discusses the reasons behind the drop. One of the distortions being pushed by the Chinese media and picked up by foreign media is the drop in sales due to Spring Festival. I couldn’t find a specific source on it, but it was my impression that Spring Festival was generally a time for sales promotions due to people having time to visit properties. As Yu points out, workers traveling home for the holiday are sales targets, especially in smaller cities that have large amounts of residents working in first- or second-tier cities. The holiday was not a big sales period, but it also was not a time when people avoided looking at homes 2月房价全军覆没大跌说明啥:
Is there a reasonable explanation. Spring factors leading to light volume seems to be a factor. February marks the Chinese New Year holiday sales season to enter the real estate. From the volume, the 70 cities new commercial housing sales dropped in February nearly 100,000 units. However, in the past the Spring Festival holiday was regarded as an opportunities for promotion. Third-tier cities during the Spring Festival ushered in the return home tidal wave, the decline in sales volume comparatively low, or even increase the sales volume of individual cities.
Yu goes on to discuss the reasons other than Spring Festival:
Spring influential factor, but not the fundamental reason for the expansion of price declines. For now exert tremendous pressure on the price trend or is fundamental, fatal factors, the first is the implementation of real property registration regulations. This is for all the buyers, who holds several sets of real estate constitute the effects. Especially eager to get rid of corrupt officials more suites and prevent it from becoming bald head lice, it’s clearly a factor. Trying to think of new purchase to improve the type of housing who are affected real estate registration, many of which have close hand. This poses a serious pressure on housing demand.
Secondly, the mantis stalks the cicada, unaware of the oriole behind, followed by the implementation of the registration of real estate are property tax regulations and the arrival of even more drastic action to suppress prices. Urban working-class owners of multiple properties are considering selling as soon as possible, not to mention have no plans to purchase new housing.
One of the current debates in China is over the impact of the real name registration system. Many believe government officials will offload multiple properties before they become “lice on a bald man’s head” to use Yu’s analogy, triggering a corruption investigation. Better to dump all the excess housing before it brings trouble upon oneself. Second, behind the registration system is taxes. Most Chinese housing speculators are not renting property. Taxes will increase the costs of carrying empty apartments.
Finally, Yu goes on to argue that with the stock market booming, central bank injections of liquidity will flow into equities and cause more capital flow out of the property market. This gets to the heart of the matter: have Chinese investors soured on property investments? The stock market gained 80% in eight months and housing fell 5-10% over the same period. The government’s efforts to promote equities has worked, but it may be the largest factor in thwarting efforts to revive the housing market. iFeng: 北京住宅库存超8万套压力大 房企盼政策松绑
Meanwhile, raw data is still shaky. According to official figures, inventory is at its lowest since September 2014, but if other forms of housing are included, inventory climbs from 81,000 units to more than 100,000 北京住宅库存超8万套压力大 房企盼政策松绑:
Beijing Municipal Construction Committee data show that as of March 17, Beijing Forward House can be sold and existing homes have not signed for a total of 81,114 housing units. Beijing, said Zhang Dawei, research director of the Central Plains, 81000 sets of inventory is the lowest since September 2014’s.
However, if the market in the sale of a number of commercial products (apartment, loft), etc. are included, according to Asian high figures show that Beijing’s new Jukebox stock (have not signed licensing does not include commercial and affordable housing ) up to 108,265 units, with a total area of over 13.2 million square meters.
From this figure, the Beijing property market to the stock pressure is not small, which is the largest inventory of Tongzhou District (over 19,000 units), and the second is the Daxing District (over 17,000 units), Fangshan District has more than 12,000 sets.
Bifurcation is taking place within the cities as well as between them, with the city center holding its value as outer suburbs pull the averages lower. Those high inventory figures are all outside of the city center.
As for the March April period, with the industry trumpeting the anticipated rebound in the press, it will mark the turn for the market one way or another. If it comes as expected, the market should at least stabilize. If prices and sales are weak, another leg of the property bear market will begin.
In pursuit of the former, the Ministry of Housing and PBOC are reported to support regulations being prepared which would cut the down payment for first home purchases to 20% and also lower the down payment and interest on second homes. The move comes as two cities have already implemented similar easing policies: Jinan and Guangzhou 住建部支持下调公积金购房首付比例:
The Economic Observer newspaper reporter was informed by the multi-confirmation: Housing and Urban-Rural Development (hereinafter referred to as “Ministry of Housing”) is preparing relevant documents published on the stability of housing consumption, including two important observations: First, use the fund to buy the first suite of down payment the proportion dropped to two percent; the second is lower second home loan down payment, lower mortgage rates. The document has been supported by the Ministry of Finance and the Central Bank.
In fact, support the use of drop down payment fund measures, local governments have already been launched, Jinan, Guangzhou has been the implementation of the policy. Newspaper exclusively learned that the Ministry of Housing is preparing to submit “Housing Fund Management Ordinance (Revised),” the State Council, the citizen housing fund use will be a major breakthrough, Jinan and Guangzhou, just ahead.
A source close to the central bank’s research bureau, told reporters: “should the local requirements, before the central bank survey of mortgage rates over the basic situation, mortgage rates will be adjusted, and now finds local government financial regulation is simply the mortgage finance system, so the two sets of mortgage down down payment troughs twelve high voice. ”
…March 18, Guangzhou announced by fund the purchase of 90 sq m first home reduced to tewnty percent down payment. Reduce the down payment to purchase the property is becoming a new keyword.
…March 16, Jinan City, issued a notice to the first owner-occupied housing has been cleared for home loans, in order to improve the living conditions of their own homes to buy two sets of ordinary housing, apply for family housing provident fund loans, the implementation of the first suite fund loans policy that buy 90 square meters floor area (including) the following real estate down payment ratio of 20%.
Chongqing Mayor Huang Qifan, held in March this year, Chongqing Land Resources and Housing Management Conference, to explore the possibility to reduce the down payment, “28 to open the first suite, Panax open, half-open second suite, six four, the third suite is the implementation of a full down payment. “
