The property market in first-tier cities is expected to continue to loosen
2024-08-11
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Our reporter Zhou Xuesong
The Decision of the CPC Central Committee on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization (hereinafter referred to as the Decision) adopted at the Third Plenary Session of the 20th CPC Central Committee elaborated on the overall goal of reform and deployed reform tasks in multiple dimensions. In view of the current situation that China's real estate industry is still in a deep adjustment stage, the supply and demand relationship in the real estate market has undergone major changes, and the potential risks in the real estate industry have not been completely resolved, the Plenary Session provides directional guidance for the reform of future real estate policies.
In an interview with a reporter from China Economic Times, an expert said that through further comprehensive and in-depth reform, real estate is expected to better ensure low-end security, support in the middle-end and market in the high-end, achieve a virtuous cycle in the real estate industry and healthy growth of the macro-economy, and promote high-quality economic and social development.
Favorable policies for first-tier cities will continue to be gradually released
Wei Dong, chief policy analyst and head of North Research Department of DTZ, told China Economic Times that throughout history, my country has faced extremely complex domestic and international realities, and each time it has solved various obstacles that hindered my country's economic development through reform, thus constantly creating a new situation for China's modernization. She believes that the Third Plenary Session of the 20th CPC Central Committee will have a profound impact on the future development of the commercial real estate industry, mainly in the following five aspects.
First, technology companies will continue to develop rapidly under the policy support, which is expected to drive the growth of demand for office buildings and industrial parks. Second, the reform of the fiscal and taxation system is expected to further boost consumption and promote the development of retail properties. Third, further high-level opening up will help enhance the confidence of foreign-funded enterprises in investing in China and comprehensively enhance the demand of foreign-funded enterprises in various fields of commercial real estate. Fourth, the implementation of the extension of commercial land use rights and subsequent policies after expiration will greatly promote the development of urban renewal. Fifth, the development of ESG (environment, society and corporate governance) will enter the fast lane.
Although the real estate market in some cities has shown signs of gradual recovery recently, the overall market is still in deep adjustment. According to data from the China Index Academy, from January to July this year, the total sales of the top 100 real estate companies was 2390.94 billion yuan, a year-on-year decrease of 40.1%, and the decline continued to narrow by 1.5 percentage points from the previous month, and the decline has narrowed for five consecutive months. In terms of land acquisition by real estate companies, the total land acquisition of the top 100 companies was 430.71 billion yuan, a year-on-year decrease of 38.0%, and the decline continued to expand by 2.2 percentage points compared with January to June. According to data released by the National Bureau of Statistics, from January to June, the national real estate development investment was 5252.9 billion yuan, a year-on-year decrease of 10.1%; among them, residential investment was 3988.3 billion yuan, a decrease of 10.4%. The funds in place for real estate development companies were 5353.8 billion yuan, a year-on-year decrease of 22.6%, and the decline narrowed for three consecutive months; the sales of new commercial housing were 4713.3 billion yuan, a year-on-year decrease of 25.0%, of which residential sales fell by 26.9%. Promoting the stabilization and recovery of the property market as soon as possible is the key to eliminating risks.
Both the Third Plenary Session of the 20th CPC Central Committee and the recent meeting of the Political Bureau of the CPC Central Committee have emphasized the importance of risk prevention. The Third Plenary Session of the 20th CPC Central Committee pointed out that various measures should be implemented to prevent and resolve risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions. The meeting of the Political Bureau of the CPC Central Committee also emphasized the need to continue to prevent and resolve risks in key areas.
In the opinion of experts, risk prevention requires not only accelerating the clearance of the real estate industry, speeding up the construction of a new real estate development model, and promoting the stable and healthy development of the market, but also fundamentally understanding and correctly handling the relationship between real estate and economic development.
Chen Quansheng, an economist and former counselor of the State Council, said in an interview with a reporter from China Economic Times that in fact, it is economic development that drives the demand for real estate, not real estate. If you want to rely on real estate to drive economic development, you will fall into a misunderstanding. This is not only unsustainable, but also brings many risks.
Luo Xingchi, senior analyst at the Third Department of United Credit Rating, believes that the Third Plenary Session of the 20th CPC Central Committee listed real estate as one of the important areas that need to prevent and resolve risks, and provided guidance for the reform direction in accelerating the construction of a new model for real estate development, promoting "land finance" reform and urban-rural integrated development.
A large part of the "Decision" involves "land finance" reform. The revenue and expenditure ratios between the central and local governments will be divided and adjusted to expand local revenue sources and reduce local payment pressure, thereby offsetting the adverse effects caused by a substantial reduction in land transfer fees.
From the perspective of the reform task of building a new model of real estate development, the real estate market is expected to strengthen the dual-track operation mechanism of "affordable housing + commercial housing" in the future, the real estate control policies in first-tier cities are expected to continue to be relaxed, the financing methods of real estate development need to be further reformed, and the reform of the commercial housing pre-sale system still needs to wait for the right time. The real estate tax pilot is expected to be launched in succession in the long term.
In Luo Xingchi's view, based on the increasing differentiation in real estate market performance among cities of different levels, the "Decision" affirms the necessity of taking measures based on the specific conditions of each city. However, considering the siphon effect of first-tier cities and the need to maintain market stability, it is expected that favorable real estate policies in first-tier cities will continue to be gradually released, but it is unlikely that they will be released all at once.
The supply of real estate market exceeds the demand, and the development of commercial housing should be reduced
Pang Ming, Chief Economist and Director of Research at Jones Lang LaSalle Greater China, said in an interview with China Economic Times that the Decision fully empowers city governments to regulate the real estate market, formulate policies based on the city, and allow relevant cities to cancel or reduce housing purchase restrictions. He believes that on the demand side, it is expected that governments at all levels will continue to optimize and adjust policies and measures in a timely manner based on local conditions to promote the stable operation of the real estate market and better meet the reasonable housing purchase needs of residents.
Pang Ming emphasized that the original restrictive measures such as purchase restrictions, sales restrictions, loan restrictions and price restrictions are expected to be gradually relaxed in all regions, especially in first-tier and some strong second-tier cities. Possible directions include: zoning, targeted or even comprehensive relaxation of purchase restrictions, adjustment of price limit policies, adjustment of fiscal and taxation policies such as the transaction tax exemption period, etc.
However, he pointed out that in first-tier cities and high-energy cities, although the probability of completely canceling the housing purchase restriction policy in the short term is relatively small, it is expected that based on the specific performance of the real estate market, the intensity of the housing purchase restriction policy will be further reduced in terms of location, residential grade, and relevant taxes and fees. Moreover, the cancellation of purchase restrictions and the cancellation of price restrictions, loan restrictions, and sales restrictions will be used in an orderly manner as a "combination punch."
He stressed that the real estate market regulation is a flexible, dynamic and constantly optimized process of taking measures according to the city, one city one policy and classified guidance. All regions should adjust and optimize local real estate policies and measures in a step-by-step, orderly, flexible and differentiated manner according to their actual conditions, make full use of the policy toolbox, follow up the central government's policies to launch relevant supporting measures and ensure their implementation, and implement the long-term mechanism of the real estate market to achieve the stabilization and recovery of the real estate market and long-term, healthy and sustainable development.
When it comes to risk prevention, Chen Quansheng said that we should pay attention to the siphon effect that the lifting of purchase restrictions in first- and second-tier cities will have on the real estate market in third- and fourth-tier cities, causing the latter to experience negative growth, and increasing risks for local debt and small and medium-sized financial institutions. We should pay attention to this and actively respond to it.
Regarding the macro-control policy of real estate, he proposed the policy suggestion of "allowing house purchase, restricting house speculation, rewarding house rental, and imposing fines on idle houses". In addition, he also suggested that the house rental market should be vigorously developed to guide those residents who cannot afford to buy, or cannot afford to buy, or cannot afford to buy large and good houses temporarily, from the sales market to the rental market. Based on the situation of oversupply in the housing market, the development of commercial housing should be reduced.
Pang Ming believes that accelerating the construction of a new model for real estate development, balancing supply and demand and stabilizing the market is the fundamental solution to solving the problems of real estate development and promoting the stable and healthy development of the real estate market. It is expected that efforts will be made to improve the linkage mechanism of the four elements of "people, housing, land, and money" in the future to achieve "people determine housing, housing determine land, and housing determine money", promote the balance of supply and demand in the real estate market, and a reasonable structure to prevent the market from fluctuating greatly.
Now many houses are difficult to sell because of their high prices. For real estate companies, it is crucial to adapt to major changes in market supply and demand, change development models, improve product and service quality, and build good houses that ordinary people can afford. Real estate companies should do a good job in reducing costs and increasing efficiency, increasing per capita output value and risk prevention and control. In addition, some cities have cancelled the guidance price of commercial housing, which has created conditions for further "trading price for volume" and stimulating demand.
