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Author: Yu Fei

01

Wuhan also opened the limit down

Wuhan has also cancelled the limit on house price declines.

According to Cailian News Agency:

Recently, an owner on the "Wuhan City Message Board" reported that the Wanhe Optics Valley project had a significant price reduction and asked relevant departments to supervise. He said, "The Wanhe Optics Valley project was launched in the first half of 2022 with a registered price of 23,000 yuan/square meter. After the discount, it was 19,000 yuan/square meter. The current selling price is 12,000 yuan/square meter. Is the price reduction reasonable? Can it be delivered as scheduled in the later stage?"

The response from Wuhan East Lake New Technology Development Zone Natural Resources and Planning Bureau is:

The price reduction of the project was mainly due to a debt dispute between the company and the construction party, and part of the housing was mortgaged to the construction party. Recently, in order to recover funds, the construction party sold the mortgaged housing at a low price, with the highest price reduction reaching 6,000 yuan/square meter.Enterprises adjusting commercial housing prices according to market conditions fall within the scope of independent operation of market entities and do not violate the prohibitions of laws and regulations.

This reply immediately attracted the attention of netizens, and the discussion about Wuhan's cancellation of the price limit order quickly went viral.

You should know that last year in Wuhan, many real estate projects were reported by old owners for price cuts, and eventually the projects were closed.

For example, last yearIn October, Xingang Linjianghui in Hanyang District, Wuhan, drastically reduced the prices of its houses. As a result, old owners protested against their rights, so the sales office closed for a week and issued an apology statement. It will communicate with each customer who made a transaction during the event to have their money returned and arrange for someone to handle the refund.

Last November,Located in Wuhan East Lake Hi-Tech Zone (Optical Valley Area)Weixing Guanggu Xingyue Plaza was halted due to excessive price cuts caused by protests by old owners.

Wuhan’s current change in attitude can be understood as a compromise with reality. After all, the current downward trend in housing prices is unstoppable.

There are many others who also compromise with reality.

On May 24 this year, the People's Government of Baoding City, Hebei Province responded to messages from home buyers who reported that real estate developers' price cuts were harming their own interests, saying that commercial housing prices are market-regulated prices, and developers can independently determine sales prices based on market conditions and supply and demand. Home buyers and developers can negotiate to determine the final sales price of each house and include it in the contract agreement between the buyer and the seller.

Recently, Zhengzhou City has issuedThe Notice on Canceling the Price Guidance for Commodity Housing directly canceled the price limit:

After research by the municipal government, the housing security department will no longer provide guidance on the sales price of newly built commercial housing. Developers will sell according to their own pricing and go through the procedures for pre-sale (sales) permits (filing) for commercial housing.

According to incomplete statistics, at least 11 cities have canceled or relaxed price limits since 2024, such as Shenyang, Ningde, Yangjiang, Dali, Zhuhai, Wuhu, Huainan, etc.

02

Wuhan real estate market, compromise

From hundreds of cities initially starting to limit price drops, to more and more cities now canceling price limits and opening the price limit, the reality behind this is a compromise with reality.

The reason why the price limit order was initially launched was nothing more thanThey are worried that a large drop in prices will trigger a stampede in the property market, leading to an unmanageable situation. Real estate involves many industries, such as banks, the construction industry, and a series of upstream and downstream industries such as furniture, steel, and home appliances. Banks are especially important because they are the backstop behind the property market and bear a large amount of real estate loans.

In June, among the 70 large and medium-sized cities, new housing prices fell in 65 cities compared with the previous month, and fell in 68 cities compared with the previous year. Second-hand housing prices fell in 66 cities compared with the previous month, and they all fell compared with the previous year.

Among them, Wuhan's second-hand housing prices not only ranked first in year-on-year decline, but also ranked second in month-on-month decline.

Map: Urban Finance; Data: National Bureau of Statistics

Second, land revenue continues to decline.

The price reduction restriction order has hindered the sales channels of real estate developers, making it impossible for them to collect payments. As a result, real estate developers have been selling out continuously, and at the same time, they have no time or ability to acquire land. As a result, the national land sales revenue has plummeted.

In 2023, it will be only 5.7996 trillion yuan, a drop of 33.38% compared to the peak period.

Data from the Ministry of Finance shows that in the first five months of 2024, the country’s land sales revenue was 1.28 trillion yuan, a year-on-year decrease of 14%.

If houses cannot be sold, real estate developers will accelerate their collapse.In the end, it is the homebuyers who are most tired, because this will increase the chances of buying unfinished houses.The probability of building.

In this case, local cities may need to spend more energy and more funds to deal with the problem of unfinished buildings.

Real estate developers have no other choice but to significantly cut prices.

In previous articles, I have emphasized that real estate developers will never make 9,900 yuan from you if they can make 10,000 yuan from you. There is only one reason why they can make concessions: there is a problem with cash flow and they need to collect the money quickly.

The price reduction limit order will not only fail to prevent developers from reducing prices openly or secretly, but will also weaken the current market liquidity.

Without liquidity, developers cannot get their money back, and local cities will also lose tax revenue. Moreover, in order to stop the decline in housing prices, they will try their best to introduce various patchwork measures, which will not only interfere too much with the market, hinder the independent development of the market, weaken the enthusiasm of the market, but also make the staff of the municipal government exhausted.

Accept the reality and accept the price reduction. Although it may not necessarily increase transactions in a cooling market environment, at least it will not lead to a stalemate.

The biggest fear in the property market is a deadlock.

03

Why Wuhan housing prices are not falling

Let’s get back to Wuhan.

The price of Wuhan Wanhe Optics Valley project has dropped from the registered price of 23,000 yuan/square meter last year to the discounted price of 19,000 yuan/square meter, and now to the current selling price of 12,000 yuan/square meter.

What this reflects is the rapid decline in housing prices in Wuhan as a whole. Optics Valley was one of the hottest sectors in Wuhan during the last bull market, and a large number of foreign investors came to Wuhan in groups to speculate on Optics Valley.

However, now that the tide has receded, prices have returned to their original state, which is both expected and reasonable.

Here comes the key question, why is Wuhan so vulnerable to declines?

Among the central cities in this round of adjustments, Wuhan was one of the earliest cities to adjust, and also one of the cities with the largest adjustment in housing prices.

As a city with a GDP ranking among the top ten in the country, a population ranking among the top ten in the country, and comprehensive strength ranking first in central China, why is Wuhan so vulnerable to declines?

Two factors, one objective and one subjective.

The objective factor is that prices are falling all over the country.

The National Bureau of Statistics disclosed:

From January to June, the sales area of ​​newly built commercial housing was 479.16 million square meters, a year-on-year decrease of 19.0%, of which residential sales area decreased by 21.9%. The sales volume of newly built commercial housing was 471.33 billion yuan, a decrease of 25.0%, of which residential sales decreased by 26.9%.

Source: National Bureau of Statistics

Last year, the sales volume and sales revenue of commercial housing fell sharply, directly from "Double 13" to "Double 11".

This year, sales, which were already dismal last year, have further declined.

In the first half of last year, the sales area of ​​commercial housing was 595 million square meters, and the sales area in the first half of this year fell by one-fifth compared with the first half of last year. In the first half of last year, the sales volume of commercial housing was 6.3 trillion yuan, and the sales volume in the first half of this year fell by one-quarter compared with the first half of last year.

Both the sales area and sales revenue of commercial housing fell below "5", that is, the sales area of ​​commercial housing in the first half of the year fell below 500 million square meters, and the sales revenue fell below 5 trillion yuan.

Map: Urban Finance; Data: National Bureau of Statistics

According to this trend, by the end of this year, real estate sales will most likely fall to "double 9", that is, the sales area will fall to 900 million square meters and the sales revenue will fall to 9 trillion.

In terms of housing prices, the National Bureau of Statistics disclosed that in June, prices in first-, second- and third-tier cities, both new and second-hand, were falling both month-on-month and year-on-year.

Subjective factors:

First, massive inventory is a lingering factor in Wuhan.

Let’s first look at the data disclosed by Wuhan authorities.

Official data from Wuhan shows that as of October 2022, Wuhan had approved the pre-sale of 181,626 commercial housing units that had not yet been signed online, with an area of ​​21.096 million square meters and a stock of approximately 180,000 units.

In a narrow sense, commercial housing refers to commercial housing that has already been built. In a broad sense, inventory includes completed but unsold houses, unfinished houses that are being pre-sold, houses that are under construction but have not yet obtained pre-sale certificates, and houses that have been sold but have not yet started construction.

CRIC will publish this data before 2023 and will no longer publish it after that.

I can only find data for September 2022. At that time, Qingdao's broad inventory was close to 100 million square meters, ranking first in the country. Wuhan's broad commodity housing inventory was also above 90 million square meters, ranking second in the country.

In addition, there are 265,500 second-hand houses listed in Wuhan.

Data from Gefang.com shows that as of August 7, there were 265,501 valid second-hand homes listed in various districts of Wuhan.

The combined inventory of new and second-hand houses totals more than 400,000 units, which is enough to digest a lot of demand.

Such a huge inventory has made Wuhan a buyer's market with oversupply.

Second, population competitiveness is no longer strong.

More importantly, in the past three years, Wuhan’s population competitiveness has not been strong.

In 2021, due to the superposition of the epidemic in the previous year and the population census, data errors occurred, resulting in the increase in Wuhan's permanent population in 2021 as high as 1.2012 million. This is a data error. This account has emphasized many times in previous articles that the actual increase in Wuhan's permanent population that year should be more than 200,000.

In 2022, Wuhan's permanent population increased by 90,100, ranking eighth in the country. Last year, it only increased by 36,500, falling out of the top ten and ranking 22nd in the country.

Map: City Finance; Data: Statistical Bureaus of various cities

Third, the income is not strong.

Not long ago, Wu Xiaobo Channel published an article titled "Behind the collapse of "Wang Ma" is the employment dilemma of Wuhan college students", which unveiled the veil of employment and income in Wuhan:

The more than one million college students every year have not made Wuhan as innovative as Shenzhen. Instead, the youth of young people has continued to depreciate and struggle in the vast labor market.

When you are telling the interviewer about the structure of the atomic bomb or reciting the "Preface to the Pavilion of Prince Teng" backwards, you are immediately stunned by the sentence "Basic salary 4,000, big and small weekly".