2024-08-19
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Author: Yu Fei
01
Buy a house and get a plane
During the downward cycle of the real estate market, developers and local governments have used various means to reduce inventory.
In the past few years, we have seen too many fancy marketing: buy a house and get a car, buy a house and get decoration, buy a house and get cash back, relax the deduction of agricultural products, encourage farmers to buy houses, encourage public officials to take the lead in buying houses, buy a house and get a pig.
We have also seen "free houses". Of course, it is not really free, but the owner directly transfers the house to you without asking you for any money. You only have to repay the loan later.
This year, many cities have started offering free Hukou when buying a house. Recently, developers have also come up with the idea of offering free airplanes when buying a house.
China Merchants Shekou Nanjing Company released the following news:
Its real estate project, China Merchants Center in Nanjing, recently launched a promotion for buying a house and getting a private jet for free. Buying a house will get a private jet package worth 200,000 yuan, which includes:Pilot's license; 100 hours total flying time (10 hours per year) and 5% ownership of a private aircraft.
Ordinary home buyers don’t have the time to learn how to fly a plane, nor do they have the leisure to fly a plane.
Don’t worry, you can cash in the so-called free pilot license, 100 hours of flying time and 5% ownership of the aircraft.
Cailianshe disclosed that the property sales introduction is as follows:
"If you don't use the private jet package, this part of the benefits can be converted into cash discounts... I'm afraid no buyer will choose the jet package, but will choose the 200,000 yuan cash discount. Because this 200,000 yuan benefit can be directly deducted from the house price. If you choose the jet package, the sales price of the selected house will remain the same, and the buyer will not get any actual discount. This is equivalent to the buyer buying the flight benefits himself, so almost no one will choose the flight package.
Looking through the phenomenon to the essence, this is actually a disguised price reduction by the developer, and they have gone to great lengths to circumvent the price reduction limit order.
However, developers in Nanjing are expected to be able to cut prices openly in the future, because the lifting of price limits has become a trend. Zhengzhou has issued an official document to cancel price limits. Wuhan has also compromised, and prices can basically go up or down as they please.
Shenyang, Ningde, Yangjiang, Dali, Zhuhai, Wuhu and Huainan have also cancelled or relaxed their price limits this year. More cities will surely follow suit.
After all, in an era of crazy housing prices, there is no better choice.
02
Nanjing housing prices are going crazy
Nanjing's fancy marketing also took place at the beginning of this year.
The National Business Daily disclosed that in March, a real estate project in Qixia District, Nanjing, held a group purchase cashback event from the Lantern Festival to March 18. The housing price was 9.5% off the original price. As long as the bank released the loan after signing the contract, the company's cashback subsidy could be obtained.
At that time, the 94-square-meter houses for sale in the project had a discounted price of about 27,000 yuan per square meter, with a total price of 2.538 million yuan, and a minimum down payment of 20%, which was 507,600 yuan.
The cash back subsidy for this project can be as high as 600,000 yuan, while the down payment for a house is about 500,000 yuan, which is equivalent to giving away 100,000 yuan when buying a house. This is jokingly called "the developer selling houses at a loss" by the market.
Behind all the fancy marketing, houses are hard to sell. Let’s first look at the overall situation across the country.
The National Bureau of Statistics disclosed:
From January to July, the sales area of newly built commercial housing was 541.49 million square meters, a year-on-year decrease of 18.6%, of which residential sales area decreased by 21.1%. The sales volume of newly built commercial housing was 533.3 billion yuan, a decrease of 24.3%, of which residential sales decreased by 25.9%.
Source: National Bureau of Statistics
In terms of regions, real estate investment fell the most in the Northeast, followed by the West, Central and East.
The sales volume of commercial housing in the eastern, central, western and northeastern regions all fell by double digits. The decline was the largest in the central region, where the sales area and sales volume fell by about a quarter in the first seven months.
Source: National Bureau of Statistics
Let's look at the situation in Nanjing. Nanjing is one of the cities that has introduced the most rescue measures in the past two years, but it still cannot stop the turn of the property market.
Nanjing's property market peaked in 2021. In 2021, Nanjing's commercial housing sales area was 15.1095 million square meters, with sales of 406.384 billion yuan. In 2022, the two figures dropped to 9.4232 million square meters and 242.814 billion yuan, respectively, a drop of 37.6% and 40.3%, respectively.
Source: Nanjing Statistics Bureau
In 2023, the sales area of commercial housing in Nanjing was 9.0603 million square meters, a decrease of 3.9% from the previous year.
In terms of new home prices, data from the Nanjing Research Institute of 5I5Jia shows that new home prices in Nanjing began to fall in 2022. The average transaction price of new homes in 2023 was 32,049 yuan/square meter, a year-on-year decrease of 7.1%.
Source: Woaiwojia Nanjing Research Institute
Data released by the National Bureau of Statistics showed that the price of new homes in Nanjing fell by 10% year-on-year in July, which is a double-digit drop compared to July last year.
When it comes to second-hand housing, which can more accurately reflect market changes, Nanjing has started to compete more ruthlessly.
The transaction volume of second-hand houses in Nanjing peaked in 2020, and the housing prices peaked in 2021. In 2023, as owners frantically cut prices to make concessions, the transaction volume of second-hand houses increased a lot.
The price of second-hand houses fell below 30,000 yuan in 2023.
By July this year, the average price of second-hand houses in Nanjing had fallen to 22,760 yuan per square meter, which means that from the beginning of the year to now, the price of second-hand houses in Nanjing has fallen by 24%.
Why did Nanjing fall so much?
There are macro-environmental factors as well as factors specific to this city.
03
Why Nanjing doesn't hold up
First, the last round of increase was too sharp.
In the last bull market, Nanjing's housing prices started to grow in leaps and bounds, and it was known as one of the four little dragons of the real estate market along with Xiamen, Suzhou and Hefei.
Today, these cities are frantically deflating their bubbles.
Nanjing's decline is also due to some specific factors of its own, such as its weak population competitiveness.
Second, Nanjing’s population competitiveness is average.
Compared with Nanjing, Hangzhou is actually more hyped, and the levels of speculation in Chengdu and Xi'an are no less than Nanjing. However, among the strong second-tier cities, the drop in housing prices in Nanjing's market is greater than theirs, and is only slightly better than Wuhan.
Wuhan ranks second in the country because of its large inventory.
The reasons for Nanjing's decline are that its population growth is not significant enough and its industries are mediocre.
In the era of crazy growth of central cities, Shenzhen and Guangzhou both saw an annual population increase of 500,000 to 600,000, while cities like Chengdu, Hangzhou, Xi'an and Wuhan saw an annual population increase of 300,000 to 400,000.
In Nanjing, the population increase has not exceeded 200,000 in any year in the past decade. The best year for population increase in the past decade was 2014, with an increase of 192,100. In most years, the increase was only tens of thousands.
Map: Urban Finance; Data: Nanjing Statistics Bureau
There is no harm without comparison. In 2021, when the national population growth hit a record low, Nanjing's permanent population increased by 103,400, ranking 11th in the mainland.
Against the backdrop of the national population peaking and decreasing by 850,000 in 2022, Nanjing added 67,700 people, ranking 14th in terms of growth.
In 2023, Nanjing's population increased by 55,900, ranking 16th in terms of growth.
Map: City Finance; Data: Statistical Bureaus of various cities
Not worse, not better.
Third, economic growth has slowed down.
real estateOfIn economic relations, the latter determines the former, not the former. That is, real estate will prosper and make sense only when the economy is booming. Real estate will not suffer when the economy is weak.
The logic is simple. Only when the economy grows can income grow and everyone can afford to buy a house.
If the economy is driven solely by real estate, it will be a false prosperity and will return to its original state once adjustments are made.
Cities such as Nanning, Kunming, and Taiyuan, which have been analyzed by this account in recent years, are examples.
Nanjing's economic growth this year is not impressive.
Nanjing's GDP growth rate in the first quarter was only 3.8%, which was lower than the national average. Moreover, this growth rate, together with Changsha, ranked fourth from the bottom among the 26 cities with a GDP of one trillion yuan.
In the first half of the year, Nanjing's growth rate was 4.4%, still ranking fourth from the bottom among the 26 cities with a GDP of one trillion yuan.
Map: City Finance; Data: Statistical Bureaus of various cities
For a city, the root of all problems is economic problems, and the essence of all economic problems is industrial problems.
Nanjing, if you don't know it in depth, will seem very impressive just based on your impression or online reports. It is the capital of Jiangsu, the second most economically developed province, the ancient capital of the Six Dynasties, the capital of the Republic of China, and is currently the only city named with the word "Jing".
Nanjing is indeed awesome.
This place was called Jinling, Jiankang, and Yingtian in ancient times. The name Nanjing originated in the Ming Dynasty.
Zhu Yuanzhang founded the country in Nanjing, with Kaifeng Prefecture as Beijing and Yingtian Prefecture as Nanjing. Ten years later, "Beijing" Kaifeng Prefecture was abolished and Nanjing was changed to the capital.
After the Jingnan Campaign, Zhu Di moved the capital from Nanjing to Beijing, starting the emperor guarding the country's border mode. The capital once again became Nanjing, forming two capitals, one in the north and one in the south.
Although it had lost its title of capital, Nanjing, with the title of Southern Zhili, was no less economical and populous than Beijing. By the middle of the Ming Dynasty, Nanjing had a population of 1.2 million, making it the largest city in the world at the time. Throughout the Ming Dynasty, Nanjing had always been the political, economic, and cultural center of the South.
Although Nanjing can no longer compete with Beijing, as one of the top ten cities in mainland China in terms of GDP, its comprehensive strength is still remarkable, especially its educational strength.
Nanjing has 52 universities, including 34 undergraduate colleges. It has two 985 and 211 universities, Nanjing University and Southeast University. In addition, there are 211 universities such as Nanjing University of Aeronautics and Astronautics, Nanjing University of Science and Technology, Hohai University, Nanjing Agricultural University, China Pharmaceutical University, and Nanjing Normal University.
In the second batch of “Double First-Class” university rankings announced by the state, Nanjing ranked third in the country, second only to Beijing and Shanghai.
But Nanjing also has obvious shortcomings.
A recent article in Southern Weekend, "Nanjing: Facing the Theory of the City Having No Large Factories," directly points out Nanjing's shortcomings.
The article states:
Where there are big companies, there are young people with both education and talent. In Beijing, Hangzhou, and Shenzhen, this "big company law" has been vividly played out. However, Nanjing, which has more than 50 colleges and universities and ranks second in the country in the number of "double first-class" universities, is a little embarrassed.
The article comprehensively analyzes the reasons why Nanjing lacks large Internet companies from the perspectives of talent, business environment, city history, and city status.
A suggestion was also given to encourage Nanjing, known as the city of system, the city of civil servants and the city of state-owned enterprises, to build a long-term business environment.
Labeled as a city of system, a city of civil servants, and a city of state-owned enterprises, Nanjing has earned the title of "Little Northeast of the Yangtze River Delta".
Objectively speaking, Nanjing can beat a large number of cities in China, but it is a bit embarrassing among the top strong cities. In my previous article about Nanjing, I used four words to describe Nanjing: "average".
The population competitiveness is average, and the industry is average.
The population is average, as introduced above.
In terms of industry, Nanjing's industrial added value ranks outside the top ten.In the 2023 ranking of industrial revenue above designated size, Nanjing is also outside the top 10.
According to the industrial strength of the 13 urban areas under the Jiangsu Provincial Bureau of Statistics, Nanjing is not even as good as Changzhou, a newcomer with a trillion-dollar GDP.
For example, the number of enterprises above designated size is 4,294 in Nanjing, of which 385 are large and medium-sized enterprises. The numbers for Changzhou are 5,599 and 466 respectively.
The industrial strength of Suzhou's urban area ranks first in all data, so don't say that Suzhou is strong because its subordinate county-level cities are strong.
Source: Jiangsu Provincial Bureau of Statistics
Nanjing has a good number of 100 billion yuan industries, with 6 100 billion yuan industries. The total revenue of the 6 100 billion yuan industries reached 1033.78 billion yuan, which is higher than Chengdu, Zhengzhou and Hangzhou.
Map: Urban Finance; Data: Nanjing Statistical Yearbook 2023
However, although there are six industries with a value of 100 billion yuan, there is no particularly strong or outstanding industry. No industry has an output value exceeding 300 billion yuan.
In terms of industrial strength, Nanjing's leading industry is the computer, communications and other electronic equipment manufacturing industry. In 2022, the industry's operating revenue was 231.86 billion yuan, ranking first in Nanjing.
However, this industry, which ranks first, is insignificant compared to other cities.
Shenzhen is the leader in this industry. In 2022, Shenzhen's computer, communications and other electronic equipment manufacturing industry output value was 2557.579 billion yuan, ranking first in the country. The second is Suzhou, with 1272.76 billion yuan in 2022. The third is Dongguan, which is also over one trillion yuan. These are also the only three cities in the country with trillion-yuan industries.
In addition, Nanjing's other 100 billion industry, automobile manufacturing, is not worth mentioning compared to other major automobile cities. According to the 2021 data, Nanjing ranks 15th. Shanghai, which ranks first, had a total output value of 755.3 billion yuan in 2021.
The mediocre industry determines the mediocre economic performance. This is the fundamental logic that Nanjing cannot support high housing prices.
Of course, after experiencing the last round of sharp rise, even if an industry is as strong as Shenzhen, its own income, economy, and industry cannot support its huge housing price bubble.
Therefore, this account has said that the fundamental logic behind this round of nationwide housing price decline is that housing prices in most cities far exceed the purchasing power and supporting capacity of the cities themselves, and are "unworthy of their position."
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