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The real estate market adjustment has not yet bottomed out.

On August 15, the National Bureau of Statistics released the latest real estate-related data, which showed poor performance in both investment and sales.

From the investment perspective, from January to July, the national real estate development investment was 6087.7 ​​billion yuan, a year-on-year decrease of 10.2%, of which residential investment was 462.3 billion yuan, a decrease of 10.6%. In July, the real estate development investment fell by 10.8% year-on-year, an increase of 0.7 percentage points from June.

Looking back, real estate investment has not returned to positive since it turned negative in April 2022. During this period, it has experienced various rescue policies. Although there were periods when the decline narrowed in some ranges, the overall market has not improved significantly.

The continued deterioration on the investment side is both a result and a cause.More direct data is that from January to July, the land acquisition data of real estate companies fell by 38% year-on-year, new construction fell by 23%, and the construction area fell by 12%. Developers are unwilling to acquire land. Now only central enterprises are still active in the land auction market. Local urban investment companies have gradually withdrawn this year and are no longer able to cover the bottom line for local land auctions.

Wu Ge, chief economist of Changjiang Securities, believes that public funds will still intervene cautiously on the supply side of real estate in the future, and interest rate adjustments on the demand side will also be relatively mild. Considering the weakening of housing prices and the shrinking willingness of real estate companies to acquire land, it is initially estimated that the decline in real estate investment this year will expand from -9.6% last year to around -11%.

Such a trend makes it difficult to predict when the bottom will be reached.

If we have to look at the good news on the investment side, it may be that in July, the real estate development boom index (referred to as the "National Real Estate Boom Index") was 92.22, rising for three consecutive months. The previous data in June was 92.11 and in May it was 92.01.

Generally speaking, a national real estate prosperity index of 100 points is the most appropriate prosperity level, between 95 and 105 points is a moderate prosperity level, below 95 is a low prosperity level, and above 105 is a relatively high prosperity level.

Looking at the sales side, there is a clear decline in both volume and price.

In terms of new homes, from January to July, the sales area of ​​newly built commercial housing decreased by 18.6% year-on-year, and the sales volume of newly built commercial housing decreased by 24.3% year-on-year. The good news is that under the influence of a series of favorable policies, the decline in some real estate-related indicators has begun to narrow, but the improvement is limited.

What better reflects the prosperity of the real estate industry is the sales of second-hand houses.According to the second-hand housing price list of 70 cities in July released by the Statistics Bureau, unfortunately, among the 70 cities, only Beijing and Kunming stopped falling in July, Shanghai saw a slight increase, and the remaining 67 cities continued to fall.

From the perspective of city levels, among the first-tier cities, Beijing and Shanghai stabilized, but the declines in Guangzhou and Shenzhen widened, with Guangzhou falling 0.9% and Shenzhen falling 1.2%. In terms of stimulus intensity, Guangzhou and Shenzhen are obviously greater than Beijing and Shanghai. Of course, in terms of the value of the household registration, Guangzhou and Shenzhen are also inferior to Beijing and Shanghai. At this time, we can see the difference between Beijing and Shanghai on the one hand and Guangzhou and Shenzhen on the other.

Second-tier cities fell 0.6% month-on-month as a whole, and third-tier cities fell 0.7% as a whole. The policy effects in first- and second-tier cities were more obvious.

Looking at specific cities, there are several that can be compared. For example, among the second-tier cities, Chengdu’s second-hand housing transactions exceeded 20,000 units in July, a month-on-month increase of 19.2% and a year-on-year increase of 38.3%. It has to be said that Chengdu’s real estate market is truly a breath of fresh air.

Although Chengdu's price index also fell by 0.7% in July, compared with Xiamen and Wuhan, another clear group, Xiamen fell by 13.2% and Wuhan fell by 13.4% in the first seven months of this year. In July, these two cities fell by 1.8% and 1.6% respectively, which is terrible.

Taking a house worth 5 million yuan as an example, the price in Xiamen and Wuhan dropped by 90,000 and 80,000 yuan respectively in one month. For ordinary working-class people, this may be half a year's income. Who can afford it?

Three months have passed since the People's Bank of China and the State Financial Regulatory Administration jointly issued a series of major favorable policies for the real estate market on May 17 this year. Since the "May 17" new policy, new real estate policies in various places have sprung up like mushrooms after a rain, and the overall focus is on loosening the threshold for home purchases and reducing home purchase costs.

On this basis, two policies worth mentioning at the central level are the old-for-new policy and the purchase and storage of commercial housing by state-owned assets.

These two policies have a lot of influence in the public opinion field, but their actual effects are limited.The difficulty of the policy is that neither policy has stimulated transaction growth. The old-for-new policy requires the need for new-for-old as a prerequisite, and the state-owned assets that are put into storage will eventually flow into the market and need the market to absorb the growth.

Therefore, the willingness of state-owned assets to step in is very low. As we have said before, in the cities that have announced the purchase and storage, most of them set strict conditions, which is essentially to exclude those houses that are not easy to sell. But imagine, if the houses themselves are easy to sell, why would the government need to step in to purchase and store them?

Taking Shenzhen, which has recently introduced a property acquisition and storage policy, as an example, the housing conditions include a suitable location, convenient transportation, relatively complete supporting facilities, close to the core area of ​​regional development, and industrial foundation and development advantages; suitable apartment size. In principle, the main apartment size of the project (housing) should meet the requirements of Shenzhen's affordable housing types and areas (below 65 square meters); convenient living, convenient surrounding transportation, close to subway entrances and bus stops, and relatively complete infrastructure and living facilities; complete procedures, and the proposed acquisition project must have all four certificates to ensure the legality and compliance of the project and meet the loan requirements of financial institutions.

In fact, it is easy to understand. Previously, the government earnedeasy money, through the transfer of land to get a huge amount of money, and through the collection of various taxes and fees in the process of real estate development, these are all easy to make money. But now they have to go out and trade, and make money.hard-earned money, which state-owned assets are not good at.

Wu Ge believes that under the tone of preventing and resolving real estate risks, measures such as "storage" by local state-owned enterprises are being promoted, but they also face many difficulties.

According to the detailed rules for land acquisition and storage disclosed by many places, the upper limit of the acquisition and storage price is mostly the replacement cost of affordable housing (land allocation + construction + no more than 5% profit), and there may be a certain gap between the negotiated price based on the land bidding and auction cost of real estate companies. On the one hand, the acquisition and storage price is kept very low, while on the other hand, profits must be made from it. In the end, the only ones who are hurt are the homeowners who have to be acquired and stored.

The current market needs strength to support it. If state-owned assets can really take over the extra houses in the market and convert them into affordable housing, it will indeed stabilize the downward trend. But the key point is that at this time, if the houses are taken over at the price of affordable housing, it will directly slash housing prices.

Recently, real estate observers pointed out that China's housing prices have fallen back to the range of 2016-2017! But even so, it is still very expensive.

Li Xunlei, chief economist of China Tai International, said at the recent 2024 NetEase Economist Annual Meeting Summer Forum that real estate has been in an upward period for more than 20 years. If the upward period is over, it should theoretically be a downward phase.

Li Xunlei suggested using the rental-to-sale ratio to judge the current housing price level. From the current perspective, the rental-to-sale ratio is obviously still on the low side. If a 20 times price-to-earnings ratio is considered reasonable, the current real estate price-to-earnings ratio is about 50 times, so the real estate adjustment period may be longer.

This is where the current contradiction lies. The state-owned assets acquisition and storage will inevitably require low prices, but the current houses are very expensive from the moment the land is acquired. The land price may be far higher than the price of affordable housing. If you ask the market to sell it to you at the price of affordable housing, you must first lower the price-earnings ratio from 50 times.

At present, rescue policies are still imperative.

On August 14, Fan Gang, vice president of the China Economic System Reform Research Association and president of the China Shenzhen Development Research Institute, a national high-end think tank, expressed his views on real estate and urbanization at the 2024 Boao Real Estate Forum.He pointed out that although the overall macro-economy is still sluggish, the real estate market has reached the bottom. After the bottom, there is a stage of crawling at the bottom, which is an "L" shape, and it will go through a difficult period.

To get through this difficult period, we still need continuous policy support. If lowering the threshold doesn’t work, then we can smash it; if reducing costs doesn’t work, then we can show some sincerity and further reduce the interest rates of existing housing to stimulate incremental demand.

Stabilizing the property market means stabilizing the economy and confidence. This common sense needs to be emphasized again and again.

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No.5940 Original first article | Author Liang Yunfeng

References: China Real Estate News, "What are the results of the "May 17" new policy after three months? | Think Tank"; Wu Ge, "The trajectory of housing prices"; Jiemian News, "Fan Gang: Real estate is close to the bottom, and the potential for the next stage of development of the property market lies in urbanization"