hunan hengyang encourages developers to "buy insurance". are delivery insurance and price stabilization insurance "reliable"?
2024-09-04
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recently, local governments have encouraged developers to "insure" new homes, which has attracted attention. according to the website of the hengyang municipal people's government of hunan province, the hengyang municipal government office recently issued the "several measures on further promoting the stable and healthy development of the real estate market (trial)", proposing to support insurance companies in researching and developing new types of real estate delivery insurance and price stabilization insurance, encouraging developers to purchase insurance, and home buyers to enjoy insurance dividends.
the new policy launched by hengyang obviously hopes to break the deadlock by introducing insurance, thereby solving the problem of ensuring delivery and stabilizing housing prices. since then, hengyang has also become the first city in the country to explicitly propose to encourage developers to purchase such "insurance".
so, is it feasible to provide insurance to ensure delivery of property and insurance to stabilize housing prices? can it solve the problem of "ensuring delivery" and "stabilizing housing prices"?
how to implement “building delivery insurance”?
in the opinion of industry insiders, "guaranteed delivery of buildings" has been the focus of the real estate industry in the past two years. many experts have also proposed methods similar to "guaranteed delivery of buildings insurance" to prevent developers from possible financial problems during the delivery process.
professor zhao xiu chi, dean of the beijing-tianjin-hebei real estate research institute of capital university of economics and business, vice president and secretary general of beijing real estate law society, said: "the introduction of new insurance products that guarantee delivery and house price is aimed at transferring the risks of delivery guarantee and house price fluctuations through the insurance mechanism, which is conducive to filling the insurance gap, improving the real estate insurance mechanism, stabilizing the real estate market, promoting real estate transactions, balancing the supply and demand of real estate, and promoting the stable and healthy development of real estate."
zhang dawei, chief analyst of centaline property, pointed out: "the delivery insurance can bring stronger fund supervision. in addition to the supervision of the pre-sale funds of houses, the insurance costs can be included in the special account supervision to ensure more development funds; the insurance funds participate in the supervision, the accounts are regularly checked by the insurance company, and the owners who purchase the delivery insurance will be publicly disclosed. in this way, a strong supervision model of supervision by the regulatory agency + insurance company + owner can be formed. in the future, the delivery insurance can also be used as a new benchmark for the safety of real estate projects."
however, zhang dawei also expressed concerns about the implementation and cost of insurance. he said: "part of the reason for the emergence of the current insurance for the delivery of buildings is that local governments have not been able to supervise them properly. now local governments have introduced policies hoping that insurance companies will join the insurance for the delivery of buildings. in the current market environment, if the pressure on the insurance for the delivery of buildings is very high, the insurance fees will inevitably be very high."
li yujia, chief researcher of the housing policy research center of the guangdong provincial urban and rural planning institute, said: "the delivery insurance and the previously mentioned 'housing engineering quality insurance' belong to the same type, because the main function of insurance is to prevent possible risks and losses, which are borne by the insurance company, the insured person takes out insurance, and the beneficiary is the small owner. in fact, failure to deliver the building on schedule is also a problem of engineering quality. the developer takes out insurance. if there is no delivery, the insurance company will pay to make up for the funding gap and finally complete the delivery. so, if insurance is taken out, the moral risk of the insured must be prevented. the insurance company will look at the developer's qualifications, the availability of funds, the supervision of pre-sale funds, etc. the insurance company will take these into consideration, so whether the developer is willing to take out insurance and whether the insurance company will eventually accept the order are also aspects that need to be considered."
in fact, on march 7 this year, yi gang, deputy director of the economic committee of the national committee of the chinese people's political consultative conference, former governor of the people's bank of china, and chairman of the board of directors of the china society of finance, suggested at the second plenary meeting of the second session of the 14th national committee of the chinese people's political consultative conference to "establish a real estate pre-sale fund insurance mechanism."
according to yi gang's statement, the central government or the people's bank of china will withdraw 1% of the balance of pre-sale supervision funds from the pre-sale insurance fund each year (estimated to be about 10 billion yuan/year), and will first consider a three-year limit (2024-2026), with a total of about 30 billion yuan from the pre-sale insurance fund. real estate companies will be allowed to use a certain proportion of pre-sale supervision account funds in accordance with the law and corporate governance structure. it is estimated that about 1 trillion yuan of funds can be used immediately by real estate companies. if real estate companies have unfinished buildings in the future, the pre-sale insurance fund will make advance payments up to the limit of the funds used by the real estate company.
yi gang proposed to "establish a real estate pre-sale fund insurance mechanism" where the central finance or the people's bank of china will extract a certain proportion of the pre-sale supervision funds and then introduce the pre-sale insurance fund for compensation. hengyang is currently in the stage of encouraging research, and how the "delivery insurance" will be implemented and the implementation details need further study.
the feasibility of “price stabilization insurance” is questionable
the "price stabilization insurance" has caused more controversy and concerns in the industry.
zhang dawei pointed out: "from the perspective of price reduction insurance, it is difficult to determine how much loss has been incurred. from the perspective of insurance, the decision on whether to pay compensation lies in the hands of the developer or the insurance company, so it is difficult to make an objective assessment."
"there is an obvious gambling risk when adding insurance to the price of buying a house. it is likely to encourage a small number of investors to speculate in real estate, especially in the current unstable market. when buying a house, you must be aware that you may lose money, otherwise it is likely to bring financial risks," zhang dawei added.
the reporter also found from public information that in 2016, an insurance platform in my country released the news of "the first domestic housing price drop insurance", which means that if the buyer sells the house during the insurance period, the insurance company will compensate for the loss caused by the decline in house prices, with the maximum compensation amount being 30% of the purchase price. the product is divided into two types: one-year and three-year. however, there has been no information on this "first housing price drop insurance" being approved and put on the market since then.
zhang dawei also pointed out: "in 2015, if the buyer chose the 'price reduction insurance' method to purchase the property, he only needed to pay 90% of the house price, and the remaining 10% of the house price would be retained by the customer as a deposit. four months before the agreed delivery date (end of june 2015), if the house price did not drop, the buyer would pay another 10% deposit to the developer. if the price dropped, zhujiang life insurance would pay the remaining amount to the developer on behalf of the customer, and the customer would not need to pay a deposit. at the same time, the standard for determining the price reduction of the property was to compare the price of the house purchased by the customer with the price of the houses on the same floor and facing the same direction in the adjacent buildings four months before the delivery. simply put, this was a gimmick launched by a group company to sell houses that year."
as the development idea of "market for market, insurance for insurance" in my country's real estate industry is clear, housing price fluctuations are a normal phenomenon of the market. li yujia said that housing price stabilization insurance is not "reliable". "housing prices follow the market and are determined by supply and demand. they are inherently volatile. if local governments hope to stabilize housing prices through insurance, this is unrealistic."
photo by xu qian, a reporter from beijing news shell finance/bean bag large model generation picture
edited by yang juanjuan, proofread by chen diyan
