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the third quarter is almost over, and i have been researching recently, unwilling to give up, whether there will be a turnaround in the property market this year?

on september 14, the national bureau of statistics released the price changes of commercial housing in 70 cities across the country in august this year. judging from the data, it can be summed up as "miserable".

the august housing prices in 70 cities across the country were released. in terms of second-hand housing, except for jilin, the remaining 69 cities all saw a decline. moreover, regardless of whether it was first-tier, second-tier or third-tier cities, the month-on-month decline in housing prices was significantly faster than in july, with no signs of bottoming out or stabilizing.

among the four first-tier cities, beijing fell 1% month-on-month, shanghai fell 0.6%, shenzhen fell 1.3% and guangzhou fell 0.7%. considering that the overall housing prices in first-tier cities are relatively high, taking a house worth 5 million yuan as an example, shenzhen, which has the largest drop, will drop by 65,000 yuan in a month, and shanghai, which has the smallest drop, will drop by 30,000 yuan. for a working class family, this is two or three months' income.

the two cities with the largest declines were xiamen and huizhou, both with a month-on-month decline of 2.2%. xiamen's year-on-year decline was 14.6%, the largest decline among the 70 cities in china, and it has been declining for 26 consecutive months; huizhou's year-on-year decline was 10.5%.

in terms of new homes, except for shanghai and nanjing, which saw a slight increase and xi'an, which remained unchanged, the other 67 cities saw a decrease. compared with the same period last year, 68 cities saw a decrease. among them, xiamen saw a year-on-year decrease of 10.7%, ranking first in the country, and has been falling for 28 consecutive months.

xiamen is one of the top three cities with the largest decline in both new and second-hand housing prices, the other two being wuhan and guangzhou. as a typical example of a property market that has been hyped up by capital, xiamen, suzhou, nanjing and hefei were collectively known as the "four little dragons of the property market" due to their crazy price increases during the last round of property market speculation.from 2016 to 2022, xiamen's average price caught up with beijing, shanghai and shenzhen, ranking fourth among mainland cities and higher than guangzhou.

at present, xiamen's housing prices have entered a deep period of adjustment. although the decline in the past two years has squeezed out some bubbles, for many ordinary working-class people, xiamen's housing prices are still not low. currently, xiamen's overall housing prices are still close to 31,000 yuan per square meter, and there is still a long way to go to squeeze out the bubbles.

in the last round of real estate market boom, xiamen is a typical example, but not the only one. cities such as suzhou, nanjing, hefei, xi'an, zhengzhou, wuhan, and chengdu are all experiencing such a process. they showed signs of fatigue at the end of 2022, and a small spring rose in early 2023, which lasted for a few months. since then, they have entered a downward channel all the way until now. they have undergone a deep adjustment. most communities have returned to the prices in 2016, and various mythical communities have fallen from the altar. compared with the peak prices, not counting the holding costs, a drop of 30% to 40% is normal, which is a real example of "buying a house one year later and working ten years less."

since the introduction of the new rescue policy on may 17 this year, the market has been asking when this round of downward cycle will end and whether the real estate market will stop falling and stabilize and usher in a turnaround this year?

especially after the federal reserve’s interest rate cut came into effect.

although it is clear that the federal reserve will cut interest rates, how much the rate cut will be and how much of an impact it will have on china's property market are being pulled out of the black box bit by bit.

in the early morning of september 19, the federal reserve announced a 50bp interest rate cut, the first rate cut in four years. in particular, it exceeded the expectation of 25bp, which had a great impact on the follow-up.

the federal reserve has released its latest interest rate dot plot, which shows that there is still 50 basis points of room for interest rate cuts this year. the expected average interest rate by the end of the year is 4.4%, 3.4% by the end of 2025, and 2.9% by the end of 2026. the longer-term interest rate is also around 3%.

there are two direct expectations for the us dollar rate cut. one is that the rmb has room for rate cuts, but the lpr 1-year and 5-year rates have not been lowered, remaining at 3.35% and 3.85% respectively. we have previously analyzed that china has to give tens of trillions ofexisting mortgage loansthe interest rate cut, so everyone thinks that the lpr rate will be lowered this time to reduce the interest rate of existing houses. however, the central bank has gone against the trend and kept the interest rate unchanged. it is likely that it is still paving the way for stabilizing the bank's interest rate spread as mentioned above.

another expectation is to promote capital inflows. some commentators believe that the key to the fed's interest rate cut this time is not how much it cuts, but that the channel for us dollar interest rate cuts has been opened. the expectation of continued capital outflows to the united states has eased, which will have a easing effect on price expectations for rmb-denominated assets (real estate and stocks).

but the effect is slow, because it is very simple. even if the us dollar interest rate drops to 4.4% by the end of the year and to 3.4% by the end of next year, it is still high interest rate relative to the rmb. in august, the average interest rate for three-month bank deposits was 1.478%, the average interest rate for six months was 1.684%, the average interest rate for one year was 1.81%, the average interest rate for two years was 1.928%, the average interest rate for three years was 2.322%, and the average interest rate for five years was 2.28%.

our domestic interest rate is aiming to break 2% in the future, so how can we expect capital to flow back?

the only thing that can attract foreign investment is the value of real estate. if my country's real estate continues to fall,fallafter leaving the "gold mine", overseas capital will increase its acquisition of large-scale real estate assets in china.

since the beginning of this year, foreign capital has also been gradually increasing its bottom-fishing in high-quality domestic commercial real estate.singapore's government investment company gic purchased part of the equity of qibao vanke and nanxiang impression city, asia's largest real estate investment trust fund link reit acquired the remaining equity of qibao vanke, wanda introduced middle eastern capital, hong kong-funded swire properties took over the equity of indigo phase ii, in addition, beijing hualian acquired skp's dt51, guangzhou taikoo hui cultural center reduced the price and re-listed, etc.

it’s a pity that high-quality commercial real estate is still a rare commodity, and residential real estate, which is under more pressure and attracts more attention, has not seen much foreign investment inflow.

back to the issue of the rmb interest rate cut, although there will be no cut this month, the market generally believes that the general trend is still to follow the fed's interest rate cut cycle.

for the property market, lowering the interest rates on existing housing loans remains the market's biggest expectation and an important factor in determining the direction of the property market in the remaining quarter of the second half of the year.

currently, we are faced with a game between bank profits and public interests. it is not that difficult to choose whether to protect bank profits or lower interest rates to stabilize the property market.

on september 20, dr. liu yuhui, director of the china chief economists forum, said at the 2024 shanghai global asset management annual conference hosted by cailianshe that today's banks should be more like "government banks", downplaying commercial profitability requirements, and the core task is to cooperate with fiscal policies to restart the economic cycle.

"let banks take more responsibility, tilt the benefits towards the household sector, significantly reduce the interest rates of existing mortgages, and even link them to the 10-year and 30-year long-term government bond rates."

we have discussed before that we may be facing a super cycle of balance sheets, and once the contraction process starts, it will be difficult to stop. the best choice is that some entity must stand up and stand in the front row of the economy. it is it that spends money, takes on debt, and leverages to restart the economic cycle.

in this process, all factors must give way. bank profits are important or not. of course they are important, but if sacrificing part of the bank's profits in the short term can stimulate the economy and get this cycle moving, rather than letting funds idle in the financial system, then interest rates should be cut decisively.

of course, lowering the interest rates on existing mortgage loans is just one button to boost the economic cycle.ren zeping believes that the current short-term economic operation status of my country is not optimistic, and the economy continues to decline or even overshoot. a package of measures should be introduced to stimulate the economy and boost market confidence, with a scale of more than 10 trillion yuan, including local bonds, new infrastructure, consumption subsidies, fertility subsidies, housing banks, etc., and adopt special government bonds, ultra-long-term government bonds, central bank re-loans and other tools. the scale should be large, the cost of funds should be low, and the people should have a strong sense of gain.

when the above policies are implemented one by one, it probably means that the property market will stop falling and stabilize, and regain its vitality. however, it is impossible to predict how long this process will take.

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no.5985 original first article | author liang yunfeng

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