Interpretation of the report of the Bank of China Research Institute: Analysis of the correlation between the sharp decline in housing prices and the release of household consumption
Bank of China Research Institute: Analysis of the correlation between the sharp decline in housing prices and the release of household consumption
I. Introduction
In the "Economic and Financial Outlook Report for the Third Quarter of 2024", the Bank of China Research Institute conducted an in-depth analysis of the new changes in China's real estate market and the measures to digest the stock. In particular, the report pointed out that China's current economic dependence on real estate is decreasing, and the sharp decline in housing prices is conducive to the release of residents' consumption potential in the long run. This point of view has sparked widespread attention and discussion. This article aims to delve into this view and analyze it from multiple perspectives.
Second, China's economy is less dependent on real estate
China's economy has experienced rapid growth over the past few decades, with the real estate sector playing a pivotal role. However, with the adjustment of economic structure and the advancement of industrial upgrading, China's economy is gradually becoming less dependent on real estate. This change can be interpreted from the following aspects:
1. Decline in the value added of the real estate sector as a share of GDP: The report pointed out that the value added of the real estate industry as a proportion of GDP decreased from 7.14% in 2019 to 5.99% in the first quarter of 2024. This data shows that the position of the real estate industry in the national economy is gradually weakening.
2. Decrease in revenue from the transfer of state-owned land use rights: The proportion of the revenue from the transfer of state-owned land use rights in the revenue of local government funds at the same level is also declining year by year, from 90.11% in 2019 to 86.66% from January to April 2024. This indicates that local governments are becoming less dependent on land finance.
3. Decline in the proportion of real estate loan balances: The proportion of real estate loan balances in the balance of loans of financial institutions has also decreased year by year, from 29% at the end of 2019 to 21.66% at the end of the first quarter of 2024. This data shows that financial institutions are becoming more cautious in lending to the real estate sector.
3. Analysis of the correlation between the sharp decline in housing prices and the release of household consumption
The Bank of China Research Institute believes that the sharp drop in housing prices is conducive to the release of residents' consumption potential in the long run. This view can be interpreted from the following aspects:
1. Reduce housing pressure on residents: The decline in housing prices will directly reduce the cost of housing for residents, thereby reducing their housing pressure. This will allow residents to have more disposable income to spend on other consumption areas, which in turn will promote the prosperity of the consumer market.
2. Unleash spending potential: With high housing prices, many families have to cut back on other consumer spending in order to buy a home. As housing prices fall, these households will be able to unleash some of their pent-up consumption potential to spend on improving quality of life, raising education levels, and increasing spending on culture and entertainment.
3. Promote balanced economic development: The decline in housing prices will help change the situation of over-reliance on real estate to drive economic growth in the past, and promote the optimization and upgrading of the economic structure. At the same time, the prosperity of the consumer market will provide a new source of impetus for economic growth and promote the development of the economy in a more balanced and sustainable direction.
Fourth, the impact of the decline in housing prices and countermeasures
Although the decline in housing prices is conducive to the release of residents' consumption potential and the balanced development of the economy, it may also bring some negative effects. For example, real estate developers may face the risk of breaking the capital chain, and some home buyers may suffer property losses due to falling housing prices. Therefore, in the process of falling housing prices, a series of countermeasures need to be taken to prevent and resolve risks:
1. Strengthen financial supervision: Strengthen financial supervision of the real estate market to prevent excessive capital inflow into the real estate market and avoid the emergence of real estate bubbles.
2. Improve housing security policies: Provide basic housing security for low-income families by improving housing security policies and reduce their housing pressure.
3. Promote the healthy development of the real estate market: Promote the healthy development of the real estate market and achieve a smooth transition of the real estate market by adjusting the land supply policy and optimizing the housing supply structure.
V. Conclusions
To sum up, the Bank of China Research Institute believes that China's current economic dependence on real estate is decreasing, and the sharp decline in housing prices is conducive to the release of residents' consumption potential in the long run. This view is forward-looking and instructive in the context of the current real estate market adjustment. However, in the process of falling housing prices, it is also necessary to pay attention to preventing and resolving related risks to ensure the stable and healthy development of the real estate market. At the same time, the government and all sectors of society should work together to promote the optimization and upgrading of the economic structure and lay a solid foundation for the sustainable development of the economy.