The outlook for the property market in the second half of the year - policy increase is the key

Deng Haozhi taught to buy a house

2024-07-01 16:17Knowledge Officer Real Estate Economist, Director of the All-China Economic Federation

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01 In the first half of the year, the property market continued to decline, and all indicators in the country fell by about 20% year-on-year.

At the end of 024, the management determined the target of real estate destocking, and on May 17, the central bank announced a minimum down payment of 15% for house purchases, and the lower limit of mortgage interest rates was cancelled to support the property market.

03 However, the overall response of the market is not ideal, the real estate market in third- and fourth-tier cities has fallen into a deep downturn, and large cities are still skeptical about the policy shift of the property market.

04 The property market in some areas showed signs of stabilization after the central bank's 517 new policy, such as Guangzhou's transaction volume rose by nearly 30%, and Foshan's transaction volume increased by more than 30% compared with before the new deal.

05 If the blockbuster policy does not continue, the recovery of the property market is destined to be empty talk, and it is necessary to increase policy efforts and act as soon as possible to reduce the pain and pressure caused by the continued economic downturn.

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Text/Deng Haozhi

Predicting the property market has been a common thing. But forecasting now is a thankless task. One, if you are accurate, if others make money, they will not share it with you. But if you are wrong, the Internet will always remember it, and it will always criticize you and laugh at you. Second, if you say that the market is not good, don't say that people in this industry hate you, and the article is at risk of being taken off the shelves. But annual and semi-annual forecasts are, after all, the repertoire of real estate practitioners. So I'm going to share my views for you to make your decision-making. If you don't like it, don't spray.

First, the overall trend has not changed, and the downward trend is difficult to stop.

In January ~ May this year, the national property market accelerated its downward trend, and various indicators of the real estate industry fell by about 20% year-on-year. Problems such as guaranteed delivery, real estate companies, and local financial pressure are becoming more and more prominent. Therefore, the management formally determined the target of real estate destocking at the end of April, and on May 17, the central bank announced a series of policies to support the property market, such as the minimum down payment of 15% for home purchases and the cancellation of the lower limit of mortgage interest rates. Follow-ups have been announced across the country, but the overall market response has not been satisfactory for more than a month after that.

It is roughly reflected in several aspects:

First, the real estate market in third- and fourth-tier cities has fallen into a deep downturn. It is mainly manifested in the serious lack of purchasing power in the market, which is directly related to economic performance, employment difficulties, and declining incomes. The second is a serious lack of confidence, and the continuous decline in housing prices has not only become a new consensus in the market, so try not to touch the house, and try to buy it as late as possible. Therefore, after the support of the new policy, the third and fourth-tier cities hardly see any changes in the market. Sales did not pick up, and even price reductions did not help sales.

Second, many large cities still have doubts about the policy shift of the property market, which is manifested in slow action and insufficient strength. For example, in some provincial capitals in the west, the current purchase restriction policy is stricter than that of Guangzhou. For example, in Shenzhen, where housing prices have fallen by 30%, although the conditions are a little looser, they are still restricted from purchasing across the region. For example, in Beijing, where the property market is also sluggish, none of the new policies of the 517 central bank have followed up...... The support policies are not effective, and even continue to maintain some suppression policies on the property market, resulting in the property market in many large cities not recovering.

The third is the market's concern, I am afraid that this partial recovery is also "impulsive". In fact, in the fourth quarter of last year and before the Spring Festival this year, most cities in China have also loosened the property market in two rounds, the mortgage interest rate has also fallen, and the scope of purchase restrictions has also been narrowed, but each time the policy is relaxed, it only brings about a month of recovery, and then the market returns to the downturn, even more sluggish than before. In addition, at the beginning of this year, Hong Kong also announced that the property market was "withdrawn", but the recovery market only lasted for about 2 months, and then it also showed a gradual downward trend. So how long can the effect of the new round of stimulus policies last for the property market? The market is skeptical. This has also led to the result that even with heavy policies, the wait-and-see atmosphere in the market is always difficult to dispel.

Second, there are signs of stabilization in small areas.

Although the performance of the national property market is still unsatisfactory, after the central bank's 517 new policy, the property market in some areas has begun to show relatively gratifying performance. For example, Guangzhou City has completely thrown away the idol burden and label of first-tier cities, and used up all the standards given by the central bank's 517 new policy, exhausted it, and fully released the purchasing power of the market. As a result, in June, the transaction volume rose by nearly 30%, and the online signing returned to the level of more than 6,000 sets in a single month, a new high in more than a year. Another example is Foshan, which launched 13 property market stimulus policies in one go, covering almost all areas such as house purchase, land purchase, tax cut, interest rate cut, and down payment reduction. In the end, in May and June, the volume of transactions increased by more than 30% compared with the previous year.

Looking at the national property market in June, cities with relatively good performance have several common characteristics. First, they are all located in the Yangtze River Delta or the Pearl River Delta large cities, in addition to Guangzhou and Foshan, as well as Shanghai and Hangzhou, such cities have a large population base, large housing demand, and a good economic foundation and strong market purchasing power. Second, such cities are open-minded, resolutely implement the goals set by the management, and adopt all or most of the policy space given by the central bank. It has fully adjusted its attitude towards the real estate industry and fully released the potential demand of the market.

However, it should be noted that the recovery is relatively good in only a small number of cities, and all of them are confined to megacities or megacities.

Third, if the blockbuster policies do not continue, recovery is empty talk.

The current real estate market is very serious, and it is the most difficult moment since China fully entered the commercial housing market in 2000. The continued downturn in the industry has constrained the economic recovery. The continued decline in housing prices has put the financial system under tremendous pressure. The persistence of the problem of guaranteed delivery of housing has raised the problem to the field of people's livelihood. The continued downturn in the land market has also stretched local finances. Although it is no secret that the real estate problem has caused a series of problems, the market downturn has led to a lack of confidence, and the lack of confidence seems to have formed a vicious circle that dragged the market downward. How to break this cycle? This is a question that is difficult to explain in three or two sentences. But in general, it is nothing more than two paths and two results.

First, the policy should be completely ignored, let the market return to the market, and let the property market continue to move in free fall. This will inevitably lead to a series of more serious economic and social problems. When housing prices fall and the economic recession reaches the point where the society can hardly bear it, the property market will reach the bottom of nature. Then reallocate resources in accordance with the principle of marketization, and restore the balance between supply and demand with price rises and falls, and so on. In the future, the property market policy will only manage the rules and affordable housing. Let the market return to the market

The second possibility is that the policy will make big moves, one move after another, until everyone believes in the determination of the management, believes that the market is bottomless, and the policy will not stop. Even see the fact that with the support of policies, the bottom of the market continues to rise. Thus interrupting the downward spiral cycle trend of the property market. Reduce the pain and stress caused by the continued economic downturn.

Judging from my personal belief in economics, I hope that the market can eventually play a leading role in the allocation of resources, and finally bid farewell to headaches and pains, and truly establish a self-regulation and elimination mechanism of the market. However, from a rational point of view, active policy intervention is an inevitable option that we cannot bypass today. If so, the earlier the action and the more force, the better the effect. After all, when the property market problem first started, we had already missed the opportunity to transfer thousands of pounds. Now we can only use the power of the flood to turn the tide. If the blockbuster policy does not continue, the recovery of the property market is destined to be empty talk.

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