Real estate market, experiencing three major changes | Mid year economic observation
2024-07-11
After bidding farewell to the era of high growth, where will the rational Chinese real estate market go? The answer focuses on the new development model of real estate. In the first half of 2024, the real estate market will explore new development models in the process of supply and demand rebalancing. There have been three new changes in real estate policies, markets, and enterprises, which have become important footnotes for the new development model of the real estate market. 01: There are two unprecedented aspects to regulatory policies. Firstly, the policy intensity is unprecedented. In the first half of the year, restrictive policies such as purchase and sales restrictions were widely withdrawn, and the Shanghai real estate market experienced substantial loosening of purchase restrictions for the first time in more than a decade. Currently, only a single digit number of places in China have implemented purchase restrictions. The down payment ratio and mortgage interest rates in various regions continue to decrease. According to statistics from Beike Research Institute, as of the end of May, the minimum down payment ratio for first homes in over 80% of cities has dropped to 15%, and the average interest rate for second homes in 100 cities has entered the "3 era" for the first time since 2019 (below 4%). According to the monitoring of China Index Research Institute, in the first half of 2024, about 180 regions in China introduced over 360 policies related to real estate. The Zhongyuan Real Estate Research Institute made a comparison: if we consider the intensity of restrictive real estate policies in mid-2022 (the most severe period of regulatory policies) as 100 points, the current tightening of the real estate market in major cities is only 22 points. Secondly, regulatory measures have never been seen before. The policy measures introduced since the beginning of this year, such as the "whitelist" system for real estate projects and the government's purchase of some existing commodity housing for affordable housing, are unprecedented and break away from the simple policy logic of "limiting when overheated and stimulating when too cold" in the past. The industry generally believes that the new "problem-solving approach" is expected to drive inventory digestion and solve key problems at this stage. 02: The real estate market is showing positive signals. In June, the transaction volume of the real estate market in major cities in China rebounded month on month. According to the Kerui Research Center, in June, the transaction volume of new houses in key cities reached a new monthly high within the year. In that month, the overall transaction volume of 30 key cities in China was 13.35 million square meters, an increase of 17% month on month and 52% compared to the monthly average in the first quarter; Among them, Shanghai, Guangzhou, and Shenzhen all saw a month on month growth rate of over 35%. The transaction activity of the second-hand housing market is higher than that of new houses. According to data from the Kerui Research Center, in June, among the 22 key cities, 60% of the cities saw a month on month increase in second-hand housing transaction volume, with Shanghai, Guangzhou, and other cities leading the way with an increase of about 40%; Beijing, Hangzhou, Nanjing and other cities have steadily rebounded, with growth rates of around 10%. Huang Yu, Executive Vice President of Zhongzhi Research Institute, gave an example that in June, the transaction volume of second-hand commercial housing in Shanghai exceeded 26000 units, reaching a new high in nearly a year; Nearly 15000 second-hand residential properties were signed online in Beijing. High energy cities are taking the lead in stabilizing, which is seen as a signal that the market is bottoming out, with rating agencies taking action upon hearing the news. Recently, the international credit rating agency S&P has raised the long-term issuer credit rating of China Overseas Development Co., Ltd. from "BBB+" to "A -", and raised the long-term issuance rating of the company's outstanding senior unsecured notes from "BBB+" to "A -". 03: The new development model has given rise to new growth points. After more than 20 years of rapid development, the Chinese real estate market has shifted its focus towards "good or bad" after solving the problem of "existence". The recent series of projects promoted by the government not only improve the convenience and comfort of living, but also guide the real estate industry from "building more houses" to "providing better living conditions", such as updating existing houses, renovating urban villages, constructing complete residential communities, and renovating old residential areas. In this process, new growth points have also emerged. According to a research report by Guohai Securities, compared with typical developed countries, China's real estate industry has a significantly lower contribution rate to the economy in areas such as property management, intermediary services, and residents' own housing services, with significant room for improvement; With the gradual establishment of new development models in the real estate industry, the contribution of real estate to the economy in the future will shift from incremental expansion to stock operation services, and the above activities are expected to become new economic growth points. Stock operation services are an important direction for the transformation of real estate enterprises at present. Liu Shui, Director of Enterprise Research at Zhongzhi Research Institute, stated that typical real estate companies generally adopt a "light and heavy" strategy, with heavy asset development businesses focusing on core cities and fixed investment based on sales; The light asset business focuses on diversified businesses such as property services, commercial operations, construction agents, long-term rental apartments, industrial parks, and health care. From 2018 to 2023, the proportion of operating business in the gross profit of typical real estate companies increased from 8.9% to 26.5%. Liu Shui believes that the pattern of the real estate industry is undergoing changes. With the slow clearance of risks by real estate companies, new forces will rise and the real estate industry will also "bid farewell to the old and welcome the new". (Lai Xin She)
Edit：Lubaikang Responsible editor：Chenze
Source：chinanews.com
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