2014-05-20

China Has 300 Million Homebuyers, How Can Prices Fall?

This article begins by pointing out that there are 330 million Chinese between the ages of 20 and 34, making for a lot of potential home buyers. It goes on to discuss price declines in Wenzhou, where there was a lot of speculative home buying. I recently read an article where a home buyer (in Tangshan maybe) had three apartments. One he lived in, one he raised dogs in, and one he raised birds in. There will be final demand in one form or another, the issue is at what price. The best argument the bulls have is rising wages and inflation; they will put the ultimate floor on nominal prices.

A complicating issue (one of many) is that local governments rely on land sales to fuel the development that supports housing values. Today's empty ghost city will be filled in a year or two if there are schools, hospitals and shopping centers built nearby and the city has a viable local economy. If instead the local government curbs investment due to tight finances or the local economy sinks as it has in Ordos and Shanxi due to natural resource price declines, the homes will stay empty.

目前中国有3亿人将要买房 未来楼市难下行
Most recently, the author of the CPPCC meeting, in primary research, there are always friends and acquaintances asked: "? Prices will fall further," "whether the property market to the inflection point ? "Since the Spring Festival, the country's property market is simmering, so many people feel a chill. Spring in April, major cities nationwide chain volume fell more than Liu Cheng, Beijing, Dalian and other cities volume decline of three percent; while "51" period, a total 54 cities nationwide housing contract units fell 32.5%. Among them, a second-tier cities in the largest decline, down 40% year-tier cities. So, friends and acquaintances of the property market, "depreciation" and "turning point" problem is more up market "collapse theory" has spread like wildfire, and even some local governments began brewing in the property market deregulation, such as the Hong Kong SAR Government on the recent one approach: Given the recent weakness in the property market continued to prepare adjusted to proceed in the near future, "spicy move" (property-related policies), will relax the deadline for flat buyers. But I believe that a lot of judgment belongs overreaction 2014 could be a turning point of the mainland property market, but is not "jumping", but "downstairs." In other words, prices will stop rising, or appropriately reduced, but not sharply.

Analysis of market conditions, the most basic homework is to analyze the relationship between supply and demand. So, the demand of the house like? Focus needs to analyze the rigid requirements.

Mainly due to the rigid requirements of the house much marriageable age population. Since the founding of our country had been born three peak periods. First appeared in 1949-1959. At that time the State to implement policies to encourage fertility, population growth rate of nearly 300%; second time in 1962 to 1965, continued until 1973; third is from 1985 to 1995, mostly born in the sixties which groups of people into marriage and childbearing age, creating a baby boom, according to scholars calculations, there is a third peak of the population was born around 124 million, nearly 10% of the current population. The next ten years, from 1985 to 1995 the population was born into the marriage age, which is just to be the main force to support housing. Another statistic shows that, at present, the proportion of Chinese population aged 20-24 was 9.0%, the proportion of the population aged 25-29 was 8.0% in the proportion of the population aged 30-34 was 7.4%, both at a high level, there will be 330 million cumulative population is married and purchase stage.

330 million people are divided into two categories, one is the urban population, one is rural. Results of the latest census, both half and half. Approximately 160 million of the vast majority of urban young child, the purchase of two people not only on its own financial resources, as well as financial support for the two families share a house not too difficult. This part of young people in rural areas, the economic capacity to be weaker, but they are more than learn a variety of ways to work after entering the city, most people are not ready to return to rural settlement, it is an indisputable fact that, even where there is a 50% people with housing affordability, is not a small group. In this view, the next decade, China has 200 million people in the housing consumer groups.

So, the supply of houses and how? Housing land supply is reflected in the most direct indicator of housing supply. Data from the Ministry of Land show, in 2013 China's housing land supply is equivalent to 143 percent before the five-year average actual supply, a record high. That is to say, five years before the supply of housing is small, is an important factor causing prices to rise this year to increase housing supply, would lower prices. In addition, with the end of the era of real estate profits, part of real estate speculators divestment initiative, but also the second-hand housing supply increases; With full swing since last year completed a large number of affordable housing and shantytowns projects nationwide, increased the supply of housing.

Comprehensive analysis of the relationship between housing supply and demand can be seen, the rigid demand is real, housing supply is increasing, housing investment demand is gradually shrinking. These factors contribute to the current real estate "shift" period, that is, from rapid growth to rational steady growth.

"Shift period" is an adjustment, integration, is to squeeze the bubble stage. In the overall stability of prices, the fall will not rule in time, does not rule out rates in some places there are "fire-sale." Magnitude of falling house prices, depending on the proportion of investment demand, investment demand accounted for more, the rate of decline will be bigger. For example, Wenzhou, the tree does not depend on other places just to be supporting prices, but fried up, "ups and downs" was originally "real estate" destiny, not worth the fuss. So, for the vast majority of Shanghai and China cities, housing prices are not in the "jumping", but in the "downstairs."

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