Core Viewpoints:
1. Housing prices are not a trivial matter, and their fluctuations affect people's hearts. Recently, the pace of housing price adjustments has accelerated. What signals does this reflect? As a systemically important price, how will housing prices affect other areas? How will policies respond, and how will housing price expectations eventually stabilize? All these issues are closely related to the future fundamental trends.
2. Internationally, housing price adjustments are not necessarily linear, and there is a common phenomenon of housing prices falling for a period and then accelerating the decline. What this reflects is that a significant downturn in housing prices leads to a contraction in the value of residents' and enterprises' assets and the value of bank collateral. If there is no policy intervention afterward, it will form an "accelerator" mechanism for housing prices.
3. The transmission of housing prices to other areas is not all immediate, especially the promotion of bank non-performing rates has a lag effect. Such "hiddenness" makes the policy response of various countries not necessarily timely, thereby prolonging the adjustment time of housing prices. Looking at the process of housing price stabilization, the reduction of long-term interest rates may be more important than short-term interest rates.
4. Looking forward, under the tone of preventing and resolving real estate risks, measures such as state-owned enterprises "collecting and storing" will continue to be promoted, but in reality, there are also difficulties such as the purchase price. In the short term, the intervention of public funds on the supply side may still be cautious, and the adjustment of interest rates on the demand side is relatively moderate. Achieving the annual economic goals still requires the joint efforts of multi-dimensional policies.
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Main Text:
Recently, the adjustment of housing prices has shown signs of acceleration, and the quarter-on-quarter decline since the second quarter has been the largest in nearly three years. What expectations does this reflect? As a systemically important price, how will housing prices affect other areas? How will policies respond, and how will housing price expectations eventually stabilize?
1. Are housing price adjustments traceable?
Internationally, housing price adjustments are not necessarily linear, and there is a common phenomenon of housing prices falling for a period and then accelerating the decline. What this reflects is that a significant downturn in housing prices leads to a contraction in the value of residents' and enterprises' assets and the value of bank collateral. If there is no policy intervention afterward, it will form an "accelerator" mechanism for housing prices.
The promotion of housing prices to bank non-performing rates has a lag effect. Such "hiddenness" makes the policy response of various countries not necessarily timely, thereby prolonging the adjustment time of housing prices (see "Prosperity and Stagnation," "Turbulent Times," "Firefighting," etc.).From the perspective of our country, the adjustment of housing prices has been ongoing for nearly three years. Despite the recent announcement that the overall non-performing loan ratio of commercial banks has declined, the proportion of loans under special mention has increased, and the credit quality of some small and medium-sized banks has also shown signs of weakening.
II. How can housing price expectations be reversed?
Under the tone of preventing and resolving real estate risks, local state-owned enterprises are advancing measures such as "acquisition and storage," but they also face many difficulties. According to the detailed rules of acquisition and storage disclosed by various places, the upper limit of the acquisition and storage price is mostly the replacement cost of affordable housing (land allocation + construction and installation + no more than 5% profit), which may have a certain gap with the negotiation price based on the land bidding cost by real estate companies.
Looking at the process of housing price stabilization in Japan, the United States, and other countries, long-term interest rate adjustments may be more critical than short-term interest rates. The logic behind this may be that residents' home purchases and corporate investments are not short-term stopgap measures, but are often based on long-term expectations. In our country's history, when there is a divergence between long-term and short-term interest rate trends, housing prices often follow the changes in long-term interest rates.
Looking ahead, the intervention of public funds on the supply side of the real estate market may remain cautious, and interest rate adjustments on the demand side are relatively moderate. Considering the weakening trend of housing prices and the contraction of real estate companies' willingness to acquire land, it is preliminarily estimated that the decline in real estate investment this year will expand to about -11% based on last year's -9.6%. To achieve the annual economic target, multi-dimensional policy efforts are still needed.
Risk warning: Expectations may change non-linearly.