Annual Report on Development of Housing Market in China Release & 2012-2013 Housing Situation and Policies Seminar Held in Bejing

Publish Date：2014-04-29 15:25:24

Publish Date: 2014-01-17 11:24:53

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, points out—

Domestic macro-economy has been stabilized from dropping, and positive changes occur.

Macro-economy is encumbered with real estate, yet on which its reliance is weakened.

The Green Book of Housing Market in 2013 release & 2012-2013 Housing Situation and Policies Seminar, co-sponsored by national academy of economics strategy Chinese Academy of Social Sciences and Social Sciences Academy Press (China), was held in Beijing on Dec. 13, 2012. At the conference, there are discussion on practical problems and major challenges confronted by China’s housing development, analysis on trends of 2011-2012 housing market and related markets, and prediction of 2012-2013 China’s housing developing tendency; and Annual Report on Development of Housing Market in China (2011-2012), completed by Social Sciences Academy Press (China), was officially released.

The Green Book of Housing Market points out that domestic macro-economy has been stabilized from dropping, and positive changes occur. Macro-economy is encumbered with real estate, yet on which its reliance is weakened.

The real estate investment becomes stable after the early falling. During the first 10 months of 2012, the nationwide investment on real estate development has achieved 5,762.9 billion RMB, with a nominal growth of 15.4% year on year; the growth rate is flat with that of the first 9 months, yet declined by 15.7% compared to the same period of 2011. Just in October, a single month, the nationwide real estate investment has reached 653.8 billion RMB, with a decrease of 10.5% month on month, yet an increase of 15.5% year on year.

Economy growth is also stabilized from decline. Economy once glided down to some extent for the investment has decreased in real estate. The growth rates are respectively 8.9, 8.1, 7.6 and 7.4 percent from the fourth quarter of 2011 to the third quarter of 2012, increasing respectively 1.7, 1.5, 2.0 and 2.2 percent quarter on quarter; the yearly economy growth rate is expected to achieve 7.7%. The status above shows that the economy becomes less dependent on the real estate.

Positive changes appear in the national economy. The supply structure has also been improved. Agricultural production has maintained a momentum of stable development, increasing harvests for 9 consecutive months. The industrial added value significantly declined in growth rate, yet has rebounded since December. The tertiary industry has slightly speeded up in growth rate. The structure of the three main industries has gone through some improvements, after which the proportions of primary industry, secondary industry and tertiary industry are respectively 9.4%, 46.8% and 43.8%. The demand structure presents positive changes: owing to the rapid growth of per capital income, household consumption rises after the previous decline and it becomes the first driving force of economy. In the first three quarters, disposable income per capital has reached 18,000 yuan, increasing 9.8% year on year. From January to October, the total retail sales of consumer goods have achieved 14.9 trillion yuan, with a year-on-year growth of 14.1%; the fixed asset investment has edged up after a sharp downturn, climbing by 20.7% year on year from January to October.

(The information above can be referred to 2013 Green Book of Housing Market Annual Report on Development of Housing Market in China (2011-2012). Dec. 2012. Social Sciences Academy Press (China). 1-3.)

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, points out—

The housing market regulation in 2012 has initially achieved the goals like curbing the rapid rising of housing price etc.

Green Book of Housing Market indicates that in 2012, for the sake of consolidating the housing market regulation policies, the central government unswervingly continued to reinforce the policy implementation, repeatedly reiterated to curb unreasonable demand and adhered unremittingly to housing market regulation policies like home purchase restrictions etc.; therefore, suboptimal goals have been initially realized, that is: first, the high-speed rising of housing price has been preliminarily curbed and the relative housing price has declined when taking into consideration the continual increase of residents’ income; second, the security housing construction program has been overfulfilled in advance. From January to October of 2012, security housing has started new projects of 7.22 million suites in urban areas throughout the country, and 5.05 million suites have basically completed; third, macro-economy has not only realized initial stabilization and recovery, but also presented some positive changes. Consumption has become a crucial drive force, thus economic structure is improved and macro-economy depends less on the real estate.

However, 2012 did not see the realization of the optimal goal—“return of rational housing price”. The reasons are as follow: under the tendency of overall housing price falling, the fine-tuning policy to deal with the rapid drop of macro-economy has affected the real estate; in addition, local governments relaxed the policy implementation in disguised form, which has caused the market expectation reversal and resulted in housing market panic; the sudden price rebound around July disturbed the return of rational housing price; although afterwards the central government again reinforced the implementation of regulation policies, which led to expectation change of all parties, the market has altered the trajectory of significant falling and re-enter the stage of shock and marginal rise.

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, analyzes that—

The housing market trend has undergone twists and turns after the fourth quarter of 2011.

Because parties like central policies, financial institutions, local governments etc. competed with each other.

Green Book of Housing Market indicates that the housing market trend since the fourth quarter of 2011 is a result of competition between market parties, especially between central regulation policies and the others. Generally, the central government started to tighten the housing regulation policies and local governments strictly implement the policies, which resulted in a dip in the market expectation. Then the fine-tuning of macro policies by the central government affected the real estate, which gave rise to local governments’ disguised relaxation in policy implementation and caused the reversal of market expectation. All these further brought about the market panic and then the rebound of housing market. Afterwards, the central government again reinforced the implementation of regulation policies; consequently, expectations from all parties changed again; however, the economic policies did not change with it; therefore, housing market re-entered the marginal rising stage.

1. The adjustment of the macro-economy and real estate regulation by the central government. In the fourth quarter of 2011, the central government initiatively de-rated the macro-economy growth and implemented the real estate regulation policies which used to be in the second place. The global economy recovered slowly, yet the domestic economy grew rapidly and the price level in China dropped too fast, so the RMB deposit-reserve ratio decreased twice by respectively 0.5% in February and May of 2012. On June 8, 2012, the central bank cut the interest rates for the first time in three years. On July 5, 2012, the central bank asymmetric cut the interest rates for the first time in four years. On July 25, the state council sent inspectorates to the whole country and the relevant ministries reiterated to unswervingly and strictly implement the regulation policies.

2. The adjustment of housing credit policies by financial institutions. First, raise the benchmark interest rate on the first homes. Financial institutions adjusted the housing credit policies. Major commercial banks, in succession, raised the benchmark interest rate for loan on the first suite. The rates have increased by approximately 5-10% in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou etc., and some even rose by 50%. Second, lower the benchmark interest rate on the first suite. On July 5, 2012, the central bank announced another interest-rate cut, which was the first asymmetric interest-rate cut in four years; meanwhile, the deposit and loan rate of individual housing provident fund was adjusted accordingly. Simultaneously, the central bank requested to the commercial banks that the lower limits for the floating range of individual housing loan interest rate should be 7 times as the benchmark interest rate.

3. The change of local governments in regulation policy implementation. First, the local governments have earnestly implemented the regulation policies since the second half of 2010. Second, in the first half of 2012, under the pressure of increasingly severe fiscal balance, by taking the opportunity of the central policies’ fine-tuning, some city local governments frequently tested the central government’s bottom line of the strict implementation and the fine-tuning of housing market policies was escalating. (According to incomplete status, in the first half of the year, almost 40 cities across the country have posted clear fine-tuning regulation policies for housing market, which involved the first suite standard adjustment, the land grant fee change, the housing provident fund loan quota rising etc.) Third, under the high pressure of central inspectorate, local governments again strictly enforced the regulation policies; some local governments, including Shanghai, Beijing, Nanjing, Xi’an and Hangzhou, took more stringent measures like home-purchase restrictions, housing price limitations, housing profit limitations, land sales restrictions etc.

4. Three-time alteration of the housing market expectation. First, the housing market developed a clear decline expectation in the fourth quarter of 2011 and the first quarter of 2012. Second, the market expectation changed since May of 2012 because of the fine-tuning of financial policies and the rumor of regulation relaxation. Third, the market expectation reversed again after July of 2012, for the central government again strictly implemented the regulation policies. Fourth, the central government did not take effective measures, so the expectation continued to differentiate.

5. Development enterprises changed their decisions and behaviors. First, in the fourth quarter of 2011 and the first quarter of 2012, the circumstance of overall funding restraints and inventory pressure inhibited the developers’ investment motivation; most housing enterprises chose to reduce the commence of construction or delay the construction; a majority of developers may continuously choose the sales strategies like accelerating shipment, decreasing the prices to increase sales volume etc., in order to speed up the return of funds. Second, after some houses sold well by using the strategy of decreasing price to increase volume, and meanwhile market expectation changed, the developers started to adjust selling strategies; they cancelled the discounts and even drove up the prices to achieve sales expansion. The development enterprises saw a gradually improved financial condition (see the figure below). Third, the differentiation of market expectation led to ups and downs of purchasing land by developers and construction areas recovery (see the figure below).

6. Homebuyers changed their decisions and behaviors. First, under the circumstance of strict regulation policy implementation and housing price decline expectation, families with investment and speculative demands withdrew, while those with improving demands or rigid demands held money and waited to buy houses. Second, on one hand, a great amount of families with rigid demands and improving demands have accumulated since the housing price declined in 2011; once the anticipation of housing price trend changed, they entered the market and purchased in advance, in case the housing price rebounded. On another, de-rating the interest resulted in decline of housing costs; homebuyers have lightened their financial burden and some of them enhanced their intention to purchase a house, so the rigid demands were released. Third, after the differentiation of market expectations and the release of rigid demands, the housing sales volume and price grew slightly.

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, predicts that—

The recent major swings of housing market indicators are worth noting, because they imply the risks of overall rebound and partial collapse in the future; in 2013, the central housing regulation is faced with numerous unfavorable factors.

Green Book of Housing Market points out that because the current housing market trend is not developed by market mechanism, neither by the power of reasonable housing market, the recent major swings of housing market indicators are worth noting. In the fourth quarter of 2012 and in 2013, the housing market will faced with the risks of overall rebound and partial collapse, i.e., the housing prices in most cities will increase rapidly, while those in some cities will collapse; most projects will continue to raising their prices, yet some others will be left unfinished. In most cities, if the central government does not take effective measures when the housing price begins to warm and rise up, the local governments will disguisedly relax the regulation and then the market anticipation will gradually change; consequently, the housing market will be confronted with another risk of price spurt. However, in some cities with particular serous real estate bubbles, due to the withdrawal of investment and speculation, the bubbles will burst and the housing market will crash; for some small and medium real estate enterprises or project enterprises which lack strength, their projects will become uncompleted flats and their enterprises will face bankruptcy because of financial constraints or funding strand breaks, which is possible to bring about certain financial risk.

In 2013, regarding to the market entities and policies, the central regulation and control of housing market are confronted with numerous unfavorable factors:

1. The continuous global economy downturn.

The slow global economy recovery or the continuous economy downturn has two consequences. First, it will result in severe export situation in China, for the uncertain overseas market demand hinders the economic turnaround in China. Second, in order to facilitate their national economic growth, countries have successively introduced ease monetary policies, which will cause potential pressure of imported inflation and influence the performance of expansionary monetary policy in China. Furthermore, the international capital still covets China’s real estate market.

2. The insufficiency of domestic economic drive force. Although there are some positive phenomena, the macro-economy recovery hasn’t been consolidated. Except the government investment, the driving force for the consumption demand growth and private investment growth are still inadequate. If external demand comes across grave difficulties, the government investment will lack long-term sustainability as well, which may lead to maximum repeats of macro-economy and the real estate regulation and control can also be affected.

3. The tightening local government budgets. After two years’ macro regulation and control, the local governments’ land-transferring fees decline significantly and the construction of security houses needs a great amount of fiscal expenditure; in addition, debts issued by financing vehicles are coming due, which further tightens the local government’s finance, and a more severe hidden financial risk is lurking.

4. Diversities of different regions. Different cities and different enterprises may be faced with different situations. However, composite policies to deal with each case on its merits are difficult to formulate and impractical in operation; while uniform regulation policies can be untargeted and purposeless.

5. Price decline and sales volume increase in housing market. As a special investment, housing can be rising or falling, in short term, both in sales volume and price due to long-term bullish expectations. Therefore, it is rather difficult to achieve the goal of price decline and sales volume increase in the meantime.

6. Inadequate regulatory mechanisms. Despite that we have established seven ministries regulation and consultation system, it’s still not enough and the system itself has its imperfection. In conclusion, the regulation and control lack perspectiveness, pertinence and timeliness.

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, predicts that—

In the fourth quarter of 2012 and in 2013, if the policies are comparatively powerful and effective,

the housing market will progress in stability, i.e., overall stability and partial unrest.

Green Book of Housing Market points out that in the fourth quarter of 2012 and in 2013, there will be three possible tendencies in housing market development: first, if the policies are adequate and powerless, the overall housing market will rebound and the partial market will collapse; second, supposing that the policies are comparatively powerful and effective, the housing market will progress in stability, i.e., overall stability and partial unrest; third, on condition that the policies are extremely powerful and effective, the housing market will achieve the rational return. However, the second one is the most likely. The concrete manifestation is as follow: the sales volume and price will rise gradually, yet slower than the growth of economy and per capital income. To view from every quarter, in the fourth quarter of 2012 and the first quarter of 2013, the housing sales volume and price will continue to increase gently; then since the second quarter of 2013, government will take measures and the housing market will start to cool down.

1. Macro environment: has created conditions to continuously and strictly regulate and control the real estate. First, for the request of economy transformation, the economy growth rate is actively lowered to give space to the reconstruction and the economic growth rate will maintain at 7% in the future; second, the macro-economy is in the state of stabilization and recovery, so the conflict between macro-economy and real estate is weakened; third, macro-economy will preliminarily get rid of its dependency on the real estate. Consumer demand has initially become the first driving force of the economic growth; the resident income keeps growing, so the sales of cars, sports and entertainment, household appliance etc., which is growing slowly at present, will have great potential for future growth. Although the global economic growth will slow down and the export may even worsen, the export is still competitive. The strategic emerging industries and small and medium-size enterprises will have great potential in investment growth; the current investment in transportation, storage and mail business is small, but the future investment will be potentially large.

2. Short-term fundamentals: the supply and demand are periodically released, so the supply and demand conflict is weakened. For one hand, the differentiation of market expectation will stimulate the further on-coming release of rigid demand which has been accumulated for two years, and it will reduce the pressure and fluctuation of actual demand. For another, the previous sales strategy to achieve sales volume by price decline has solved the fund shortage problem of real estate developers and boosted the confidence of land purchasing and developing. Besides, the security housing construction plays a role in improving people’s livelihood, expanding domestic demand, restructuring, stabilizing housing price and encouraging development.

3. View from long-term background: the housing development still has great potential. The urbanization in China is in its accelerating period, the resident income is continuously increasing, so there will still be great potential in rigid housing demand and improving demand; the long-run economy growth in China is equal to the developed economy entities, so RMB appreciation will be continued in several years and thus the real estate investment still has great potential.

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, indicates that—

The regulation and control in 2013 will continue to reflect in the competition between the market participants and the central regulation.

We must reiterate to unswervingly implement the regulation, and timely and targetedly introduce relevant reserved regulation policies.

Green Book of Housing Market indicates that the regulation and control will continue to reflect in the competition between the market participants and the central regulation. The market participants will be comparatively sensitive to the central regulation policies, while the central government will have greater initiative and leeway. To tackle the problem above, the goal has been set as: by strengthening and completing the regulation policies, set ambitious goals to endeavor for the rational return of the real estate market; at least we can achieve the steady progress of housing market; and avoid the overall rebound and partial collapse of the real estate market. The specific manifestations are as follows: on price, the housing price should be maintained steady and we should strive for the reasonable price return, i.e., cities with comparatively lower housing prices should keep their growth rates lower than the economy growth rates, while those with comparatively higher housing prices should lower their prices; on sales, we should make efforts to maintain a stable growth in sales volume, especially the sales of security housing and the ordinary commercial housing; on investment, overall investment should properly reduced, while the investment in security housing and ordinary commercial housing should increase rapidly and the investment in land purchasing and housing constructions should rise steadily. To achieve these goals, we should adhere to the general principles:

First, persistently and unswervingly adhere to the general principles. The real estate regulation should be a protracted war and we should not expect it will be put right once and for all. To achieve the reasonable housing price return, we should regard the real estate speculation investment curb as a long-run policy and resolutely stop the disguised relaxation of regulation policies. Second, make overall plans and differential measures. The housing sales volume should be raised, but meanwhile the prices should be lowered, and the two aspects should promote each other. For one thing, when fine-tuning the macro policies, we should take orientation and isolation measures to ensure that the related real estate policies will not change or change reversely; for another, we should further strengthen the measures to realize the goals of both macro policies and real estate policies. Third, seize the opportunities and take the initiative. Change the policies which cuts down the tall poppies, pay close attention to housing situation and tendency and the changes, stifle the bad behaviors in their cradles by actively and timely introducing and adjusting policies, propaganda etc., and regulate and control the market participants to act towards the central regulation goals. Fourth, combine long-term policies and short-term policies to seek both temporary and permanent solutions. We should put forward the system policies which can solve both current problems and long-term healthy development by seizing the good opportunity of regulation to make a breakthrough, and then deepening the comprehensive corresponding reformation of housing system.

To avoid the overall rebound and the partial collapse of real estate market, to strive for the rational return of housing market and to realize the steady progress of real estate market, the State Council should aim at the changeable reality of current and future housing market, continuously reiterate to unswervingly and strictly implement the regulation and introduce timely and targetedly the related reserve regulation policies. Suggestions as follows should be taken: on administrative system, complete the regulation departments and their coordination mechanism and implement the control target responsibility system; on requirements management, elaborate the purchasing restriction policy and make it more rigorous and accurate, then stop and correct various attempts to change the policies; on expectations management, improve the new spokesman system and severely punish the rumormongers and speculators related to real estate; on monetary policies, cancel the commercial housing pre-selling system and complete the differential monetary policies; on tax policies, make breakthroughs in stabilizing the current expectation and deepening housing comprehensive corresponding reformation by enlarging the tax pilot areas of real estate; on security housing, improve the various measures of security housing project and exploratorily implement the Comfortable Housing Project; on housing rental market, regulate and develop the rental market; on land policies, set goals of land regulation and control, and explore and establish a mechanism to curb the excessive land price hikes; on space management, take different measures in different cities, and build emergent real estate regulation mechanism to avoid market hard landing for cities which are more likely to appear real estate bubble burst.

Green Book of Housing Market points out that in the fourth quarter of 2012 and in 2013, there will be three possible tendencies in housing market development: first, if the policies are adequate and powerless, the overall housing market will rebound and partial market will collapse; second, supposing that the policies are comparatively powerful and effective, the housing market will progress in stability, i.e., overall stability and partial unrest; third, on condition that the policies are extremely powerful and effective, the housing market will achieve the rational return. However, the second one is the most likely. The specific manifestation is as follow: the sales volume and price will rise gradually, yet slower than the growth of economy and per capital income. To view from every quarter, in the fourth quarter of 2012 and the first quarter of 2013, the housing sales volume and price will continue to increase gently; then since the second quarter of 2013, government will take measures and the housing market will start to cool down.

1. Macro environment: has created conditions for continuously and strictly regulate and control the real estate. First, for the request of economy transformation, the economy growth rate is actively lowered to give space for reconstruction and the economic growth rate will maintain at 7% in the future; second, macro-economy is in the state of stabilization and recovery, so the conflict between macro-economy and real estate is weakened; third, macro-economy will preliminarily get rid of its dependency on the real estate. Consumer demand has initially become the first driving force of the economic growth; resident income keeps growing, so the sales of cars, sports and entertainment, household appliance etc. grow slowly at present, but will have great potential for future growth. Although the global economic growth will slow down and the export may even worsen, the export is still competitive. The strategic emerging industries and small and medium-size enterprises will have great potential in investment growth; the current investment in transportation, storage and mail business is small, but the future investment will be potentially large.

2. Short-term fundamentals: supply and demand periodically release, so the supply and demand conflict is weakened. For one hand, the differentiation of market expectation will stimulate the further on-coming release of rigid demand which has been accumulated for two years, which will reduce the pressure and fluctuation of actual demand. For another, the previous sales to achieve sales volume by price decline have solved the fund shortage problem of real estate developers and boosted the confidence of land purchasing and developing. Besides, the security housing construction plays a role in improving people’s livelihood, expanding domestic demand, restructuring, stabilizing housing price and encouraging development.

Green Book of Housing Market in 2013, publicized by Chinese Academy of Social Science, indicates that—

The regulation and control in 2013 will continue to reflect in the competition between the market participants and the central regulation.

We must reiterate to unswervingly implement the regulation, and timely and targetedly introduce relevant reserved regulation policies.

Green Book of Housing Market indicates that the regulation and control will continue to reflect in the competition between the market participants and the central regulation. The market participants will be comparatively sensitive to the central regulation policies, while the central government will have greater initiative and leeway. To tackle the problem above, the goal as been set as: by strengthening and completing the regulation policies, set ambitious goals to endeavor for the rational return of the real estate market; at least we can achieve the steady progress of housing market; and avoid the overall rebound and partial collapse of the real estate market. The specific manifestations are as follows: on price, the housing price should be maintained steady and we should strive for the reasonable price return, i.e., cities with comparatively lower housing prices should keep their growth rates lower than the economy growth rates, while those with comparatively higher housing prices should lower their prices; on sales, we should make efforts to maintain a stable growth in sales volume, especially the sales of security housing and the ordinary commercial housing; on investment, overall investment should properly reduced, while the investment in security housing and ordinary commercial housing should increase rapidly and the investment in land purchasing and housing constructions should rise steadily. To achieve these goals, we should adhere to the general principles:

First, persistently and unswervingly adhere to the general principles. The real estate regulation should be a protracted war, we should not expect it will be put right once and for all. To achieve the reasonable housing price return, we should regard the real estate speculation investment curb as a long-run policy and resolutely stop the disguised relaxation of regulation policies. Second, make overall plans and differential measures. The housing sales volume should be raised, but meanwhile the prices should be lowered, and the two aspects should promote each other. For one thing, when fine-tuning the macro policies, we should take orientation and isolation measures to ensure that the related real estate policies will not change or change reversely; for another, we should further strengthen the measures to realize the goals of both macro policies and real estate policies. Third, seize the opportunities and take the initiative. Change the policies which cuts down the tall poppies, pay close attention to housing situation and tendency and the changes, stifle the bad behaviors in their cradles by actively and timely introducing and adjusting policies, propaganda etc., and regulate and control the market participants to act towards the central regulation goals. Fourth, combine long-term policies and short-term policies to seek both temporary and permanent solutions. We should put forward the system policies which can solve both current problems and long-term healthy development by seizing the good opportunity of regulation to make a breakthrough, and then deepening the comprehensive corresponding reformation of housing system.

To avoid the overall rebound and partial collapse of real estate market, to strive for the rational return of housing market and to realize the steady progress of real estate market, the State Council should aim at the changeable reality of current and future housing market, continuously reiterate to unswervingly and strictly implement the regulation and introduce timely and targetedly the related reserve regulation policies. Suggestions as follows should be taken: on administrative system, complete the regulation departments and their coordination mechanism and implement the control target responsibility system; on requirements management, elaborate the purchasing restriction policy and make it more rigorous and accurate, then stop and correct various attempts to change the policies; on expectations management, improve the new spokesman system and severely punish the rumormongers and speculators related to real estate; on monetary policies, cancel the commercial housing pre-selling system and complete the differential monetary policies; on tax policies, make breakthroughs in stabilizing the current expectation and deepening housing comprehensive corresponding reformation by enlarging the tax pilot areas of real estate; on security housing, improve the various measures of security housing project and exploratorily implement the comfortable housing project; on housing rental market, regulate and develop the rental market; on land policies, set goals of land regulation and control and explore and establish a mechanism to curb the excessive land price hikes; on space management, take different measures in different cities, and build emergent real estate regulation mechanism to avoid market hard landing for some cities which are more likely to appear real estate bubble burst.