Do first tier cities have the conditions to land?, Hot discussion on "house recognition but not loan recognition": An intermediary has held a meeting to study house recognition | Shanghai | First line
This week, there has been continuous positive news about the real estate market. First, a high-level meeting proposed "timely adjustment and optimization of real estate policies", followed by a call from the Ministry of Housing and Urban Rural Development. The industry believes that a new round of loose policies in the real estate market is about to unfold.
In terms of specific policies, the Ministry of Housing and Urban Rural Development's proposal of "recognizing houses but not loans" has received great attention. At present, only first tier cities and a few strong second tier cities are left with strict implementation of the "house recognition but loan recognition" policy. If the "house recognition but not loan recognition" policy can be implemented, it will stimulate the recovery of the real estate market in these cities. But experts also point out that if the policy of "recognizing houses but not loans" is fully implemented in first tier cities, there may be situations where housing prices rise too quickly.
Second hand housing transaction volume in first tier cities has been declining for several months
After this year's Spring Festival, the real estate market in core cities such as Beijing and Shanghai has rebounded, and developers and real estate brokerage companies have felt a hint of warmth. The real estate market seems to be showing a trend of rebounding from the trough.
However, this trend did not last long. According to the official website of the Beijing Housing and Urban Rural Development Commission, the transaction volume of second-hand houses in the city was 22192 in March, while in April, May, and June, it was 13928, 12982, and 11607, respectively, with a month on month decrease of 37.2%, 6.8%, and 10.6%.
Guo Tao, a real estate agent in Guanzhuang District, Chaoyang District, Beijing, told China News Service that around March, the transaction volume of second-hand houses was higher, and prices also increased, but overall remained stable. Recently, there has been a decrease in transaction volume, and housing prices have remained basically unchanged from the same period in 2021.
Zhang Dawei, Chief Analyst of Zhongyuan Real Estate, told China News Service that the transaction volume of second-hand houses in Beijing in June was only about half of March, reflecting the current market coldness. "The monthly online signing of 12000 second-hand houses is the 'withering line' of the Beijing real estate market. If the monthly online signing volume is less than 12000 units, the market will be relatively sluggish. If the monthly online signing drops to less than 10000 units, housing prices may experience a general decline." He also said that based on current data, the transaction volume of second-hand houses in Beijing in July is likely to be lower than in June.
The same goes for Shanghai. In March this year, the transaction volume of second-hand residential properties in Shanghai was 23991 units, an increase of 24% compared to the previous month. By April, the number of transactions had dropped to 17686 sets, and in May and June, it had dropped to approximately 15000 sets and 12600 sets respectively. According to the National Bureau of Statistics, among 70 large and medium-sized cities, Shanghai's second-hand housing prices fell 1.2% month on month in June, ranking first in the 70 cities.
Pang Jun, a broker at a large real estate brokerage firm in Shanghai, told China News Service that the current transaction volume in Shanghai is relatively low, and some housing prices have returned to the levels of 2020 and even 2019.
According to the Guangzhou Zhongyuan Research Department, the transaction volume of second-hand residential properties in Guangzhou from March to June this year was 12260 units, 10041 units, 8771 units, and 8292 units, respectively. Due to favorable factors such as the adjustment of the guidance price policy for second-hand houses, the transaction volume of second-hand houses in Shenzhen has increased in recent months compared to before, but there is still a considerable gap compared to the past high points in the market. According to the Shenzhen Real Estate Intermediary Association, the transaction volume of second-hand houses in the city from March to June was 4943 sets, 3744 sets, 3603 sets, and 3192 sets.
What is the power of "recognizing a house but not a loan"?
Minister of Housing and Urban Rural Development Ni Hong stated at a recent corporate symposium that she will continue to consolidate the stabilization and recovery trend of the real estate market, strongly support the demand for rigid and improved housing, further implement policy measures such as reducing the down payment ratio and loan interest rate for purchasing the first home, reducing the tax and fee for purchasing improved housing, and providing personal housing loans with "no need to subscribe for housing".
The policy of reducing taxes and fees for the purchase of improved housing has already been implemented, therefore, the statement of "not having to subscribe to housing loans" for housing loans has become a focus of market attention. "Buying a house but not a loan" refers to commercial banks determining the loan ratio only based on whether the family has a house in the local area under their name, regardless of whether the purchasing family has a housing loan record.
According to the different standards for identifying the first and second homes, they can be divided into three types: "recognizing the house and recognizing the loan", "recognizing the house but not recognizing the loan", and "recognizing the loan but not recognizing the house", with a decreasing degree of strictness. According to a research report by Guojin Securities, as of June 30th, more than ten core first and second tier cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Changsha, Hefei, Chengdu, Haikou, Xiamen, Fuzhou, Sanya, and Chongqing, still implement the policy of "recognizing both houses and loans". At present, some cities have made adjustments to the implementation of the "housing and loan recognition" policy, with only a few core cities strictly implementing the policy.
There is a significant difference in the down payment ratio and loan interest rate between "buying a house and buying a loan" and "buying a house but not buying a loan". According to Yan Yuejin, the research director of E-House Research Institute, under the policy of "recognizing both houses and loans", the down payment ratio for second homes in Shanghai reaches 70%, and the lowest mortgage interest rate is 5.25%. If it is changed to "recognizing houses but not recognizing loans", the down payment ratio and mortgage interest rate can be reduced to 35% and 4.55%, respectively. At present, the down payment ratio for second homes in Beijing is 80%, and the lowest mortgage interest rate is 5.25%. If it is changed to "recognize the house but not the loan", the down payment ratio and mortgage interest rate can be reduced to 40% and 4.75%. It can be seen that implementing the policy of "recognizing houses but not loans" can significantly reduce the down payment and interest rate costs of demand for improved housing.
What is the impact of implementing "house and loan recognition" on market transaction volume and prices? The Beike Research Institute reviewed the two complete cycles of real estate market regulation in China from 2010 to the present. The institute stated that in terms of transaction volume, after launching the "house and loan recognition" policy in 2010, the transaction volume of second-hand housing in Shenzhen decreased by 22% year-on-year in 2010, and continued to decline significantly by 45% in 2011; The trading volume in Beijing for the same year decreased by 26% compared to the previous year's high, and continued to decline significantly by 38% the following year to 120000 units, less than half of the level in 2009.
Beike Research Institute also stated that from the end of 2016 to the beginning of 2017, after first tier cities resumed "housing and loan recognition", the annual transaction volume of second-hand housing in Shenzhen, Shanghai, and Beijing decreased by 34%, 54%, and 49% year-on-year, respectively, with transactions in Beijing and Shanghai halving. From the perspective of transaction prices, "buying a house and buying a loan" has effectively curbed the rise in housing prices. The housing prices in first tier cities are prone to rise but difficult to fall. Before 2020, one of the few cases in the history of first tier cities where the slowdown or decline in housing prices was mainly caused by the policy of "recognizing houses and loans".
Beike Research Institute believes that the implementation of "recognizing a house but not a loan" can reduce the cost of house replacement and accelerate the release of demand for improvement. On the one hand, it enables the circulation between the demand for housing and the improvement group. The improvement group will list and sell their existing housing, increase the supply of demand housing, meet the demand for demand to enter the market, and achieve a virtuous cycle between the demand for housing and the improvement group. On the other hand, improving the group's ability to purchase new houses after selling second-hand houses promotes a virtuous cycle between second-hand and new houses. Furthermore, sales in the new housing market have improved, real estate companies have accelerated their payments, confidence in land investment has increased, and the land market has been restored, ultimately achieving a virtuous cycle in the real estate market and industry.
According to Zhang Bo, the director of 58 Anjuke Real Estate Research Institute, it is expected that the trend of continuous easing of real estate policies in the second half of the year will not change. With the implementation of "recognizing a house but not a loan" in first and second tier hot cities, many down payment ratios and loan interest rates that were originally executed for a second home may be executed according to the first home standard, which has a more obvious impact on the real estate market. The core issue of hot cities is not to reduce the down payment ratio for first or second homes again, but to provide policy support that matches the improvement needs that are truly harmed.
Implement conditionally?
While the market is looking forward to the implementation of the policy of "recognizing houses but not loans" in first tier cities, it is also estimating whether the policy will be fully implemented or conditionally implemented.
Zhang Dawei said that if the policy of "recognizing a house but not a loan" is fully implemented, a large number of homebuyers who were originally designated as second homes will regain the qualification for the first home, the impact of this policy will be significant. In this situation, the market in first tier cities such as Beijing and Shanghai may become hot again, and may even attract homebuyers from other cities to come and buy houses.
Zhongxin Jingwei has noticed that some homeowners and homebuyers are starting to change their attitudes. After the announcement of the above statement by the Ministry of Housing and Urban Rural Development, Pang Jun said, "We are currently in a meeting to discuss this new policy. Generally speaking, the new policy will be implemented according to different details in different places. As Shanghai has not yet followed up, it is uncertain how it will be implemented. Recently, the favorable policies have been more concentrated, and coupled with the decrease in prices, some homeowners are unwilling to further lower their prices." Guo Tao also said that some customers have chosen to take action after the new policy is implemented.
Zhang Dawei stated that if the policy of "recognizing a house but not a loan" is implemented conditionally, such as a slight reduction in the down payment ratio and loan interest rate, or only implemented in new urban areas and suburbs, applicable to families with two children or elderly cohabitants, and requiring social security in their respective urban areas, the policy of "recognizing a house but not a loan" will not significantly stimulate the market.
Due to the significant effect of "recognizing a house but not a loan", Zhang Dawei believes that first tier cities are likely to implement "recognizing a house but not a loan" with additional conditions, which not only improves the market but also does not excessively stimulate the rise of housing prices.
According to Yan Yuejin's analysis of the China Singapore Economic and Social Network, the possibility of implementing the "house recognition but not loan recognition" policy in first tier cities is high, which will also help to boost the market's recovery. He agrees that the policy will be implemented conditionally and may be implemented differently in different regions and new second-hand houses. Li Yujia, Chief Researcher of the Housing Policy Research Center of Guangdong Provincial Urban Planning Institute, stated that further measures will need to be specifically introduced by financial management departments and governments at all levels. At the same time, the policy will also follow the principle of implementing policies based on the city, which means that different regions will not implement them in a consistent manner or with consistent content, but will have policies implemented first and then, with varying degrees of policy intensity, and will not immediately apply them to the end.
