"Ten thousand people shaking" chaos abounds! The real estate market's price limit has reached a crossroads, and new arbitrage often leads to a price limit of tens of millions | real estate | arbitrage
In the first week of June, a case named "Huafa Huitian Mansion" in Lin'an, Hangzhou unexpectedly went viral and made it onto the hot search list in the same city. Because in the past six months, this property has been offering discounts and promotions through buying houses and giving away gold.
Why don't real estate developers directly lower their prices, instead offering one or even two pounds of gold as a hedge against housing prices? For this question, many people in the marketing circle of real estate companies feel helpless: the pricing of real estate projects has upper and lower limits set by record prices. In the past two years, the market has been declining, and real estate marketing has racked their brains to break through the price limit and lower limits, offering free parking spaces, free property management fees, and even accepting agricultural products to offset housing prices, promoting five flowers and eight doors.
On the other hand, high-end residential properties in Shanghai are facing marketing difficulties due to their inability to break through price limits and go online. Not long ago, Yunjin Oriental in Xuhui Binjiang, Shanghai, announced the suspension of lottery sales and cancellation of bookings. This property has caused wealthy social security tycoons in Shanghai to go crazy because "no matter which one you buy, you can easily make a net profit of over ten million". There are rumors in the market that some people are willing to "fake marriage" in order to increase their buying points in order to increase their buying chips.
In every city, houses can be considered one of the most regulated commodities, but the sales process of houses still has frequent loopholes. Taking the "price limit" policy aimed at stabilizing housing prices as an example, since 2016 and 2017, the implementation of price limit policies in various regions has successfully stabilized market expectations during the overheated real estate market, and played an immediate role in stabilizing housing prices. But at the same time, it has indeed given rise to side effects such as "shaking tens of thousands of people" and "striking new ones". Nowadays, standing in the current downturn of the real estate market and sluggish demand, some industry insiders have proposed that the price limit policy has basically completed its historical mission. Currently, it may be considered to withdraw from the historical stage. In some hot cities that still face pressure from rising housing prices, it may be considered to relax the price limit appropriately while optimizing the real estate market regulation measures.
Chaos of New Development in Real Estate Development
In the past few years, due to the price difference of second-hand houses caused by price limits, "buying new houses" has become a fashionable term in major cities. Even people who originally did not have a demand for buying houses have flocked to the new housing market for millions to millions of speculative space, giving rise to one crazy "ten thousand people shaking" of real estate projects.
The wave of innovation driven by Shanghai Yunjin Oriental is not an isolated case. In previous years, several major cities across the country have frequently staged similar myths of innovation and wealth creation. The Hangzhou International Financial Center, which opened for the second time in mid March this year, is one example. This top tier red property located in Qianjiang New City, Hangzhou, except for 8 properties that have been locked in by A-class talents, the remaining 56 properties have attracted 2798 families to participate in the lottery, and the entire selection process ended in less than 20 minutes. According to public information, the price limit of Hangzhou IFC is only 69800 yuan per square meter, but the average listing price of second-hand houses in surrounding areas has reached nearly 120000 yuan per square meter, which is nearly double the price of new houses.
Even in Beijing, where the real estate market is slightly lackluster, there is such an inverted "miracle", and Yongding Mansion, a jointly owned property in Dongcheng District, cannot be ignored. The project is located along the Second Ring Road in Beijing, with an excellent location and an average sales price of 89000 yuan/square meter, with a maximum of 93500 yuan/square meter; The average price of secondary second-hand houses in the surrounding area has reached 127000 yuan per square meter. Although the upside down cost of about 30000 yuan/square meter is not too large, the project positioning is more rigid, starting from 89 square meters, with a relatively low threshold for total price, only around 5 million yuan. So the 391 housing units in Yongding Prefecture attracted about 9000 people's intention to buy houses, approaching the "ten thousand people shaking" trend.
The high-end project that truly achieved the goal of attracting new talents from thousands of people has emerged in Shenzhen. In November 2020, the first phase of the internet famous real estate project, China Resources West, entered the market and launched 1171 residential properties at once, covering an area range of 100-200 square meters with an average registered price of 131000 yuan per square meter. At that time, the average transaction price of second-hand houses that had already been delivered in the early stage of the project was about 180000 yuan/square meter. Under the temptation of having the opportunity to earn 5 to 10 million yuan upon purchase, homebuyers flocked to the market, with over 15000 applicants for home purchases. In the end, 9690 people completed the freeze of sincerity funds and were eligible to participate in the lottery. According to the requirements at that time, the earnest registration deposit was 3.5 million yuan/set, which means that the frozen capital amount of China Resources Runxi Phase I alone reached 33.9 billion yuan.
The Chengdu Kaide Zhuojin Wandai project, which opened in July 2020, has an average price of just over 10000 yuan/square meter, with a price difference of about 5000 to 6000 yuan/square meter compared to the surrounding second-hand houses. Under the temptation of "buying is earning", 58000 people signed up to buy 774 properties. And the Chengdu Chuanfa Tianfu Shangcheng project, which entered the market earlier, also had 40000 people participating in the lottery.
In fact, during the period of rising market heat, many cities such as Nanjing, Suzhou, and Ningbo have experienced "ten thousand people shaking" projects due to the price difference of primary and secondary goods. For example, in April 2022, Tiandiyuan Danxuan Fang in Xi'an attracted over 34000 groups of customers to subscribe and register with a price difference of about 25000 yuan per square meter; In 2021, the real estate market in Xi'an experienced over 12 instances of "ten thousand people shaking"; Hangzhou has even set a record of 28 "ten thousand people shaking" in just over two years.
The price difference brought about by price limits has unprecedentedly stimulated people's enthusiasm for buying houses during a special historical period in the past. In the Hangzhou market with a strong investment atmosphere, a homebuyer revealed to First Financial that during the hot years of the real estate market, young people would gather a few people to participate in the lottery, while those with families were busy helping their parents settle down to obtain the qualification to start a new business. In Shenzhen in 2020, due to the tightening of real estate policies, many people lost their eligibility to buy a house overnight. As a result, homebuyers with no quota or low points chose to "hold on", while those with insufficient funds "crowdfund to buy a house"... The real estate market was plagued by new chaos.
Management of housing price expectations
The starting point of the price limit policy was the hot real estate market in 2016, when many cities adopted a five limit pattern of purchase, loan, price, sales, and business restrictions, limiting from the supply side to the demand side, committed to suppressing investment demand.
In December 2017, at the National Conference on Housing and Urban Rural Construction, then Minister Wang Menghui proposed the direction of regulation for China's real estate market in 2018, which is to implement differentiated regulation policies for various needs, meet the demand for first homes, support improvement needs, and curb speculative speculation.
Industry insiders believe that this meeting essentially emphasized the main theme of policy regulation in 2018: suppressing investment demand, which is consistent with the logic of previous policies. On July 31, 2018, the Central Political Bureau meeting clearly proposed to "resolutely curb the rise of housing prices" and clarified the tone of policy regulation.
According to the statistics of Yihan Think Tank, from 2016 to 2018, over 50 cities implemented price limit policies with inconsistent regulations, covering four first tier cities, most second tier cities, and some third and fourth tier cities. The institution believes that for price limited projects, developers sell them at government guidance prices, stabilizing the expectations of homebuyers for housing prices and suppressing market fluctuations.
But the inversion of second-hand housing prices is an inevitable result. Tian Jing, Vice President of Yihan Think Tank, analyzed to reporters that the price limit policy is unilaterally aimed at first-hand houses. Therefore, the price of new houses is capped due to the restrictive policy, while second-hand houses are freely traded in the market, and the price is determined by the market. When the market is booming, second-hand housing prices remain strong, and inversion is inevitable.
In the first few years of the implementation of the price limit policy, the situation of competition and difficulty in finding a house has emerged in the price limit projects of high-energy cities. The Nanjing Poly Yue Plaza project, which opened in 2018, attracted 5428 groups of customers to draw lots, with a winning rate of only 5.8%; During the same period, there were also many cases of companies grabbing houses in the name of enterprises in the hope of arbitrage.
The policy of patching has gradually emerged. In June 2018, Xi'an, Changsha, and Hangzhou successively introduced policies to suspend the purchase of housing by enterprises, compressing the profit space for both enterprises and individuals. In July 2020, Hangzhou, which frequently experienced "ten thousand people shaking", introduced a new lottery policy, which includes four aspects: the policy of prioritizing the purchase of houses by high-level talents, binding sales restrictions, increasing the tilt towards "homeless families" policies, and increasing restrictions on the registration of purchase intentions to support self occupied demand and curb speculation in housing.
Policies continue to be patched, but it still seems difficult to fundamentally plug loopholes. In fact, there have always been different opinions in the industry on the effectiveness of price limit policies.
In the view of Tian Jing, a think tank at Yihan, the price limit policy was a policy tool that emerged in the market environment from 2016 to 2017, with its timeliness and historical value.
However, in the view of real estate columnist Xi Feng, price controls are often ineffective, and good intentions can also lead to bad things. The original intention of price limit policies was to curb the increase in new housing prices, but the actual implementation of price limit policies has led to a widespread inversion of prices for first and second tier cities, which has unexpectedly triggered a large amount of speculative demand and has not truly played a role in curbing speculation. At the same time, price limits have also led to thinner profits for developers and the loss of huge taxes.
Discussion on "Exit"
Nowadays, the fundamentals of the real estate market have undergone tremendous changes, but the current price limit policy still gives rise to sales chaos and unfairness like "Yunjin Dongfang". So, is it time for price limits to exit the historical stage?
Chen Wenjing, Director of Market Research at Zhongzhi Research Institute, told reporters that the original intention of the price limit policy was to achieve "stable land prices, stable housing prices, and stable expectations", supporting reasonable housing demand. However, with changes in the market environment, the negative impact of price limits has become increasingly prominent. Price inversion not only increases the difficulty of purchasing real housing demand, but also fails to reflect the real market situation, which goes against the original intention of the policy. In the context of increased pressure for real estate market adjustment, multiple cities have issued "price limit orders", which has also led to poor sales of real estate enterprises and hindered the return of funds. In the new market environment, price limit policies also need to be adjusted and optimized in a timely manner
Tian Jing believes that currently, the historic task of the price limit policy has been achieved to a certain extent, which has also raised some additional issues. If we want to cancel the price limit policy, we need to conduct market tests to consider the impact or impact it will have on the market. She proposed that policy withdrawal can be promoted at a hierarchical level, such as lifting price limits for some markets with huge profit margins, such as the luxury housing market, while maintaining other markets.
In fact, with the continuous consolidation of "housing for living, not for speculation", cities and regions have been constantly differentiated. In recent years, the phenomenon of inverted prices of primary and secondary houses has significantly decreased, arbitrage space has narrowed, and the hot buying scenes have been continuously reduced. Many cities and regions have gradually relaxed or even withdrawn their price limit policies.
A real estate industry analyst from a new first tier city revealed to reporters that from the actual implementation of the price limit policy, Suzhou has been gradually relaxing the price limit since last year, and the upper limit of new projects has broken through from four directions, reaching a maximum of 55000 yuan this year. The analyst believes that after the price increase of projects in the core sector of the city, it can promote some demand to overflow into this core sector, thereby driving destocking to a certain extent. Last year, Suzhou was driven by this policy to promote destocking.
However, if the price limit is lifted, will housing prices skyrocket? Tian Jing believes that currently, lifting price limits does not necessarily mean an increase in housing prices, which requires consideration of specific cities and projects. In the years after 2015, there was a phenomenon in the market where land prices were transmitted to housing prices, and the rise in housing prices in first tier cities was transmitted to second tier, third and fourth tier cities. However, this phenomenon no longer exists today. The current market is clearly divided. After the price limit is lifted, some projects in certain cities may have the possibility of price increases, while for others, it may be a false proposition.
