Will house prices in third-tier cities continue to rise? What do you think?

Most of the spillover effects brought about by purchase restrictions in second-tier cities have been released, the destocking of the property market has basically been completed, and the fulcrum for maintaining high growth in housing prices in third- and fourth-tier cities is decreasing.

“As soon as the market opens in the morning, buyers with full payment and 80% down payment will view the property first, and those with 70% and 50% down payment will view the property in the afternoon. By the evening, you will only receive a text message notification: There is no room.” The development manager of a leading real estate company in Foshan told a Caijing reporter that in his impression, housing prices in Foshan began to rise in early 2016, and by mid-2017, the number of houses in Foshan's urban area had roughly doubled.

During this period, the property market in Quanzhou, more than 700 kilometers away from Foshan, was also extremely hot. "After the influx of demand, new houses in Quanzhou have to be purchased through a lottery. The chance of winning a popular property is 1:10. It can be said that if you win the lottery, you will make a fortune." The person in charge of Xiamen Company, another leading real estate company, told Caijing reporters that since Xiamen After the purchase restrictions were strengthened, a large amount of money poured into Quanzhou. Quanzhou is less than half an hour away from Xiamen by high-speed rail, but the housing prices are less than half of Xiamen. The average price of new houses in Xiamen is 41,000 yuan, fourth in the country, while Quanzhou is less than 20,000 yuan, making it an obvious investment lowland.

Since 2016, housing prices in third- and fourth-tier cities have entered a rapid growth trajectory, and there are many cities like Foshan and Quanzhou where housing prices have skyrocketed. Thousands of people are fighting for houses until the early morning, sleeping on the streets at night. These scenes that can only be seen when fighting for houses in first- and second-tier cities have begun to be performed frequently in third- and fourth-tier cities. Netizens even made more "inspirational" jokes: Better than you Rich multi-millionaires are waiting in the rain, so what reason do you have for not working hard.

On August 15, the National Bureau of Statistics released commercial housing price data for 70 large and medium-sized cities in July 2018. From a month-on-month perspective, the sales prices of newly built commercial residential buildings in four first-tier cities increased by 0.2%, a decrease of 0.4 percentage points from the previous month. Among them, prices in Shanghai fell, and prices in Beijing, Guangzhou and Shenzhen increased by 0.2%, 0.6% and 0.5% respectively. The sales price of newly built commercial housing in 31 second-tier cities increased by 1.1%, a decrease of 0.1 percentage points from the previous month. The sales price of newly built commercial housing in 35 third-tier cities increased by 1.5%, an increase of 0.8 percentage points from the previous month. In addition, the sales price of second-hand housing in first-, second- and third-tier cities increased by 0.2%, 1.0% and 1.1% respectively.

Third-tier cities are obvious highlands for growth.

On July 31, the Political Bureau of the Central Committee of the Communist Party of China proposed to "resolutely curb the rise in housing prices." In the past, relevant statements in both central and local documents have been to "resolutely curb the rapid rise in housing prices." Subsequently, news came out that the approval authority for urban shantytown renovation had been transferred to the central government and that enterprises and institutions were restricted from purchasing houses. Several local governments that had planned to relax purchase restrictions were forced to continue to tighten them.

Can the carnival in the property market in third- and fourth-tier cities continue?

Who is driving the skyrocketing housing prices?

“A tourist group from Hangzhou just got off the bus, and one person could buy dozens of units.” A salesperson from Country Garden Beihai Impression told the Caijing reporter. His building opened in January this year and was almost sold out after May Day. "We are not selling large units of more than 140 square meters very quickly. The 21st North Latitude unit is a small unit and faces the sea, so it was snapped up as soon as it opened." He said.

The housing big data project team of the Institute of Financial Strategy of the Chinese Academy of Social Sciences compared 141 sample cities. The data shows that in April 2018, Xishuangbanna, Xianyang, Nanchong, Leshan and other cities entered the period before the month-on-month housing price growth. 10 bits. Among the 55 cities with a median house price exceeding RMB 10,000 during the same period, they include third- and fourth-tier cities such as Foshan, Quanzhou, Jinhua, Kunshan, Zhangzhou, Nantong, Zhangjiagang, Zhongshan, Cangzhou, Taizhou, Quzhou, and Baoding.

What has stimulated the skyrocketing housing prices in third- and fourth-tier cities? Caijing reporters found in interviews that the overflow demand brought about by purchase restrictions, price limits, and restricted credit in first- and second-tier cities, the monetization and resettlement policy for shantytown renovations in urbanization development, and the sluggish A-share market are all stimulating factors.

In March 2017, Xiamen introduced what is known as the strictest purchase restriction policy in history, “restrictions on housing, loans, divorce, and social security.” Although Quanzhou also has purchase restrictions, they are relatively loose. For example, one will be eligible to buy a house after paying social security for one year, while in Xiamen it is three years. Among the home buyers in Beihai, half are locals and half are tourists. After Hainan restricted home ownership, many home buyers who had not bought a house in Hainan came to Beihai. The geographical location of Beihai is only separated from Hainan by the Beibu Gulf, and it can be reached by boat in about 10 hours. Now, outsiders can only buy one house in Beihai, but before 2017, there were no restrictions on house purchases by outsiders.

Similarly, due to the purchase restrictions in Guangzhou, the overflow purchasing power has promoted this wave of rising housing prices in Foshan. On May 1, 2015, Foshan canceled the purchase restriction policy. In terms of credit, starting from 2016, the down payment for house purchases in Foshan has also increased from 30% to 20%.

An employee of Foshan Country Garden, a native of Foshan, told Caijing reporters that in 2016, the prices in areas around Guangzhou such as Nanhai, Shunde Beijiao, and Chancheng Center all increased significantly, and they are all Guangzhou customers. Come and buy. The new house he bought in Foshan at the end of 2016 has now increased by 80%. According to him, the opening of the subway has also stimulated the rise in housing prices, especially new homes.

Since 2017, Foshan has entered the Metro 2.0 era and has been connected to the Guangzhou Line, which has an immediate impact on housing prices.

The financial report shows that about 58% of Country Garden’s sales in 2017 came from third- and fourth-tier cities.

Chen Ge, a real estate and education industry analyst at UBS Securities, believes that there are three main reasons for this round of rising housing prices in third- and fourth-tier cities. He analyzed to the Caijing reporter that the first is the government’s policy guidance. In the past two or three years, the renovation and monetization of shantytowns in third- and fourth-tier cities have released and generated demand for home purchases in many third- and fourth-tier cities; second, with the continued advancement of urbanization, some local rigid needs and demand in third- and fourth-tier cities have Improved demand; the third is the spillover effect after purchase restrictions in first- and second-tier cities. Due to purchase restrictions and high housing prices in first- and second-tier cities, real estate transaction volume in first- and second-tier cities has declined significantly since 2017. Many people who work and live in first- and second-tier cities choose to go back to their hometowns to buy houses. Some investors and real estate speculators It also moved to third- and fourth-tier cities.

Another main reason why real estate speculators move to third- and fourth-tier cities is that there are too few domestic investment targets.

On July 1, 2017, the "Measures for the Management of Large-Amount and Suspicious Transaction Reporting by Financial Institutions" issued by the Central Bank came into effect, strictly blocking the possibility of enterprises and individuals exchanging foreign currency to invest in overseas markets; in the past two years, , the P2P financial management platform that focuses on inclusive finance has fallen into a wave of runaways, and a large number of investors have lost all their money overnight; and the stock market has been fluctuating and falling since the sharp decline in mid-2015, entering a slow bear. Houses have become the only anti-inflation investment in the country.

However, there is no comprehensive surge in housing prices in third- and fourth-tier cities, and their urban differentiation and phased characteristics are relatively obvious. Xu Xiaole, chief market analyst of the Shell Research Institute, said in an interview with a reporter from Caijing that the rise in housing prices in some third- and fourth-tier cities is due to the background of urbanization, and the monetization of shed reform has also affected market expectations. In terms of sales volume, the contribution of monetization of shed reform to third- and fourth-tier cities is about 15%, but it has ignited expectations for home purchases in third- and fourth-tier cities.

The "Caijing" reporter found a list of urban shanty town reconstruction projects in Quanzhou City in 2018 on the official website of the Quanzhou Municipal Housing and Urban-Rural Development Bureau, which showed that Quanzhou will invest a total of 3.248 billion yuan in 2018. The construction area is 510,000 square meters, and 9,644 units of affordable housing projects in shantytowns have been renovated.

On March 27, 2017, in the "List of Shantytown Renovation Projects in the Province in 2017" released by the Fujian Provincial Department of Housing and Urban-Rural Development, Quanzhou ranked first in the country with a total investment of 31.074 billion yuan. It ranks second in the province, second only to Putian, and about three times that of Zhangzhou City (10.111 billion yuan).

The person in charge of the Xiamen company of the above-mentioned leading real estate company told Caijing reporters that part of the surge in Quanzhou housing prices comes from the spillover effect of the rigid demand for Xiamen’s purchase restrictions, and the spillover scope is the Jiaomei and Shuitou areas around Xiamen. And more comes from the local demand in Quanzhou, or more accurately, the development of urbanization.

Quanzhou is a third-tier city, but its permanent population is 8.65 million, Xiamen’s permanent population is only 4.01 million, and Shenzhen, a first-tier city, has a permanent population of approximately 12.52 million. In 2017, Quanzhou's GDP reached 754.801 billion yuan, ranking first in the province. This is the 19th consecutive year that Quanzhou's GDP has led the province. Some people in the real estate industry predict that Quanzhou's population may soon exceed the 10 million mark. Quanzhou, a third-tier city, has the economic aggregate and population density of a second-tier city.

Xu Xiaole believes that the accelerated urbanization of third- and fourth-tier cities is the basic factor. my country is still in the middle stage of urbanization, and the urbanization rate in third- and fourth-tier cities is still low. In recent years, with the improvement of transportation infrastructure and the inward relocation of industries, third- and fourth-tier cities have entered a stage of accelerated urbanization, attracting the return of local rural populations and migrant workers. As incomes rise, rural residents are more likely to move to cities when they get married and their children go to school, creating demand for housing in third- and fourth-tier cities.

How difficult is it to maintain the stability of housing prices in third- and fourth-tier cities?

As we enter the second half of the year, the fulcrum that maintains the rapid rise in housing prices in third- and fourth-tier cities is changing.

First of all, the housing reform policy has been adjusted, with the approval authority transferred from local governments to the central government.

In a recent interview with Xinhua News Agency, the head of the relevant departments of the China Development Bank said that the contract approval authority still remains at the branch, and there is no situation where the head office has the authority to approve the loan contract for housing renovation. However, according to the regulations of the China Development Bank, the approval of loan contracts is subject to the division of responsibilities between the head office and branches, with joint supervision.

Recently, in order to implement relevant regulatory requirements, China Development Bank has unified the contract review authority to the head office. The main purpose is to prevent local governments from excessive borrowing and avoid inconsistent policies in various regions, and centralize it at the head office for unified control.

A real estate equity investor revealed to a reporter from Caijing that although the credit authority lies with branches, the requirements are much stricter. If the first three requirements were met in the past, local governments could obtain low-interest loans, but now they may have to meet ten requirements.

There are two types of housing resettlement: monetary resettlement and physical resettlement. In June 2015, the State Council promulgated the "Opinions on Further Improving the Renovation of Urban Shantytowns and Urban and Rural Dilapidated Houses and the Construction of Supporting Infrastructure", which changed the compensation model for shantytown reconstruction from equal emphasis on physical monetary resettlement to priority on monetary resettlement.

Monetary resettlement means that the government directly compensates the residents of the demolished shanty towns in the form of currency, and then the residents purchase houses in the commercial housing market. Due to illegal operations, many second-generation developers have been demolished, some of whom are even worth over 100 million yuan, which has also heated up housing prices in third- and fourth-tier cities.

Local governments have benefited greatly from this.

After receiving low-interest loans from the China Development Bank, local governments compensated the relocated households and then sold the demolished land to developers at high prices. This process not only pushed up the transaction volume and housing prices of real estate, but also increased the Local fiscal revenue.

According to the head of the relevant departments of the China Development Bank, the China Development Bank issued shantytown renovation loans of 750.9 billion yuan, 972.5 billion yuan, and 880 billion yuan respectively in 2015, 2016, and 2017. As of the end of June 2018, a total of 3,868.4 billion yuan in shantytown renovation loans had been issued, of which 460.9 billion yuan had been issued this year.

“The amount of housing renovation in third- and fourth-tier cities should not increase significantly this year and next year.” Chen Ge told a reporter from Caijing. Although local governments have been actively looking for new pillar industries for transformation, land transfer fees have always been an important source of revenue. When local governments implement central government policies, they still prefer to crack down on real estate more than they actually crack down on it.

Data from the Ministry of Finance show that in 2017, the fiscal revenue and government fund revenue of local governments across the country were 9.1 trillion yuan and 5.8 trillion yuan respectively, and real estate-related revenue accounted for 45% of the total. %, of which land sales revenue accounts for 35% and real estate-related taxes account for 10%.

In March 2018, the "China's 2017 Fiscal Budget Implementation Report" jointly released by the Institute of Finance and Taxation of Renmin University of China, the Chongyang Institute of Financial Research, and the School of Finance and Economics showed that the top five companies with high reliance on land finance The provinces are Zhejiang, Chongqing, Jiangsu, Shandong and Jiangxi, among which Zhejiang reached 113.5%.

Chen Ge said that the rise and fall of house prices also reflects the game between the central and local governments.

Statistical data from the Centaline Real Estate Research Center shows that in July alone, the intensity of regulation of the national property market set a new record, with more than 60 cities in total issuing more than 70 real estate regulation policies of various types. Control policies were previously concentrated in second- and third-tier cities. In July, they were widely distributed from first- and second-tier cities to third- and fourth-tier cities.

On July 31, the Political Bureau meeting of the Central Committee of the Communist Party of China proposed to "resolutely curb the rise in housing prices." A week later, at a symposium on real estate work in some cities held in Shenyang, Liaoning, the Ministry of Housing and Urban-Rural Development proposed to “resolutely hold cities that fail to regulate the property market accountable.”

After other aspects were restricted, the talent policy became a sideline.

In the first half of 2018, more than 40 cities across the country issued various types of talent policies to attract talents to settle in, launch preferential subsidies for home purchases, and step up the boundaries of purchase restriction policies. This also shows that under the strong supervision of the central government, there are not many tricks that local governments can take.

“Xiamen had planned to quietly relax, but after the Politburo meeting at the end of July, it could only continue to tighten.” The person in charge of the Xiamen Company of the aforementioned leading real estate company told the Caijing reporter that Quanzhou transactions started last year The volume is huge, and it has basically absorbed the local demand accumulated in the past few years. Nowadays, affected by market confidence, the number of people from Xiamen coming to Quanzhou to buy houses has dropped significantly. The marginal properties that used to have a signing ratio of 2:1 or higher have just been sold out. "I think it will be colder, but after all, prices in Quanzhou have never risen irrationally, so it should not be as cold as Xiamen and Zhangzhou. For Quanzhou, the impact of urbanization is greater."

And The sales office staff of Country Garden·Beihai Impression also revealed that “transactions have slowed down recently.”

Beihai also introduced a purchase restriction policy in the second half of 2017. Non-local residents can only purchase one house. , and bank down payment loans have been increased to 40%.

Xu Xiaole, chief market analyst at Shell Research Institute, believes that the timely and orderly exit of the housing reform monetization policy will help bring the market back to fundamentals and will cool down some overheated markets in the short term.

This impact has already been reflected in the transaction volume data in June and July. Many cities have experienced sales declines for two consecutive months. The number of cities with house price growth narrowing and falling has gradually increased. Among the 347 cities across the country, the number of cities with house price growth greater than 1% decreased from 260 in April to 199 in June. In the long run, excluding external policy influences, housing prices in third- and fourth-tier cities will return to fundamentals such as income and population.

Vanke’s 2017 annual report shows that commercial housing in 14 cities that Vanke focuses on (Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin, Shenyang, Hangzhou, Nanjing, Chengdu, Wuhan, Dongguan, Foshan, Wuxi, Suzhou ), approved pre-sale area and transaction area decreased by 4.3% and 29.3% respectively year-on-year.

On the other hand, third- and fourth-tier cities benefited from investment spillover effects and driven by destocking policies. The transaction area of ??commercial residential buildings continued to grow year-on-year, but the growth rate also gradually slowed down at the end of the year.

Chen Ge believes that from the perspective of investment spillover demand, after about a year and a half, housing prices in many cities have doubled, and the demand has been almost absorbed; now, the main factor supporting the rise in housing prices in third- and fourth-tier cities is urbanization , this process is relatively slow. Therefore, from the second half of this year to next year, real estate sales in third- and fourth-tier cities may decline slightly, but the magnitude will not be too large, and housing prices will be relatively stable.

Second-tier cities may rebound slightly

Although factors for rising housing prices in third- and fourth-tier cities have changed, it does not affect the enthusiasm of real estate developers.

A report from the China Index Academy shows that from January to April 2018, 20 representative real estate companies accounted for 50% of the land acquired in third- and fourth-tier cities, a year-on-year increase of 8 percentage points; The land area acquired in second-tier cities accounted for 46%, a year-on-year decrease of 3 percentage points; as for first-tier cities, the land area acquired was only 4%, a year-on-year decrease of 5 percentage points.

Statistical data from the Centaline Real Estate Research Center shows that in July, the land market in hot cities across the country continued to see concentrated transactions, with land sales in 50 hot cities exceeding 2.15 trillion yuan, a year-on-year increase of 33%. Among the 50 cities with the most land sales, 25 are third- and fourth-tier cities, setting a new historical record. Land sales in 20 third- and fourth-tier cities exceeded 20 billion yuan, including Foshan, Changzhou, Huzhou, Jiaxing, Nantong, Jinhua, Xuzhou, Heze, Taizhou, Shangrao, Weifang, and Fuyang , Ganzhou City, Quanzhou City, etc.

Zhang Dawei, chief analyst of Centaline Real Estate, believes that this does not mean that housing prices in third- and fourth-tier cities will continue to rise in the future. It only means that developers expect housing prices to rise. Whether the final rise will depend on banks' credit controls intensity.

Chen Ge believes that land prices lag behind housing prices. After the beginning of 2017, housing prices in first-tier cities basically stopped rising, but land prices in first-tier cities only began to decline at the end of 2017. The market has a lagging process. "Our team has observed that listed companies that have made more investments in third- and fourth-tier cities in recent months are now becoming more conservative and starting to talk about risks in third- and fourth-tier cities," Chen Ge said.

Compared with third- and fourth-tier cities, Chen Ge is more optimistic about the future of second-tier cities. According to data from UBS Securities, throughout 2017, the sales area of ??first-hand residential properties in first-tier cities fell by 27%, and in second-tier cities fell by about 4%. Chen Ge believes that first- and second-tier cities have rigid needs brought about by net population inflow, but many second-tier cities are not as financially healthy as first-tier cities. They mainly rely on real estate to drive economic growth and have weak tolerance for regulation. The industry generally believes that the real estate regulation cycle is two years. From September 2016 to now, Beijing, Shanghai, Guangzhou and Shenzhen have been under control for two years, but the purchase restriction policy is still strict, but there is some room in second-tier cities.

In addition to market rules, changes in monetary policy have also triggered expectations of rising housing prices.

On June 24, the central bank announced that it would lower the deposit reserve ratio by 0.5 percentage points starting from July 5, 2018. This RRR cut by the central bank released 700 billion yuan in funds. This is the third RRR cut by the central bank this year. Compared with the two RRR cuts in January and April this year, this time there is increased encouragement for debt-for-equity swaps. Wen Bin, chief researcher of Minsheng Bank, once predicted that there may still be one or two targeted RRR cuts by the end of the year. After three RRR cuts in 2008, 2011 and 2015, sales in the real estate market recovered significantly and lasted for more than a year.

“Although the country hopes that funds can flow into the industry, we are also worried that this part of the funds will be used by companies to speculate in real estate and return to the old path.” A real estate analyst told a reporter from Caijing . He believes that "the impact of RRR cuts on the housing market mainly depends on later supervision."

According to the Caijing reporter, in July, many cities have issued policies restricting corporate housing purchases, completely blocking the possibility of investment in real estate speculation, and possibly suspending the policy of housing purchases by enterprises and institutions. spread to many cities. Zhang Dawei believes that this policy has a significant impact on alleviating the tight supply and demand in the market. Because in most first- and second-tier cities, there is a phenomenon of companies buying houses.