[Look at China October 25, 2021]In the past 20 years, the Chinese property market has not had a complete cycle of rise, prosperity, and decline, because every time the real estate declines, it is either destocking or releasing water to save the precarious property market.
This is the case in 2015. By destocking, residents can increase leverage to buy houses and help real estate developers reduce the burden. Now this kind of operation is coming again, but the residents are unable to increase their leverage, and they have begun to encourage financial institutions to relax loans to rescue real estate developers. After tightening credit for a year, the real estate developers represented by Evergrande suffered heavy casualties, and now they can only let them go and continue their lives. I don’t know if we can bring these real estate companies back to life like in 2015.
We don’t care about the life and death of real estate developers. What we care about is whether we can get rid of our house. Over the past year, many netizens have heard the news that their houses cannot be sold off. Many people have immigrated to a critical moment and found that the houses cannot be sold and the capital chain is broken—all because of the cliff of real estate.
Now, because of concerns that real estate companies’ debt defaults will bring down China’s real estate and the economy, the Chinese government has recently begun to loosen credit in the property market and has begun to release water urgently to rescue the property market. This may be the back light of real estate developers, or it may be the last window of time for those who have been trying to get rid of their houses. I asked everyone to sell their houses for 3 years before, and 2019 is the best opportunity, followed by last year, and now this time window may be the last escape door, I don’t know if you can seize it.
A lot of things happened in the property market a few days ago. It mainly revolves around several positive announcements made by Zou Lan, Director of the Financial Markets Department of the Central Bank. It can be said that these benefits have given the entire industry a glimmer of life in the dark cracks. But personally understand that this is just a glimpse, the general trend of the bursting of China’s property market cannot be stopped.
The first advantage is to guide major banks to accurately grasp and implement the real estate financial prudential management system to ensure the stable and orderly distribution of real estate credit.
To interpret this sentence, we need to look at the background of the property market. Everyone knows that real estate companies are having a particularly miserable life, mainly because from this year, the relevant state departments have required key real estate risk prevention and set up “three lines and four gears” to fully tighten the blood vessels for developers. Real estate is a financial-intensive industry. Anyone who has previously expanded on a large scale and played high-leverage games will basically be slashed, causing certain turbulence. For example, Evergrande’s trillions of dishes will collapse if they fail.
After the thunderstorms of several large developers, the confidence of the entire banking industry in real estate declined severely, and they were reluctant to lend to them. Therefore, the director of the Financial Markets Department of the Central Bank highlighted one sentence: Some financial institutions have “misunderstandings” in the rules of the 30 pilot housing companies.
It is vital to re-correct the market and boost the banking industry’s confidence in real estate. Otherwise, according to the current situation, there will be a large-scale risk of unfinished buildings. Eventually, the developers will close down, the sellers will lose their money, and the local land finance will The collapse can be said to be three losses.
On September 24, the Monetary Policy Committee of the Central Bank held a regular meeting of the third quarter, and for the first time proposed “dual maintenance”-safeguarding the healthy development of the real estate market and safeguarding the legitimate rights and interests of housing consumers. On September 29, the Central Bank and the China Banking and Insurance Regulatory Commission held a real estate finance symposium, and after putting forward the goal of “maintaining continuous and stable real estate financial policies”, “two maintenances” were mentioned.
The “three red lines” of financing by real estate developers, the “concentration management of real estate loans” by banks, and the “land expenditure not exceeding 40% of sales” by real estate developers… The series of measures to “limit the inflow of funds into the property market” initiated last year have already caused some Real estate companies, and even leading real estate companies, are in a capital chain dilemma, and there are signs of “overregulation” in the regulation of the property market. The stability of the property market is not only related to promoting economic development, but also related to the livelihood issues of whether houses will be unfinished and whether people can live in. Therefore, moderate relaxation of property market regulation is also a last resort.
In fact, this is true not only for housing loans, but also for other loans such as business loans… Approvals have become looser, lending speed has accelerated, and interest rates have been lowered. This is in marked contrast to the credit picture in the first half of the year. Therefore, this series of policies is simply a “lifesaver” for developers. Not surprisingly, there will be a wave of directional injection of water into the real estate next.
This can be said to be “good” for buyers and sellers who still want to enter the market. You must know that since the beginning of this year, the housing loan market has been tight: housing loan quotas are tight, housing interest rates are rising, and even news of second-hand housing loan suspensions have appeared in turn.
This year, more than 400 major control measures have targeted the property market. In order to curb housing price increases, many cities have directly ordered banks to raise interest rates, postpone loans, or even suspend loans, and freeze transactions. First, during the New Year’s Day, the new year’s mortgage quota was consumed by the backlog of “approved but not released” mortgages from the previous year, resulting in no mortgage for people who bought a house at the beginning of the year. Around the Ching Ming Festival in early April, a new round of housing loan tightening appeared in the market again. However, after May 1st, under the strict control of the regulatory requirements, the second-hand housing market even stopped lending in some cities. This one-size-fits-all approach is a big killer to the market.
Since June, readers in cities such as Wuhan, Suzhou, Hefei, Nanjing, and Lianyungang have extended their loans to varying degrees, and some even wait in line for six months. The increase in mortgage interest rates has almost become a common phenomenon. Huizhou’s first set of interest rates soared to around 7%, and it is very common to reach around 6% nationwide. Probably from August, the national property market suddenly turned down, and the transaction volume dropped drastically. In September, the country generally fell by about 30%. After that, we saw that mortgage interest rates continued to rise, mortgage lending became slower and slower, mortgage approvals became more and more stringent, and the amount of approved mortgages also declined. Up to now, not only the housing prices have risen too fast before, but almost all cities have entered the cold winter ahead of schedule. This fierce regulation has reduced the expectations of the entire market, and housing prices have a feeling of “hard landing”. Therefore, during this period, many cities are very anxious and have introduced drop limits to stabilize the market.
The central bank said this time that “the supply and demand of housing loans will return to normal”, which means that the next bank lending cycle will accelerate, and the most tight days of credit may have passed. At the same time, the mortgage interest rate will also be lowered from the peak, and the window for buying houses will gradually open.
On the eve of “Eleventh”, some cities such as Guangzhou and Foshan showed signs of relaxation. The most direct manifestation is that the mortgage interest rates of some banks have been lowered. China Everbright Bank’s first mortgage interest rate has even dropped by 40BP (0.4%), and the second mortgage interest rate of some banks has been lowered by 10BP (0.1%). These are major signals.
The signal of credit easing has already emerged from the National Standing Committee held on September 1. The meeting pointed out that in order to intensify the support policy, an additional 300 billion yuan of small re-loan lines will be added this year to support local corporate banks in granting loans to small and micro enterprises and individual industrial and commercial households. In layman’s terms, the central bank will issue money to commercial banks, and the commercial bank will issue loans to small and micro enterprises/self-employed after receiving the money… and the disbursement must be completed before the end of the year.
This year’s credit market can be described simply as follows: throughout the first half of the year, all loans were tight. After June, operating loans began to slowly relax, and after September, housing loans finally showed signs of relaxation.
A new round of credit easing window is coming.
Now that there is a window of credit easing, is the property market going to fire again and the stock market going up again?
If someone thinks this way, they definitely think too much. As mentioned earlier, the current credit is very different from before…short cycle, slow smoothness, precise orientation, and financial technology makes it easy for the regulatory authorities to regulate and control policies. Once the signs of asset bubbles and credit tightening measures are discovered Just come. The result is that the bubble bursts immediately after it rises, and it is easy to stand on guard to take over. So, this time is not the time to buy a house, it is the time to sell the house, it is to give you the last window of escape.
Editor in charge: Yu Zhen
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