Last year, Wuhan’s real estate industry hit a new low in terms of transaction volume and investment, making it a “difficult industry.” (CFOTO/Future Publishing via Getty Images△)
[The Epoch Times, February 10, 2023](Epoch Times reporters Xia Dunhou and Chang Chun interviewed and reported) Last year, the real estate market in Wuhan hit a new low in terms of transaction volume and investment, and the government classified the real estate industry as a “difficult industry.” Scholars believe that not only Wuhan, but the real estate industry across the country has been unable to continue to develop due to years of abnormal growth, and the housing market is generally depressed.
“Daily Economic News” reported that Wuhan issued “16 measures to stabilize the economy” on February 6, classifying the real estate industry as a “difficult industry” and claiming that it will provide support in various aspects such as capital and pre-sale restrictions.
According to the monitoring data of the Middle Finger Research Institute, in 2022, 116,300 new commercial housing units will be sold in Wuhan, a year-on-year decrease of 42%, which is the year with the lowest transaction volume in the past eight years. The annual land transaction value is about 82.2 billion yuan, a year-on-year decrease of about 47%. %. Both the construction area and transaction value of residential land fell out of the top ten in the country. From 2017 to 2021, Wuhan’s ranking has remained in the top 4-7 in the country.
Industry insiders in Wuhan disclosed that in the first half of last year, it would not be possible to sell without price cuts, and many projects that acquired high-priced land in the early stage were sold at a loss. Some regional project prices have dropped by nearly 20%.
In addition, the Wuhan property market is facing more pressure to guarantee the delivery of buildings.
According to the statistics of Crane Research Center, as of December 31, 2022, among the 290 shutdown projects monitored in 32 typical cities, the number of problematic real estate projects in Wuhan is 36, accounting for more than 10% of the total number of 32 cities; The number of undelivered units is 69,266, and the undelivered area is 7.27 million square meters. No matter in terms of the number of problematic real estate buildings, the number of undelivered units, and the area, it ranks first in the 32 cities.
American economist Davy Jun Huang told The Epoch Times on February 9 that there was a wave of rapid rise in the property market in Wuhan in the past. In 2013 and 2014, there were large-scale house purchases, and many people changed houses. Afterwards, many developers had overly optimistic market expectations and built a large number of houses, but gradually the houses could not be sold. Coupled with the impact of the three-year epidemic, the housing market has become even worse.
Analysis: The abnormal development of China’s real estate industry
Columnist Wang He told The Epoch Times on February 9 that Wuhan, as a key city in the country, listed real estate as a difficult industry, which is quite typical and has a great influence. But not only Wuhan, but the real estate market across the country is generally depressed, facing the bursting of the bubble. For example, many places such as Harbin have already experienced difficulties.
“Since the housing reform in 1998, China’s real estate industry has been growing abnormally. It has kidnapped banks, local finance, and China’s economic development.” According to Wang He’s analysis, this determines that China’s real estate industry will not be able to develop sustainably and benignly.
The “Wall Street Journal” reported in 2021 that real estate activities accounted for a quarter of China’s gross domestic product (GDP), which is much higher than that of the United States. Chinese real estate speculation has supported local employment and government revenue.
China’s real estate has soared since 1998, and land prices have taken off. By 2021, the national land sales revenue will reach 8.7051 trillion yuan, accounting for 42.97% of the national total fiscal revenue of 20.2539 trillion yuan (46% in 2020), accounting for 78.36% of the local fiscal revenue of 11.1077 trillion yuan (2020 was 84.03%). Land revenue has become the main source of local fiscal revenue.
David Huang said that high taxes and land finance have pushed up real estate prices, resulting in the current real estate bubble and puffy GDP.
The abnormal development of China’s real estate industry is also reflected in the high debt ratio of real estate companies.
According to the “Beijing News” statistics at the end of July last year, the financial reports of 50 listed real estate companies showed that by the end of 2019, the asset-liability ratio of real estate companies had reached the highest level in history. ~91%, far exceeding the warning line of 80%, which does not include opaque off-balance sheet liabilities. By 2021, 11 large-scale real estate companies have defaulted on their debts. In August 2021, Evergrande incurred a staggering 1.96 trillion huge debts, which was equivalent to exceeding the GDP of New Zealand, Kuwait and other countries at that time.
Wang He said that if the current housing market price returns to being determined by the market, the real estate bubble will collapse immediately. The entire Chinese economy will quickly return to zero, the entire society will be in turmoil, and the entire country will be in crisis, so the CCP dare not let it collapse.
Analysis: Authorities’ bailouts to no avail
The 16 economic measures issued by Wuhan mentioned that in order to reduce the financial pressure on real estate enterprises, the allocation node of “the main structure of the project reaches two-thirds of the progress” is added to the key regulatory funds; the pre-sale conditions of new commercial housing are optimized and adjusted, and real estate development enterprises can Increase the number of applications for pre-sale licenses, etc. Locals in Wuhan can buy three sets of properties, and foreigners can buy two sets, an increase of one each compared to before.
In mid-2022, in order to save the market, Wuhan has introduced many measures including but not limited to lower interest rates, lower down payment ratios, and lifting purchase restrictions. However, the real estate transaction volume in Wuhan will still fall by more than 40% in 2022.
According to statistics from CRIC and the Financial Associated Press, in 2022, more than 500 policies to stabilize the property market have been issued across the country, involving relaxation of purchase restrictions, loan restrictions, price restrictions, and sales restrictions, relaxation of provident fund loans, tax reduction and exemption, and housing purchase subsidies. But neither has stopped the property market’s continued downward trend.
Wang He said that China’s real estate industry has already had a hard landing. “The CCP still wants to save the real estate industry and relive the old dream. This is simply impossible.”
“The CCP still wants to regard real estate as a pillar industry, so it invests a lot of resources into the bottomless pit, which will exacerbate the difficulties of China’s economy. China’s local financial crisis will be even more serious.”
Wang He said that under such circumstances, China’s economy needs to undergo transformation and China’s real estate needs to undergo transformation, and the two become consistent, but there must be a very painful process. Moreover, history may not give the CCP this opportunity.
Impact China’s economy and multiple upstream and downstream industries
The real estate industry chain is very long, upstream to cement, steel and other building materials, downstream to decoration, home appliances, home furnishing, etc.
David Huang said that China’s real estate industry has been reduced to a difficult industry, which not only greatly reduces local fiscal revenue, but also has a more prominent impact on the entire economy. It will affect about 50 or 60 industries upstream and downstream, especially the investment industry.
“Generally speaking, the final result is that China’s troika loses momentum, consumption has no money to move, and now ordinary people have no extra funds. Exports are not too clear at the moment, except for Russia and South East Asian countries. In addition to a little more exports, there are more uncertainties for Europe and the United States.” David Huang said that if the real estate industry is relatively negative, it may also lead to systemic structural financial risks in some regions.
Responsible editor: Lin Congwen#