A number of recent events have further confirmed that the Shenzhen property market has entered winter. We have talked about the Shenzhen property market a few times before, mainly about the fact that Shenzhen is cracking down on business loans as well as capital and population outflows, resulting in a sluggish and very light property market in Shenzhen this year. And recently, there are two more things about the Shenzhen property market, which can be said to further confirm that the Shenzhen property market has entered the winter. This also means that the entire Chinese property market, which has been bucking the upward trend since last year, has entered winter. This is a window to understand the overall operation of China’s property market, very meaningful.
In the past, April in Shenzhen, usually a small positive spring market, but now the second-hand housing market in Shenzhen, not to mention the small positive spring, even the winter is not yet finished. According to the data of the Shenzhen Housing Association, the total number of second-hand house transactions in Shenzhen in April was only 4877, down 28% compared to March, the transaction data fell back to the data of February when the new policy was first released. Although the transaction data in March slightly rebounded, but 208 after the new policy the overall market is still penetrating cold. The whole market presents a picture of increasingly cold agency stores, increasing bargaining space for second-hand homes, and lower expectations for home prices ……
The new policy after the cold city market has basically set, so the next question is, how long will such a market last? If you follow past experience, the policy adjustment period is usually two months to three months, like the previous year after 715, the volume of transactions fell for three consecutive months, to November the volume began to climb again, indicating that the market has digested the new policy. However, this time, Shenzhen wants three months to jump out of the “New Deal quagmire” is afraid of no chance. Because, not yet beaten down the Shenzhen property market to stand up, two sets of combinations have been played up.
The first set of combinations, is a comprehensive siege on the purchasing power of Shenzhen. To put it bluntly, is to let these used to buy buy buy buying power to buy buy! We all know that after the regulation of the property market in Shenzhen, Shenzhen’s purchasing power will usually spill over to other products. The reason for this is very simple, the rich people to buy assets demand is objective, the number one target can not take, then of course, will go to choose a spare tire.
In today’s Shenzhen property market, there are three most popular spare parts: Lin Shen, small property rights and apartments. Among these three spare tires, two of them have started to make “adjustments” now.
The first is the “de-Shenzhenization movement” carried out by the cities near Shenzhen one after another. Dongguan is the earliest one, from last year onwards in the regulation policy, this year followed the Shenzhen 208 policy out of 227 policy, requires now foreign household population want to buy a house in Dongguan, must provide the purchase of the house before the date of 2 years in the city month by month continuous payment of more than 1 year of social security.
Next is Nansha, before Nansha’s talent purchase policy is very loose, to buy a house only need to get a talent who can get a certificate of talent can buy a house. Last month, Guangzhou’s talent policy home purchase tightened, Nansha requires talent to provide 12 consecutive months of continuous payment of personal tax or social security payment certificate in the district where the talent is identified, no retroactive payment. The Centaline property even the always uneventful Foshan also has a small action. There is news that late last month it was announced that new homes with a unit price of more than 18,000 were suspended from the net.
In addition, Zhuhai, Zhongshan, the city of these property market fire, to strengthen the wind of regulation and control is also incessant. The housing environment, who ventured who is the focus of care. Lin Shen property market action to Shenzhen has been on the table, just to see the implementation of the time sequence, the strength of the size of it.
The biggest crackdown is on the small property rights in Shenzhen. This time, Shenzhen’s small property rights remediation was firstly reported by CCTV to the world, and then Shenzhen quickly carried out the remediation with public opinion, which can be directly scored full marks. It is worth mentioning that since small property rights are not protected by law, the action is all administrative measures, and it is not negotiable to seize small property agency stores without talking nonsense or greeting. The administrative force is directly to rectify, in the short term, small property rights are completely cool.
This also means that, among the backups of Shenzhen real estate, the two are suppressed, the only safe backups are apartments. Recently, I saw that many second-hand agents who have no more commercial property business have started to sell apartments.
Just a few days ago, a condominium project in Shenzhen was selected by lottery, becoming the first condominium project in Shenzhen to be selected by lottery. The condominiums are all going to be balloted, so it is not necessary to describe too much how hot the remaining spare parts are. However, like small property rights, if the current fire continues, there is every possibility that apartments will be the next target of regulation. Shenzhen’s purchasing power options are becoming less and less available.
The second combo is the interest rate hike. Two days ago, the Shenzhen branch of China Construction Bank raised its mortgage rates to 5.1% for the first set and 5.6% for the second. The key is that this is only for Shenzhen, CCB does not operate this way in other cities. It may be a focused and precise strike on Shenzhen.
One of the four major banks CCB interest rates, other banks will basically follow, Shenzhen bank interest rates across the board up just a matter of time. The increase in interest rates, equivalent to the Shenzhen property market in the interest rate hike. From the national economic point of view, interest rate increases are usually aimed at economic overheating, the release of the signal is the economy will enter a tightening. And this time the Shenzhen property market interest rate hike, the release of the signal is also very direct: Shenzhen property market after the epidemic this wave of up cycle has ended, the property market has now entered the housing price decline cycle.
For this one signal, to be interpreted from the vertical and horizontal two perspectives. First is the vertical historical perspective. Before the epidemic, the last rising cycle of the Shenzhen property market was 2015-2016, and a typical feature of the regulation after that rise was that the regulation policy came first, followed by a wave of interest rate hikes. This regulation rhythm and now exactly the same. 2016, 315 new policy and 104 new policy successive introduction, 315 new policy period, Shenzhen property market by a few months after the impact and immediately recovered, house prices counter-trend rise, house prices control effect is not good, followed by the introduction of 104 new policy, house prices only began to fall sharply, the property market into the winter. This is very similar to the regulation process last year to now after the 715 new policy house prices do not fall but rise, until the 208 new policy after the property market to calm down. And after the regulation in 2016, followed by interest rate hikes. shenzhen raised interest rates once in september 2017, followed by another interest rate hike in march 2018. Before and after these two rate hikes, Shenzhen house prices have been slowly declining.
Regulation policy + interest rate hike = falling house prices, this is the formula given by past history. this wave of property market boom in Shenzhen since the epidemic in 2020 is mechanically the same as the property market boom after the stock market crash in 2015, both are the performance in the property market after the economic downturn and excess funds looking for a way out.
Since the performance of the rise is similar, the reaction of the banks after the interest rate increase will naturally not be very different. Now the downward pressure on housing prices in Shenzhen has been very large, after the stick of interest rate hike down, housing prices have fallen inevitably. And this interest rate hike is not only for Shenzhen, in terms of the whole China, is also in the window of policy contraction. Note that no base money such as MLF (spicy noodles) and SLF (hot and sour noodles) were issued in the whole month of April, and the interest rates of all blocks are rising.
From a horizontal perspective, the general trend of mortgage rates going up is a national trend. The national average mortgage rate for the first suite has continued to rise over the past four months. the average rate in April came in at 5.31%, already higher than last September’s rate of 5.24%. In the Greater Bay Area, mortgage rates in Zhuhai, Guangzhou, Foshan, Zhongshan and Foshan have been rising one after another in the past month. Right now, the first set of interest rates in the major cities of the Greater Bay Area are all above 5%, while Shenzhen is now averaging 4.9% in addition to the CCB, which has gone up.
The country is rising, other cities in the Bay Area are rising, the property market trendsetter city of Shenzhen mortgage rates do not rise really can not say. Follow the general tone of the national property market is the embodiment of the political station, the route of the problem is so, housing prices are so, in these issues, Shenzhen does not have the autonomy to decide.
Shenzhen property market after repeatedly hit hard, the subsequent market wants to completely slow over, I’m afraid not so fast, at least until the fourth quarter of this year, Shenzhen’s market to digest the new policy brought a series of impact. Before then, if you want to buy a house, the opportunity cost is very high, because now the home purchase quota and down payment funds are very valuable.
Even after the fourth quarter of this year, it does not mean that the future of the property market in Shenzhen will be full of blood. This also depends on whether the Federal Reserve monetary policy tightens and also whether China’s monetary policy returns to normal. Once the monetary policy of these two major countries tightened, China pinched the tap of new loans, the borrowing capacity of Chinese residents was exhausted, then the property market in Shenzhen may never be able to see the high point once. And the same is true for the entire Chinese property market.
The latest data now is that the U.S. CPI was 4.2% year-over-year in April, far exceeding the Federal Reserve’s estimate of 2% and growing at a new high since September 2008; the core CPI rose 3% year-over-year in April, the largest increase since January 1996. This means that the era of real inflationary spikes has arrived.
Inflation can be described as a negative feedback mechanism for the entire economic system. In the past so many years, starting with the subprime crisis in 2008, the central bank released water without consequences, because inflation simply did not rise, the result is to keep intensifying the release of water, as soon as the wind blows, the big release of water to solve the problem, so to speak, are addicted to drugs. Anyway, the rich-poor divide is a long-term problem, a moment will not be a big problem, and the result of continued water bailout is a surge in asset prices, inflation is not rising, the central banks are very cool, giving them the illusion that unlimited printing will not have inflation, so more reckless. This a capricious and lack of negative feedback constraints of the mechanism, not only no negative feedback, each time the release of water to bring the benefits, in fact, positive feedback reinforcing effect, necessarily a road to black.
The trend of Chinese real estate is almost in the gradual acceleration to catch the top. Once the future incremental funds can not support the rapid growth of prices, the final bubble is bound to burst. When the trend is upward, no suppression will work, no prediction will be wrong, and there will only be a permanent rise, a rise that no one can change. But the wolf always comes when people are already tired and no longer believe. Once the trend goes down, it is the same down that no one can change. This fate is predestined.
Housing is debt, and debt is housing. This is a reasonable framework for analyzing real estate and is the underlying logic of rising home prices. The incremental debt of residents is the most critical variable in determining the rise and fall of house prices. As with all financial markets, whether A-shares or U.S. stocks, cryptocurrencies, or the Chinese housing market, it is the incremental amount that determines the price.
There is still a strong wave of commodities before the Chinese housing market bubble is burst by inflation. If the Chinese housing moves, there will be a deep adjustment in the bulk. The most important sign of the middle house is new loans to residents. Once new residential loans continue to decline, don’t hesitate. Once you leave the fire, don’t look back.
In the future because of the bursting of the real estate bubble jumped, no one is innocent. The market doesn’t punish mistakes, but it punishes people who don’t know the risk-reward ratio. Everyone has to pay the price for their stupidity. All those who do not believe the real estate bubble will burst have to ask themselves: what if they are wrong? What are the consequences? What is the risk-reward ratio?
Those who think the bubble will burst, do not participate, and if they are wrong, they will at best miss out, a loss of opportunity. And people who think the bubble will never burst, betting their entire fortune, plus the rest of their lives, if they are wrong, it is the end of the world!
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