Chapter 8 Chapter 7 Real Estate: Chinese Economics of Happiness

The one-off housing price reduction caused by the property tax is conducive to the purchase of houses by low- and middle-income consumers.You mentioned earlier that the introduction of property tax is of great significance to solve the problems of speculation in the real estate market and the inability of middle- and low-income consumers to afford housing, and to maintain the stability of the macro economy, especially the stability of the financial system.Recently, a new round of debate has started on the issue of property tax.Can you use this as a basis to talk about the deep problems of China's real estate in a comprehensive and systematic way?

Bai Chongen: I have talked about the positive factors of property tax many times, but there are still some disputes.First of all, the one-time reduction in housing prices caused by the property tax is conducive to the purchase of houses by low- and middle-income consumers.Secondly, under normal circumstances, the future property tax amount is positively related to consumers' ability to pay at that time, so consumers should not be a problem paying property taxes—when the economy is good, real estate prices will be higher.When the tax rate remains unchanged, the property tax amount is relatively high, and the income and payment ability of consumers also increase accordingly; when the economic situation is poor, although the consumer's ability to pay is low, the house price will not be too high due to the poor economy. Therefore, the property tax amount is also reduced accordingly.Combining these two factors, the implementation of property tax benefits low- and middle-income consumers.As low- and middle-income consumers' ability to buy houses increases, real estate developers will shift their attention to providing them with self-housing. The direct competition of low- and middle-income consumers and the diversion of developers' attention are not good for real estate speculators.

Finally, even if real estate prices rise sharply in the future, property taxes will also rise sharply, and speculators' speculative profits will be suppressed.When middle and low-income consumers increase their purchases of self-occupied houses and their speculative purchases relatively decrease, the stability of the real estate market and the macro economy will increase accordingly.Firstly, the vacancy rate of real estate will decrease, and an excessively high vacancy rate is an important factor affecting the stability of the real estate market; secondly, consumer demand for self-housing is relatively stable, while speculative demand is affected by many external factors (such as overseas speculation investors' expectations of the exchange rate) and fluctuate widely.Moreover, changes in the payment patterns of real estate consumers brought about by property taxes will also contribute to the stability of the financial system.The direct effect of the property tax is to change the consumer's payment from a very high one-time payment to a lower one-time payment plus multiple smaller payments in the future.If a consumer takes out a loan from a bank, the property tax shifts the consumer's payment from a higher monthly mortgage payment to a lower monthly mortgage payment plus property taxes.Under the latter payment method, consumers are less likely to face payment difficulties, thereby reducing the likelihood of consumers defaulting on or stopping mortgage payments and reducing financial system instability.The promotion of property tax has several difficulties.

For example, what kind of people should be exempted and how should they be exempted?A retired old employee, the company gave him a house, bought it for tens of thousands of yuan at the time, and now it has appreciated to more than 1 million yuan. How do you ask him to pay taxes?How to draw a line?Furthermore, different local governments have different attitudes. For example, there is not much land in Zhejiang. Anyway, the land transfer fee is gone. Of course, they hope to collect taxes.In some places, the land transfer fee has not yet been collected. After you collect the property tax, the land transfer fee will start to be affected.How to balance the interests of local governments?Regarding the first question, I envisage that we can start from the incremental, put the stock on hold first, and start to collect taxes from the newly developed houses. In this way, consumers will also have anticipation.Here, the stock of second-hand housing is still not taxed, otherwise it will affect the transaction of second-hand housing.Of course, local governments do not necessarily welcome this policy.

If taxes are imposed on new house prices, the price of new houses will drop, and developers will not be willing to buy land, and local finances will suffer.Some time ago, the local government could not approve the land at all.If the property tax is introduced, the fiscal revenue will be a little bit, but the "Xiaoyangchun" in the first quarter of 2009 has excited the local government again, and the property tax can be said to be difficult.In response to this contradiction, the policy can open a hole, that is, allow local governments to issue bonds with property tax as collateral, and use part of the future property tax revenue for current use to compensate local governments for potential losses.But even so, some people objected: How can the government use tomorrow's money today?In fact, the situation of land transfer fees is already like this.Just imagine that the bond size can be limited, but the land transfer fee cannot be limited, because bond investors will consider, what is the repayment ability of future property taxes?The government will naturally limit the size of bonds, if the size is too large, there will be no market.I think this is a more feasible solution.

When discussing housing prices, it is necessary to prevent public opinion from confusing long-term and short-term issues.The discussion on the real estate market is the field with the most problems and the most difficult to unify in the current macroeconomic field.In view of this, in order to choose the correct regulatory policy in the long run, we must first theoretically clarify the specious views that often appear in the discussion from a macro perspective.Based on the correct understanding after clarification, it can be said that the long-term policy tendency to regulate the housing market should have been clear and simple.

Xia Bin: One is the long-term and short-term problems of housing prices.The media often compare the housing prices in Shanghai and Beijing with those in Hong Kong, and believe that housing prices in China will continue to rise.Indeed, if one is optimistic about the prospect of China's sustained high economic growth and that its economic aggregate will approach that of the United States and China's per capita income in another 20 years; It is a historical inevitability that big cities like Shanghai will be more prosperous.Due to limited land resources, in the long run, housing prices will show an upward trend.However, it should also be noted that due to the adjustment of the economic cycle, because the current real estate market is not yet mature, the policy still needs to be continuously improved, because of the aging population, the factors that urban single-child families inherit more and more real estate from both parents, or the emergence of macroeconomic policies. Adjustment factors after major mistakes, etc.

Due to many uncertainties, it is determined that in a certain historical period, house prices may not necessarily rise, but may fall, or the rising trend is not at all what people expect now.Therefore, investing in the real estate market, especially borrowing money to invest, may suffer serious losses, or even go bankrupt.Therefore, when discussing housing prices, we must prevent public opinion from confusing long-term and short-term issues.The second is the issue of people's livelihood and the market.After exploring the macro-control policies of the real estate market in recent years, people have become more and more aware that the housing issue is not only a market issue, but also an issue of people's livelihood and social politics.To regulate the housing market, first of all, it is necessary to basically guarantee that every citizen has the minimum right of residence, and it is necessary to guarantee some low-income families in the form of non-market low-rent housing.Under this premise, we can talk about market-oriented regulation of all housing except low-rent housing from the perspective of balance among macroeconomic variables.Therefore, based on the characteristics that China's per capita income level is still at a relatively low stage, and that the improvement of national welfare is a gradual process, in regulation, as long as the basic balance of the macro economy is ensured, even in the face of residents' improved housing and other The rise of housing prices and the guidance of public opinion cannot allow residents to buy improved housing and college students can buy houses with mortgages within a few years of graduation, with higher expectations.

Similarly, in the regulation and control, there is no need to panic in the face of the decline of improved housing and other housing prices, and market laws should take effect as much as possible.Because as long as the macro-economy maintains a basic balance, a relatively large rise or fall in housing prices in the short term does not mean that there is a problem with macro-control. What needs to be studied and solved may be a problem with other policy systems in an immature real estate market.Only by distinguishing the relationship between people's livelihood and the market can macro-control have the initiative and space.The third is the issue of pillar industries and virtual assets.There is no doubt that the real estate market has become an important pillar industry in our country.Nevertheless, we should also admit that in current China, buying a house can be used as both consumption and investment, which is also a reality.Therefore, if the policy is not properly guided and housing prices are expected to rise rapidly, the investment and speculative factors of buying a house are often greater than the consumption factors, and the characteristics of virtual assets will be prominent.In real life, pillar industry factors and virtual asset factors are mixed and exist at the same time.The virtual asset factor is often the interference factor of excessive fluctuations in the macroeconomic cycle.

Therefore, based on the long-term policy thinking of macro-control, first, we should try our best to eliminate the negative impact of virtual asset factors in the real estate market on macroeconomic cycle fluctuations; When it comes to pillar industries, we should not adopt policies to compress and limit their rapid development for a certain period of time.Therefore, for a pillar industry, the trade-off between growth and price balance should also be considered under the premise of maintaining a balance in the macroeconomic aggregate.Especially in the current situation of excessive liquidity and upward pressure on asset prices, and when many systems in the real estate market are not perfect, and policies to regulate the real estate market are still in the exploratory stage, more attention should be paid to the negative impact of its virtual asset factors on the macro economy .In this regard, China should learn from the experience and lessons of other countries in the world in developing the real estate market.Where the real estate market is regarded as a consumer market, a country's economic cycle fluctuations are relatively small, such as Germany and France.Where the real estate market is used as an investment market, a country's economic cycle fluctuates relatively large, such as the United States, Japan, and Spain.Based on this reality, the "17th National Congress" document proposed to increase the property income of ordinary people, and should encourage ordinary people to obtain more property income (capital return) from investing in the real economy, instead of encouraging ordinary people to obtain instability from investing in the virtual asset market. property income (depending on the rise in asset prices).The fourth is the issue of intertemporal consumption and credit expansion.

After the US financial crisis, more and more people have seen clearly that one of the problems of China's unsustainable economic development is the structural problem.The outstanding performance that concentratedly reflects many structural problems is the structural problem of "high savings and low consumption".Therefore, expanding consumption is the core content of today's macroeconomic policy adjustments.Proceeding from this, encouraging residents to use financial functions for intertemporal consumption is the meaning of the question.However, should there be a "degree" for intertemporal consumption? Where is the "degree"?This must also be considered from the perspective of the balance between the growth of residents' disposable income and the stable development of the macro economy.Compared with the continuous and rapid rise of housing prices, if the growth of residents’ disposable income is slow, the macroeconomic cycle fluctuates greatly at this time and there are frequent adjustments in interest rates. Loans with low original mortgage interest rates or loans with low down payment ratios, There may be a loan repayment risk, or a macro risk of credit inflation.Therefore, starting from the balanced growth of the macro economy, it is necessary to have a "degree" control over intertemporal consumption.It is necessary to allow intertemporal consumption and prevent excessive credit expansion.In this regard, the US financial crisis has provided a typical negative lesson.The last is the medium and long-term principle. Based on the above four points of macroscopic thinking, in the face of a series of policies in China's current housing market regulation, it is difficult to correct and adjust some policies in the short term; but in the medium and long term, the principles that must be unswervingly adhered to are: First, there must be a clear distinction between policies on people's livelihood and market issues, and there should be no ambiguity.Second, we must use taxation, financial and other means to weaken the virtual asset market factors in the real estate market.Third, as long as it involves financial amplification functions, certain regulatory restrictions must be adhered to.At the same time, the current public opinion that financial policy determines whether real estate is hot or cold is incorrect and dangerous, and should be guided correctly.When using financial functions to support real estate enterprises in intertemporal production and residents in intertemporal consumption, we should not only look at the role of investment and consumption in the sense of the real economy, but ignore their macro risks. The financial policy, one of the real estate market regulation policies, must be placed in the most basic long-term considerations of economic growth and prices, economic growth and credit supply, and balance of international payments.In short, as long as the people's livelihood problems in the real estate market are well resolved, and the real estate market is subject to a certain risk control system based on the consumer goods market, China's real estate market will naturally show a trend of stable development, and the government's macro-control will not be affected by excessive fluctuations in the real estate market. Bring trouble and passivity.Right now, the above-mentioned policy adjustments may affect the real estate industry and thus investment.In this regard, the adjustment strategy can be adopted: first, adhere to the principle of gradual change, easy before difficult, and gradual convergence; second, maintain a clear understanding, and never adopt a simple policy of drinking doves to quench thirst for the problem of short-term investment decline, and will not accommodate From a long-term perspective, institutional issues should be resolved early.Reforms should be passed as soon as possible to make up for it by improving other aspects of macroeconomic policies and investment and consumption policies.