Chapter 47 9. The hand that pulls housing prices up and down

●In 2007, mainstream developers in China basically failed to withstand the temptation of land kings. ●Do we want to buy a house at this time? ●In the next year or so, the entire property market will definitely be in a shrinking period. ● It is impossible to predict housing prices, including some celebrities, they must be wrong, and no one is correct. ●There are real estate bubbles, but there are many middle and low-end real estate projects. Lang Xianping: This year, you can see that a large number of manufacturing companies have closed down. In particular, more than 30% of the manufacturing companies in Guangzhou have closed down, and the Shenzhen area is also very miserable.So please pay attention, this phenomenon of capital flow is very important, because this phenomenon of capital flow completely dominates the development of China's property market.I named this kind of fund virtual fund, because it is abnormal in itself, not because the society is getting richer and you want to live in a better house, but because of a certain industry, especially the manufacturing industry Or the mining industry has become more depressed because of the investment and business environment, and his money does not know what to do with it.So they don't continue to invest, you know what they do?It is a lot of real estate speculation, so wherever the money is spent, there will be bubbles.Then this phenomenon deserves our attention, and the money will first enter the high-end real estate market in this area, pulling up the price of high-end real estate, and making the nearby middle and low-end real estate rise accordingly, so this is different from our general understanding. of.We found that in Guangdong, or in other regions, there are really real estate bubbles, but there are more middle and low-end real estate. High-end real estate is relatively strong due to the large amount of manufacturing funds being introduced, which drives up housing prices. It still has funds to support it.And you see in 2008, the real estate prices falling basically is the low-end real estate fell first.And the real estate in Shenzhen is very interesting. It fell first from outside the customs, because in recent years, 70% of the houses were built outside the customs, and Shenzhen people don’t like to live outside the customs. Real estate prices have plummeted, so what about high-end real estate?Probably the house price is between 20,000 and 30,000 yuan, which is considered normal. If it exceeds, for example, Xiyuan will rise from 10,000 to 40,000 yuan per square meter, which is crazy. It will return to the range of 20,000 to 30,000 yuan, almost temporarily. Steady.Therefore, we can say that high-priced real estate has a very strange phenomenon. As you just said, the prices of high-priced real estate within the third ring road in Beijing are still firm, and there is no phenomenon of price reduction. , then this phenomenon is very strange and deserves our attention.

Li Yongtao (Deputy General Manager of China Real Estate News): The reason why low-end housing has been hit hard is because the country attaches great importance to housing security.Whether it is Shenzhen or Shanghai, almost all cities across the country have launched such plans.In the past, Hong Kong also promoted this kind of low-rent housing in large numbers, and it had a great impact on the market.What developers are most worried about now is not only the shortage of funds, but also the fact that the state has taken back part of the real estate market. Before 1998, most of the houses were built by raising funds. The state-owned enterprises built houses, the state built houses, and after the abolition of welfare housing distribution, the real estate market developed, and so many big developers made a lot of money. Then this If part of the market is deprived to some extent, it will hit the developers the hardest.

Lang Xianping: And this is why the Vanke phenomenon occurred. Before this stage comes, quickly sell at a lower price. Do you think there is such a possibility? Li Yongtao: Yes, there is such a possibility.Some time ago, there were some reports that several developers went to raise pigs.There are also some construction companies that are forced to change jobs because the developer owes him money. Lu Xinzhi: One thing I think can be judged, that is, in the next year or so, the entire property market will definitely be in a period of shrinkage, a period of downturn. At least the price will drop. It is not easy to say how much it will drop, but its transaction volume will definitely shrink. A wait-and-see sentiment may prevail.In this case, assuming you buy your first house and you are willing to keep the money for a year, it doesn’t really matter if you rent a house and wait for a year.But I think if it is someone with experience in financial management, or someone who has requirements for the quality of life, he can buy it first and put it away for a year, and the price will not be too far apart.

Li Yongtao: It is impossible to predict housing prices.Let's take a look at the predictions of some famous people. They are basically wrong, and no one is correct.People who gamble on housing prices are also very funny. He was right for a while, but he did not consider the impact of the US financial crisis, and he must be wrong next step.But just now Professor Lang mentioned a problem, the problem of pricing power. Now I want to add that the pricing is in a dilemma. The developers are very painful now. Why?On the one hand, there is definitely room for him to lower the price now, because the real estate he is selling now is the land of the previous two years, and the land price was very cheap at that time.In this case, he still has more than 20% of the profit, and it is no problem to lower the price. If the developer takes all the land with such a low price, he is now generally able to lower the price.But now the developer is in pain. In 2007, the mainstream developers in China basically failed to withstand the temptation, and they all took high-priced land.The price reduction space of his partly built house is very limited, so he is suffering here now, just like flour is more expensive than bread, how can he sell it when he uses expensive flour to make bread?

Lang Xianping: Let me tell you what is the determining factor of stock price and housing price. Many experts have already told you today.And I think I have told you very clearly what determines the housing price and what should determine its trend.But I won't tell you whether you should buy a house or not. You make your own decision. Everyone has their own position and different circumstances. When to exit the property market and when to buy a house is your personal decision, but I think My purpose is to tell you what the whole environment is like, and to provide a background for everyone to judge.

The audience also raised many questions about housing prices. I believe it will be very helpful to readers. I will list these questions and my answers for your reference. Audience: Hello, Professor Lang. Lang Xianping: Hello. Audience: You just talked about the issue of real estate. You said that the government should come out to rescue the market, but I think the current housing prices in China are still very high, so I think there is still a lot of room for downward adjustment of housing prices in the future, so I would like to ask, you When do you think the price will be lowered before the government needs to carry out a comprehensive rescue of the real estate market?

Lang Xianping: Frankly speaking, real estate in China today is no longer affordable for ordinary people. No matter how much it falls, I can tell you that most of the 1.3 billion people still cannot afford it.Those who cannot afford real estate are the majority of people, and there are probably only tens of millions of people who can really afford real estate, and these tens of millions of people are fooling around there.Even if our housing prices fall again, most people still cannot afford them.In other words, our real estate resources have been misled to high-end real estate. Although there are still mid-range and low-end real estate, the prices of mid-range real estate are still very high.Ordinary people cannot afford it, that is to say, there are still 12.3 billion people who cannot afford houses.

Audience: I know what you mean, but what if the government comes out to save the city? Lang Xianping: Let me make it clear again that after real estate developers saw the price of high-end real estate skyrocketing and at the same time drove up the price of low-end real estate, a lot of funds flowed into this market to build such houses to meet market demand. , but where does this need come from?from the depression in manufacturing.That is to say, the manufacturing industry has returned to glory. The funds from the manufacturing industry have entered high-end real estate, causing prices to soar, and at the same time driving the prices of mid- and low-end real estate.At the same time, our social resources are slowly flowing into this market, and the entire market is separated from the actual level of wealth of the 1.3 billion people. It is not because the 1.3 billion people become richer and everyone has money to buy a house, but It is because after the manufacturing industry failed, a large amount of manufacturing funds poured into special high-end real estate.As a result, housing prices have risen, attracting a lot of social resources to build such houses to meet this need, and this special real estate is out of touch with the needs of the general public.It is because it is a flashback of the manufacturing industry that a certain high-end market is particularly popular, not because the whole society is richer, and everyone has more money to buy houses.Some people will never be able to afford it, because our social resources have been misled, and it is useless to fall any further.

Audience: If the government bails out the city, won't it make it more disconnected from the people's ability to bear it? Lang Xianping: My so-called rescue of the market is not to save real estate prices, but to save the most primitive one. What is it called?It is called China's private economy. After it is saved, I will talk about an ideal state, that is, China's private manufacturing industry is richer, and the boss is richer. Give workers more money, and then workers earn more money. Have the ability to buy a house slowly.Therefore, the method I am talking about is called encircling Wei and saving Zhao. It is not to directly save the property market, but to save the manufacturing industry, which accounts for 70% of China's total economic output.Because the manufacturing industry employs 90% of the workers, I hope they will be richer and raise the wages of ordinary people at the grassroots level, and then a lot of our resources will slowly flow into this market to build some houses they can afford. We should do this.Instead of just saving the property market, directly saving the property market will only have a short-term effect. Only after the private economy, which accounts for 70% of China's total economic output, has been revived, can our real estate have hope.This is what it means, so this question is very important.It is very important to unravel this problem.

Audience: I have a question.Regarding real estate, I have a preliminary point of view, and I would like you to comment on it. I think it may be in 2009 or early 2010. It is difficult to say in other places. Beijing's housing prices will drop by about 40%. Why do you say that?The first one is that the purchasing power is basically at a standstill, and everyone is waiting and watching.In addition, the reason why the current real estate prices cannot go down is because the current developers have very high costs, the cost of buying land and the cost of construction are very high, and if they fall, they may lose money.Another possibility is that the government does not want to fall, but if we wait until the end of 2009 or early 2010, because the cost of land acquisition for new developments is quite low, it may be 50% lower than the highest point, and the construction cost is about 40%-50% lower. Then the developer's profit expectations will also be lowered, so the overall calculation, I estimate that it will drop by about 40%.According to the pure market situation, it may fall even lower, about 50%, but why not 50%?Because the government may take action, according to the previous purchase situation, the down payment of the buyer generally only pays 30%, that is, his cost is 30%.Plus some other fees, at least 40%. If it falls to 40%, there may be a supply cut. If the supply is cut off, it will affect the safety of the bank. I think it is impossible for the government to let it fall to 40%. I fell, I don't know if Professor Lang agrees with my point of view.

Lang Xianping: You said that this phenomenon will happen by the end of 2009, or by 2010.I want to remind you a word, that is, assuming that these real estate developers are all present, alive, and living well, so after he sells the house, the land acquisition price is very low in 2009, and then the prices of various raw materials It is also very low. The price of the house he built should be very cheap. According to this inference, there is no problem with this conclusion.But I would like to ask you to pay attention to one thing, that is, under this round of crisis, you must know that a large amount of our social resources have been invested in the real estate industry through the operation of real estate developers, and this is an industry with special needs. I want to tell you that it relies on the special distorted price mechanism of high-end real estate to drive low-end real estate, which attracts a lot of resources to invest in it.Therefore, 1.3 billion people basically cannot afford it.Your assumption is that in a good development situation, when housing prices are low, land prices are low, and costs are low, real estate prices will drop, and a group of people will gradually have the opportunity to buy them.Let me ask you again, the real estate developers who have been locked up so much, what will happen if their capital chain is broken by the end of 2009? Audience: Now if you follow the market demand, you have no purchasing power? Lang Xianping: Now there is no purchasing power, and now most real estate developers have no ability to develop new real estate.Because the funds are almost locked up, I doubt that real estate developers will have the ability to develop new buildings. At the same time, you must know that 2009 is a very difficult year, and the profit level of the entire society will be greatly reduced. Under the situation of falling, falling sharply, I doubt whether anyone will develop new real estate. Audience: At this time, because there are fewer people buying land, the land price is very low, and some real estate developers are still doing it. They are also developing new buildings, and some developers believe that the real estate industry in 2009 or early 2010 It is possible to recover, but I don't know the exact time point. Lang Xianping: They are too optimistic. Audience: Here's what they think. Lang Xianping: I told them during the speech, you must not take land now. What is the biggest crisis of the financial crisis?It is not the financial crisis itself, but everyone's understanding of the crisis is not in place.Everyone sees things too simply.To put it simply, for example, you buy a land with a low price, and then you build some cheap houses in the end. This is a very good wish.But let me tell you, when you go to buy, if the economy continues to deteriorate, you will find that the demand for real estate will also continue to decrease. Without demand, it is difficult for this real estate company to survive. This is why Li Ka-shing retained A lot of energy, stopped all investments, and kept 22.1 billion US dollars in cash, what is the purpose?Just getting ready for this winter.So at this moment, the acquisition of the land itself, I think, is open to discussion, and the risk is too great.And I think this logic is so beautiful that there are no problems, but such a rigorous inference with no problems will inevitably cause problems in the end, that is to say, after the Chinese economy continues to deteriorate, the capital chain may be broken. Audience: Li Ka-shing was mentioned just now, but Li Ka-shing always invests in land in times of crisis. Lang Xianping: That was in the past, and it is gone this time.This time he stopped all investments, because it was a small and medium depression in the past, but this time it is the Great Depression, which is different.So why remind you, you have to tell your friends.According to what Professor Lang said, it is best for everyone to save more cash at this time. Don't rush to buy land at this time, and don't have too many fantasies, because they have never experienced it.If Li Ka-shing stops, they'd better think about it. When major Western banks such as Citigroup and AIG were about to apply for bankruptcy protection or provide financial assistance again, the second wave of the financial crisis loomed.When will the current financial crisis bottom out?How will it evolve?Where is our world headed?What choice should we make for ourselves? When the economy is in a recession, most businesses will naturally change their corporate goals from "maximizing profits" to "minimizing debt", and while they stop borrowing, they will invest all the cash flow that the business can use into debt repayment, leaving no stone unturned It is hoped that it will get out of the quagmire of technical bankruptcy as soon as possible.This massive shift in corporate “debt minimization” models ultimately creates a fallacy of composition, where banks are unable to find lenders even though they would like to continue lending. During a balance sheet recession, the effectiveness of the monetary policy tools advocated by today's academic circles is doubtful, and it is the government-led fiscal policy tools that are really effective.The economic cycle can be visually divided into two phases of "yin and yang".When the economic cycle is in the "positive" stage, the economic situation falls within the scope covered by traditional mainstream economics, the company's balance sheet is sound, profit maximization is the operating goal, interest rates are normal, and there is a tendency for inflation.At this time, the government can effectively use monetary policy tools to regulate the economy, while fiscal policy tools should be avoided as much as possible because of crowding out. In the economic recession induced by the bursting of the asset price bubble, when the economic cycle is in the "negative" stage, the balance sheet of the enterprise is out of balance, and the phenomenon of insolvency occurs, and the enterprise turns to the debt minimization mode on a large scale, which leads to the fallacy of composition and the economic downturn. dragged into a balance sheet recession.At this time, interest rates have dropped to extremely low points, deflation has occurred, and monetary policy has completely failed. The government must boldly use fiscal policy tools to stimulate economic recovery. (This article is excerpted from "The Great Recession: How to Survive and Thrive in the Financial Crisis" by Koo Chaoming)