The silver lining there is this is the third month in a row where we see a deceleration of the price decline.
More fundamentally is the economic growth on the investment side.
Now with more of the silver lining we expect more signsides from the policy makers.
That means if the stock market goes up by a very large extent next year, they might generate a lot of positive impact to the property market.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to the chat lounge I'm Tuyin joining me to discuss the recovery of China's housing market are Dr.
Yat Liang Professor of Economics, Wulamich University, the United States, Professor Liu Wau -cheung, Director of International Business Ethics, University of International Business and Economics Beijing and Chen Jiahe, Chief Investment Officer of Beijing based November Market Technologies.
It's great to have you all back at the chat.
So China's housing market has shown some signs of positive momentum as many major cities reported rising home prices and transaction volumes.
Let's first take a look at the data.
According to the latest figures from the National Bureau of Statistics, among the 70 large and medium sized cities regularly under survey, 17 saw an increase in selling prices for newly built residential homes in November.
That's 10 cities more than in October.
And additionally, 10 cities reported a rise in secondhand residential prices, two more than in October.
And before we dive deeper into this issue, please allow me to share some personal observation.
I was checking the WeChat moments of a real estate agent friend of mine that day and found during the two months from October to November, he clinched 17 deals, which means he sold flat every three and half days on average over the period of 61 days.
But during the 61 days from August to September, he only sold four flats and in September alone only one flat.
So it seems the housing market in Beijing is recovering.
Do you share similar observations in Beijing or other cities?
Shall we start with the Baoqing and Jiahe here in China, maybe Baoqing first.
Well, if you look at the real estate climate index, which is a strong indicator based on 2012, the picture does not really show a very strong optimism, although there has been silver lining over the last three months.
The indicators show that in 2021, it was 95 .4.
But from January to November this year, it has dropped to 92 .62.
So again, when you really refer to the housing market, only one spot which shows silver lining is the sales.
But the rest with regard to the expansion of construction, with the rate of completion and even with the availability of funds to developers, they are not really increasing.
So much of the sales takes place with the existing homes instead of the new buildings.
And this is driven by primarily the government policy to release some of the restrictions and also by providing more of the subsidies on the purchasing end.
But of course, a larger picture is that there has been pent up demand either for the first time buyer or for those who really want to improve their living conditions.
So this is there, particularly in considering the strong regional integration program, more of the rural residents are buying homes in the city.
So I should say that the general picture does not show a very strong optimism.
But the last three months performance only in terms of sales are showing positive signs.
So we'd be happy about it or should we be you know, or obviously, you know, we have to proceed with a quotient optimism.
So I think the optimism lies in that there is more liquidity due to the quantitative easing to the market.
And also, there is further consolidation on the real estate developers because of the white list is being there to provide more confidence to those buyers because many buyers got their fingers burned due to the late delivery on even default from the real estate developers.
And so it is expected that the market is going to be stabilized and more confidence will have to recover.
But on a gradual basis, on the consumption side, and then the contribution rate to GDP growth will be slower to show its effect because the much of the sales takes place in existing homes and the pre purchased ones.
So if we really wanted to see even a better picture, more of the say the loans can really increase in the developers to build new homes or new office buildings.
OK, well, we'll have more on how to create a better prospect later on.
But to Jiahua, you've been traveling around the country.
What's your observation then?
Well, currently, when we look at the property market, if you look all over China, it's actually quite different.
I mean, you look at different cities, you've got different ranges of rental yield.
But the highest amount of rental yield in some smaller cities, which is about 3%, I mean, especially if you go to places in the middle of China, for example, Changsha and cities like these, you find the rental yield would be pretty high.
So that means the property market is stabilizing in these places, because if you got like 2 .5 or 3 % rental yield, especially when you consider that China doesn't have property tax, it's not like United States, you have to pay a certain part of the value of your property every year to the local government
for the property tax.
China doesn't have that.
So that means a 2 .5 % rental yield to 3 % rental yield in China means about 3 .5 % to 4 .5 % in the United States, because you have to press that property tax back in.
So for cities with a rental yield that's around or even above 3%, that actually means the property market is stabilizing.
Even if it drops in the future, it does have the fundamental to support that.
But also in some other cities, we can see the rental yield is still pretty low, it's even lower than 2%, somewhere that's 1 .5%.
That's a pretty high valuation if we talk about property price, because a lower rental yield means that the price compared with the rent is actually pretty expensive.
And if you look at the recent market movement, we can see that there are much more buyers in many cities compared with a few months ago, basically because the government has been given a huge amount of policies to support the property market.
We can see the cutting down of the down payment ratio from previously, if you buy the second home, it can be as high as 60 to 70%.
So if you buy a house saying you cost something like a million, you have to put a down payment of about 0 .6 or 0 .7 million yen into it.
But now the down payment ratio is dropped to as low as 15%.
So that's a really large job.
And you can see a very large job with mortgage rate as well.
So that means monthly mortgage repayment is actually reduced.
Also, we can see the government is providing this so -called whitelist for the property developers, they give certain financial support to property developing companies.
So you can see with all these matters, currently, we are seeing there is much more trading volume compared with a few months ago, say half an year ago.
And if you want to sell a property right now, it's actually much easier.
I've got friends who've been selling houses recently, they said it's actually much easier than before.
And a lower price, or?
The price is not actually increasing.
We didn't see a price increasing.
But the price seems like stabilizing in if you look at a month to month basis, but it's not increasing.
I mean, there are people who are trying to sell the property and currently more buyers.
So it looks like the market is reaching a balance when we talk about price right now.
And the trading volume is actually increased.
Because with this price, you get much more buyers because of these policies.
In some small case, smaller cases, you might see a price increase as well, especially when we talk about those places that you have a pretty high rental yield.
I mean, for example, you've got a rental yield as 3%, and in some smaller cities especially, I mean, this usually exists in middle or smaller cities, you got 3 % rental yield.
And people will say, okay, if I deposit money in the bank currently, you get about 2 % interest rate, or even lower than that.
If I put it into stock market, then I face volatility.
Maybe I would get more money, but it is too volatile.
If I rent a house, I have to spend this much rent every single year.
And if I buy it, it cost me only about 30 times of my annual rent.
So why not just buy a house?
So especially when we talk about places with higher rental yield.
In some cases, we see a small range of pricing increase.
Right. And to, Jan, I remember half a year ago when we were talking about this issue, you were actually concerned about the home selling or purchase issue of your younger brother.
And what's your first response to the latest figures from the National Bureau of Statistics?
Were you, to any extent, surprised that the new data, given the top policymakers set the tone, actually, of promoting the real estate market in only in late September?
I so, well, first of all, I don't think I'm surprised.
But also, I think we need to be careful how to interpret, you know, the policymakers intention.
So I think this idea of promoting the real estate market doesn't mean that we're going to go back to the old model, right?
Over leveraged, over invested real estate market.
I think what policymakers really mean here is that we want to stabilize the housing market, which we know it has been in, you know, three, four years of a slum.
You know, it's very clear that the real estate market, it's very important for the broader economy, not only because it contributes a lot to investments, fixed -access investments.
But it's also very important tied to the demand side, you know, households wealth, 70 % is tied to the real estate market.
So without that positive wealth effect, it's going to dampen consumption demand.
So I think that's the policy intention is we wanted to stabilize the housing market and enhance, you know, the sluice of policies that started to put in place, you know, as of September this year.
So I don't think we're going to go back to where we were.
And I think, you know, again, this is not a policy intention.
We have seen the cells of the, you know, floor areas, for example, where or the cells in the real estate market in general, right?
It has gone down from the 18 trillion, then back in 2021 to now about 9 trillion.
So I think the idea is that we wanted to reduce the kind of downward pressure on the property market, but not really going back to where it was.
And I wanted to also echo what, you know, others have said, I do think that there is some civil lining.
When, you know, when we talk about the real estate market of the property market in China, we're not talking about one market, we're talking about many different markets in many different tiers of CDs.
And when you look at the most recent data in November, when it comes to floor cells for the first tier CDs, or what they call them the 30 key CDs, the cells of new homes actually gone up by 12 .4 % month over month and 20 % year over year.
And also, when you look at the secondhand housing transaction in the 20 key CDs, that has also got out by 26 % year over year.
So in terms of, you know, the major CDs, they're actually seeing some, I think, growth in the transactions.
And also in terms of the home prices, I think, again, it's not surprising in the first tier CDs, we have seen new home prices actually increased, you know, at 0 .69 % month over month.
And also in second tier CDs, we're seeing new home prices actually increase.
But of course, when you look at the broader picture, when you're taking into account the 70 CD property price, the new home prices still, you know, fallen by 0 .2 % month over month.
But again, the civil lining there is this is a third month in a row, where we see a deceleration of the price decline.
So I think that gives some hope that, you know, we're going to continue to see the price to decline, but continue at a slower and slower pace.
And I think many of the forecasters, including Goldman Sachs, ING and S &P, they're seeing the bottoming out at the end at the later part of 2025.
So we're not quite out of the woods yet.
So I think we're too early to say recovery of the housing market or bottom out.
But I think, you know, we're on track of that.
And so hopefully by late, you know, next year, we're going to start to see that inflection point and start to see the recovery of the housing market.
It's an encouraging beginning, right?
Yeah, yeah. Right. And Baojung just mentioned, those purchases maybe mainly have this pent -up demand.
Yan, do you see it similarly, or do you see any speculators entering the market at this moment right away?
Well, I think that's a great question, because we know that in some of the major cities like Guangzhou, you know, the housing purchase restrictions were completely removed.
So I wouldn't be surprised that, you know, there are definitely immigrant workers and some other, you know, previously couldn't purchase house single individuals and so on and so forth would start buying houses.
But I think, you know, it's also too early to tell if speculators start coming to the market and, you know, buy up homes.
Although I think, again, for speculators, they probably are not thinking that the housing price has been already bothering now.
So as a speculator, it might not be still a great timing at this point.
But I do think whether or not the housing market is going to recover and all that really still depend a lot on policy, you know, because we know, you know, the government seemed to be sort of determined at this point to support the housing market even more.
Right. We have seen some really major improvements in terms of, for example, whitelist.
They have increased funding from the previous two trillion to now four trillion yen support to some of the whitelist as developers to help to relieve their, you know, liquidity constraints.
The central bank also had the three hundred billion yen facilities for local governments to buy up houses.
And I think it's very interesting when you think about the central work economic conference that talked about the unconventional monetary policy.
So to me, it could mean, you know, something even more forceful measures when it comes to setting up lending facilities and also setting up the real kind of QE, right, purchases of real estate developers bonds and swap them out.
So I think, again, it really depends on the policy moves next year and see if that really helps to stabilize the housing market.
When you say unconventional measures, what you're thinking about, like trying to expand the liquidity on the market or more land supply or things like that?
Well, I think that is really depending on, you know, different localities, right.
This is more of a fiscal and also local government decision than a general sort of monetary authorities decision.
But I think it's interesting when you think about unconventional because, you know, the triple R cuts or interest rate cuts, the central bank has been doing this, right, that they have been cutting, you know, triple Rs and they have been cutting various interest rates.
So those are not really unconventional.
But I think the more unconventional was, you know, after September this year, they set up these two facilities to support the stock market, you know, allow the companies to buy better stocks and also allow some of the financial institutions to invest in the stock market.
So in a way sort of normalize this idea that the national team is going to be able to get the, you know, lending facilities and to be able to really help to support the stock market.
And also for the housing market, as we just mentioned, you know, the whitelisted and also the lending facilities to purchase houses at the local government level.
So to me, the unconventional could be a stronger measure to set up these lending facilities to support the stock market and the housing market specifically.
So in other words to me, it's not a general increase in liquidity in the market, but more targeted liquidity expansion to support a specific market and sectors.
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Welcome back to the chat lounge.
We continue our chant on the recovery of China's embattled housing market.
Right. Yan just mentioned some lending facilities and back to those traditional supporting measures, you all mentioned the government supports including cutting mortgage rates, minimum down payments, and also loosening purchasing restrictions, also tax incentives to lower the cost of housing transactions.
Then which of these measures or policies are most convincing to the purchasers, you know, to trigger the purchasing, I should say, trend or a new trend to about China?
It is most of the credit to the relaxation of restrictions.
And you see the divorce rate has been on a decline, because over the previous restrictions, the individual homes could only own no more than two.
So therefore, the couples choose to divorce, and even among my neighbors, simply to buy more homes, and now the restrictions are removed.
As for the lowering of the mortgage rate, the effect is really not to be exaggerated in that because people, you know, particularly buying so big ticket items like house, they have a very strong rational calculation.
It's like you'll pay less at the beginning, but eventually you're going to pay the total sum, given the housing price has not really significantly declined.
And the other issue is that some of the third tier cities, as a matter of fact, that people wanted to live a more comfortable and cozy life without much of the hassles in those first tier cities, and even people in the first cities would go to the third tier cities with good climate was living amenities,
and to purchase homes.
So that I think that's also a very much a rising phenomenon among people like, you know, people purchase homes in Zhenjiang, in Zhangzhou, or in some parts of Hainan Province, and in Yichang of Sichuan Province.
So this is really a encouraging sign.
And as for the new developments, I do not really see much of it because if you look at the data over the past 11 months for the new reliefs, the land for realistic construction, it is still down by 23%.
And for the funds that's available is still down 18%.
And also for the total sales on a national basis, it's still down by 19 .2%.
So this is not really a very strong picture.
And also, it is not really the government intention anymore to have more of the fiscal revenues of local governments to derive from the sales of land.
And so more of the long term debt is there to give them further injection into their fiscal package.
So whether those cities are going to see different picture by having differentiated policies, so that's much to them.
And the matter of fact, you see that there are a number of cities who are also having more robot sales.
It pretty much depends on their differentiated policies to support such sort of purchase.
Right, then which specific policy do you think the government can maybe use, you know, it's already taken some effect, but maybe it can be strengthened there for a stronger recovery in the future.
Oh, I think the government have to accept the fact that the housing market is a market less intervention.
And also there's more commitment and there's also a strong need for trust building among those home buyers.
And then they need to reinterpret their slogan, the home is for living, not for speculation, how to define speculation.
If, as we mentioned, in the rental market, if we buy a house by actual houses simply for rental purposes, is that a matter of speculation?
So the is the third round or fourth round of sales over one home part of a speculation.
So I think this is pretty much has to do with many other sectors.
So there needs to be confidence that's to be injected among those investors.
So the we can see that over the past few years, particularly during the COVID, much of the money has gone abroad.
The big money was there to buy homes in, well, on speculative purposes in Cambodia, in Vietnam, and the rise of the real estate market in Singapore by calculation is attributed to 43 % by the monies injected from China.
So when there is more confidence that's being built up, hopefully, some of the money can really come back.
And also you see that in terms of development funds, the foreign investment here has been very much cautious, because there has been a significant drop by nearly 30 % of foreign investment in the Chinese real estate market.
So I think, wait until the situation gets more stabilized.
And there's more optimistic signals that's being sent, because investors are very savvy and agile to opportunities.
At the moment, I could see that many of those big investors are holding the money and keep a close watch.
And you know, when the situation gets more convincing, they will come back.
And then the market can really show a better picture.
Right. We want some investors from outside, but not speculators, but talking about investment, let's zoom into some specific cities, Bao Zhong just mentioned Zhanjiang and also according to the national bureaus of statistics, the cities of Hangzhou and Zhanjiang led the country with a nearly 1 % increase
in home prices, surpassing Shanghai, which had previously topped the list.
So what do you think people are seeing in Hangzhou and Zhanjiang then?
Well, I'm not too sure about the property markets in these two particular places.
I haven't been to Hangzhou myself.
So if you look at the markets, you have to look at a few things, especially when we talk about a city.
The first is that how much is the rental yield?
That's a very critical matter that you have to check out the local rental yield.
How much percentage that is.
For example, I've been looking at Changshan very specifically, they've got a rental yield that's about 3%.
So that's something I think is really healthy over there.
And when you talk about cities like Hangzhou, I haven't been there myself.
The second is that you have to look at the local economy and the democratic issue.
Are there people flowing into the city?
How is the local economy going on?
That's a very good news for Hangzhou because what I know is Hangzhou is a place fulfilled with large tech companies.
And you can see that tech companies are coming back to be more vivid compared with last year.
You can see there has been a lot of actions taken by Alibaba, which is headquartered in Hangzhou in recent months.
There has been a lot of actions that they took recently compared with what the we're doing about 12 months ago.
So that means people get more money if your local economy is strong.
And also you have to look at how many people are actually moving into the city or outside of the city.
So with this into consideration, if you look at the northeastern provinces, the reason that the property market has been really soft for quite a long period of time is because they have a population moving outside of this region, mainly to the southern provinces.
The places that they are actually going into is the Hainan province.
You see, there is a lot of people in Hainan coming from the northeast of China.
And the property market in Hainan never got some headwind in the past few years, even when the overall property market in China has been coming downward in the past 34 years.
But the Hainan's property market has been relatively stable, actually pretty stable.
They even got some restrictions for buying even at this moment.
And that's because they got an inflow of their population every single year.
They also got some unfinished buildings, I think a lot of their, especially in Sanyal.
Well, currently in Hainan province, they are still remaining the restrictions.
That's a very unique picture in China, because currently most of China's cities has removed the restriction on buying.
You can just buy a house as much as you want because the market is so cold, especially back half a year ago.
They don't even oversupply some problems?
I have lived in Sanyal for about a year.
So I know that market really, really well.
I have walked into almost every property site in Sanyal city.
So I think I'm a really expert with Sanyal.
If you talk about Sanyal, it's that they are not oversupplying.
Well, they have some properties building up right now, but the selling in Sanyal is actually pretty okay.
Especially, you have to know that Sanyal is currently still having the restriction on buying properties.
You can't buy property in Sanyal.
If you are a newcomer in the city, you have to pay the social insurance.
I think it's about two or three years now, or maybe one year.
I can't recall that figure very precisely, but you have to pay at least one to two years of social insurance in order to buy a property in Sanyal.
So that's stopped many people from buying that.
Even with this, the Sanyal property price is still relatively stable compared with many mainland cities, Hainan small island out there.
And if they remove the restriction, they probably get a price surge.
I don't know, but that's not removing yet, probably partly because they are confident about their property market.
Another city that stands out is Chengdu.
In November, the price increase of new and second hand houses in the city ranked third in the country.
Over 11 ,400 new homes were sold in November.
That's an increase of over 50 % from October.
And over 26 ,000 secondhand homes were sold nearly one third more than in October, which is the highest since April last year.
So why Chengdu? I'm not sure whether Yan or Bao Cheng or Daxa, either of you can talk about Chengdu.
I just remember that there was an old saying in Chinese that if you're too young, don't go to Chengdu, which stands for that area, because the easy, cozy light there could erode your ambition probably.
So what's behind the achievement of Chengdu?
Yan, do you have any idea?
Yeah, I mean, I think there are some general factors, but there are also idiosyncratic factors for Chengdu.
So, Wino Chengdu is one of those so -called new first year cities, along with out 14 cities.
And I think, as Jaco pointed out, some of these localities have experienced really vibrant population growth and Chengdu, as a matter of fact, between 2011 and 2021, they have actually grew by 7 million people, which is actually one of the world's fastest growing urban cities.
And so I think that means the housing demand is going to be robust.
And also Chengdu didn't really experience the same kind of rapid price increase as in some other areas during the past housing boom.
So there's less sort of a correction in their prices, and therefore, people are waiting for the price to come down to buy houses, that kind of phenomenon.
There's also really, like I mentioned earlier, the vibrant sort of economy, they have really growing the manufacturing industries.
And so that leads rising income, more population coming in, and so stronger demand for housing.
And I think one of the last but not least factor is because of policy changes.
So, as Jaco mentioned, Sanyai didn't really lift the housing purchase restrictions, whereas in Chengdu, they actually removed quite a bit of home buyer restrictions.
For example, they removed the housing registration status and also the social security payments, again, unlike Sanyai's practice.
They're also doing things like encourage the conversion of some of the non -residential housing into rental units.
They're also increasing loan limits for buyers for the trading programs.
So if you have an old house in order to trade in for a new, they're giving you a loan, right?
And they lift that increase that loan limits.
So I think there are just many of these policy changes that have really stimulated and galvanized the buyers.
And so I think those are some of the reasons that I think that we see Chengdu's relatively robust recovery in the housing market.
And I think Zhanjiang has its own specific factors as well.
So I am actually from the South and Zhanjiang, I think this is a seven million people, port city.
And one of the reasons that they now start to recover more is because they actually had a much steeper price decline since 2022.
It was one of the cities that experienced the most steep housing price decline.
So back then, there was a little bit of overcorrection in terms of the prices.
And so now we're seeing the pricing is going down.
And so I think that people are more incentivized to purchase.
Right. Probably they can learn from those cities, especially Chengdu and Hainan province as well, like Jacqueline just mentioned.
But obviously, those are real estate agents of those cities or some provinces are happy because of the latest development on the market.
But they also got a question, like the real estate agent, a friend of mine, he's been asking how long can this relatively positive momentum sustain before maybe another stimulus package is needed or is introduced.
Bao Cheng, your take here?
Well, I think much still lies in how people read the messages from the central policymakers.
If they really refrain from excessive intervention, the housing market is there to gradually recover.
How do you define excessive intervention?
What's excessive? Well, excessive restrictions and the ad hoc hit on the market.
So I think much of the policy should be there to give people more predictable picture.
First on the supply side, the realistic developers once they enter the white list, they are there to really to see stable and continuous support of bank loans, given there is much of the liquidity due to quantitative easing.
And the other is that they, as I said, speculation needs to be further defined so that home buyers can really have also a better predictable picture to see that they are doing it in a legitimate way.
And then the local government also needs to be given more flexibility in devising targeted policies to show up the realistic market by attracting more of the purchases not only from their local residents, but also from other places.
As you just mentioned, those are three typical places, Shanghai, Chengdu, and Hainan, and they are very different culturally.
People often say that if you really wanted to have a crazy life, you go to Shanghai.
And if you really wanted to have a life, you go to Chengdu.
And then if you really want to go for seclusion, you go to Hainan.
So different cities have different attractions in terms of culture, in terms of living and work conditions, so that if they are given more relaxed or deregulated policies, the local governments can really find a better way to bring up the housing market into speed.
And I think more fundamentally is the economic growth on the investment side, because the cluster of workforce is the one that's the mainstay in supporting the local economy.
And has the living conditions over there, and by producing more of the homes and more prospects in their income can also correlate directly positively with their purchase power, because everyone wanted to have a better living condition.
So that's something that's very certain.
And then the mortgage rate, and also the access to bank loans to those individual home purchases, they also need to give a more stable signal instead of a one -time campaign.
The chat lounge. The chat lounge unpacks views and opinions on hot issues in a more casual way.
Right. Last week, the Central Economic Work Conference reaffirmed the need to stabilize the property market and continue to work hard to promote the real estate market to stop falling and stabilize.
It outlined three aspects to focus on next year, namely, unleash demand, improve supply, and promote the transformation of the real estate sector.
Baochen just mentioned how to improve the fundamentals of the whole economy is quite important.
Then, Gyeon, can you help us understand the three major aspects, how to realize them?
You know, there is this improved supply.
I don't quite understand that there are oversupplies there, right?
So what's the point of improving the supply there?
Right. So I think the two major challenges now in the housing market are two.
So one is the unfinished housing units.
And so I think that is where the effective supply, where the supply comes from.
Right. You know, the quality.
Yes. Yes. I mean, in terms of finishing the unfinished projects, you know, these presoled housing that people already paid down the payments and they are yet to receive the housing.
But the real estate developers run out of liquidity, they're not able to finish the projects.
So I think this is a major drag on the housing market.
Again, this is everyone's guesstimates.
But, you know, somewhere between 20 to 48 million housing units are yet to be completed.
So I think this is a big drag on the supply side, because, you know, again, these are the presoled housing units that need to be completed.
So then the households would receive their houses, right, which they well deserve to get their houses that they already paid for.
So that is also in a way unleashed demand because no one is going to buy houses if they're not sure of the payment, they are able to receive their house at all.
So I think that is one thing the government has been trying.
I think this year they have said that they helped the developers, the wireless real estate developers to finish 4 million units of these uncompleted housing units.
And I think definitely they need to do more, right?
So we're, again, talking about between 20 to 48 million units that need to be completed.
And then the second major challenges, of course, are these inventories.
So again, that is everyone's guesstimates.
But somewhere between 40 to 60 million units of unsold inventories are now still in the market.
And so that is a big drag.
When you think about housing prices, and also new housing starts and new housing sells.
So that is another thing that the government needs to come up with policies to resolve.
So one of the things we know the government is doing now is to set up this lending facilities for the local government to purchase some of these unsold inventories as social housing projects.
So the difficulties are again, two, one is this re -lending facilities are still relatively small.
It used to be they only allow, you know, 60 % of the financing coming from this re -lending policies.
They just now back in September increased that 60 % limit to 100%.
So that is improvement.
But still, they need to increase the amount of financing that would allow the local governments to, to actually, you know, have incentives and have the financing means to purchase these houses for social housing.
But there's a second point, which is what Jacqueline mentioned a lot about the rental yield.
In other words, in the current situation, some of these unsold inventories have very undesirable locations, or their rental yield is very low.
So what that means is that even if the local government is able to borrow at a very low rate, and convert this unsold inventories into social housing, it's unlikely that they're able to make profits out of it or, you know, just even made this financing self -financed, meaning that they're borrow at a rate
that may be even higher than what they can recover from the social housing rental yields.
So I think those are really the important challenges.
And so that require more government, especially at the central government level, to provide more financing for the real estate developers to complete their housing constructions, and then also provide more financing for local governments to purchase these unsold inventories and convert them into social
housing. Because you know, without doing those two and removing these two barriers, it's hard for the housing market to stabilize, you know, it's hard for people to come in and buy more houses for that matter.
But there are also some people questioning whether this increasing market liquidity is working as it's expected to, because we've already seen installments of a lot of 500 billion yuan of market liquidity being given to the market by the central government.
Do you think it's working or actually, it's like a black hole sucking up all the money with almost no feedback?
No, I do think it is working.
But again, only marginally, because the problem is much larger.
Right. So again, the estimate, if you look at some of the Goldman Sachs or S &P or, you know, other major sort of institutions estimates, we're talking about in trillions of dollars worth of needs.
And so if you're only gaining hundreds of billions, that's insufficient.
But of course, yeah, I mean, it should be trillion, be trillion, right?
Right now, I think we're not looking at that much.
I mean, again, the white listed property support has just expanded from 2 trillion to 4 trillion.
But in terms of the central bank, redending facilities for the local governments to purchase social housing, that is only 300 billion yuan.
So it's really peanuts, right when it comes to compared to what, you know, the needs are.
But again, even if they just do it in a gradual way, it helped to stabilize the expectations of the market and also helped to crowd in some of the private financing, I think that still will be helpful.
Yeah. All right. And again, also earlier mentioned, she expects the market to recover, you know, by late next year, also similar to what those investment companies are predicting, like Goldman Sachs.
So I'm wondering what Bao Cheng and Jack was view there?
Are you optimistic China's property prices may stabilize or recover at a faster speed by late 2025?
Is it too optimistic?
The way I see that the price is already stabilized because of the bargaining power between the supplier and the buyer, because on the supply side, the main stakeholders are the banks, real estate developers, and the local governments.
They do not really want to see a decline of the prices because they also have many other considerations.
So the home buyers are really also having pent -up demands.
If you see the savings rate, individual houses has gone by 4 % over the last two years.
And then there is a further flow of immigration into cities from the rural area.
So these are really the positive signs.
And also that the more of the infrastructure is being improved.
So the last mile connection is being solved by building more of the subways and paving all the roads and gas water supply are better available in some of the suburban areas.
So these are really a very positive sign.
The issue lies in that how the local government would really switch their model of physical revenue because for many of the local governments, particularly in the central and western part, roughly 40 % to 60 % of their fiscal revenue are dependent on sales of land.
And right now, the predicament they face is that they have a large amount of unsold houses, and many of those developers who purchase land, but they are hesitant to really to develop the properties and how to address these issues are also much of the hassle for some of the local governments.
So you know, you talk about trillions of money that is being unleashed, but much of it really aims at a high quality development by supporting the manufacture side.
So as how much of the money can be really factored for real estate development, that really remains to be seen.
So overall, I could see that it's going to be stabilized.
But if you predict that by the end of 2025, everything can really turn out to be a rolling picture.
And that's over optimistic.
And Jaco, what's your take very briefly?
Well, I think the price is really difficult to predict.
I mean, I have been working in the investment world for over almost 20 years.
And I just never try to predict whether the price is going to be, it's way too difficult.
You look at two things, when you talk about the property market, then you will know when the property price will come up or down when these two things are turned.
One is, as I have always been talking about the rental yield, the rental yield is really, really important.
It's a bit like the PE ratio, or the dividend yield of stocks.
You know, you look at a stock and you tell me, you ask me whether I should buy this stock or not.
I will ask you what's a PE ratio in the first place.
I mean, if it's a PE ratio of 200 times, then you probably just say, okay, whatever the company is, I'm not going to buy it.
I don't even want to know what the company is working on.
But if you tell me that PE ratio is only five times, I have more interested to look at how the company is looking at.
So now you have more interest.
You think China's property market is more worthwhile for investors?
It depends on the rental yield.
I mean, if you've got the rental yield of less than 2%, then it's definitely not.
I mean, it means a PE ratio of 50 or 60 times.
But if you talk about the rental yield of 3 % in some smaller cities, then yes.
I mean, if you've got 3 % rental yield, then the PE ratio is subjected to about 30 times, so why not?
So it depends on the rental yield in the very first place.
And this rental yield is also changing over time because you have rising personal income.
I mean, China's income is increasing like 5 % every single year and we've got inflation almost to zero.
So that means the real income is rising about 4 % or 5 % every year.
And that pushes up the rent as well over the long period of time because you have a relatively fixed supply of property.
So you've got the rising rent if you go the rising income.
And that gradually will push up the rent as well as the rental yield.
So that's one thing.
The other thing is the attitude of the markets.
Because if you consider most of our purchasing behavior, for example, you're going to buy a TV set or you're going to buy a car, well, just say, okay, I'm buying this car because the cost price is going to rise.
You're not doing that.
You do this purchase because you know that you're going to use it.
That's a normal purchasing.
But if you look at the property market, it's really strange is that in the first two decades, many Chinese people when they're buying the property, they say, okay, I'm not buying it because I'm going to use it.
I'm buying it mainly because this price is rising.
That's a market that's weird because that's different from what we call, you buy the house to as China's central government has always been mentioning is that you buy the property to live, not to speculate.
But if you look at the past over almost two decades, people buy the property to speculate, not to live.
On the other side is that when the property price started dropping down everything's 2021, about 2020 to 2021 in the past four or five years, people started saying, okay, I'm not buying it, not because I don't want to live in a flat or a house.
I probably want to upgrade my living environment, but because the price is dropping, I'm not buying it.
Then that's a weird market again.
Okay. So I think overall speaking, looking into the future when China's property price will be stabilized will depend on when this market is coming back to normal, that people go into buy a house, but it's in many other reasons that they want to live in a larger house or they want to own their first home,
whatever that is, but not because the price is coming up or down.
Maybe it's because of unique psychology of the Chinese people?
Well, the psychology of people are similar.
I mean, I have lived in the United Kingdom for five years.
I don't feel that you could people are very different from Chinese people.
We have similar psychologists.
I mean, it's a market.
I mean, China's market, American's market, marketing United States or Europe, we're all markets.
People jump in and out and they chase where they can get their money from.
So if you get the property price to increase in United States, like what it did before 2008 financial crisis, people were buying houses in the US because the price was going up.
That's the same thing as what Chinese people were doing many years ago.
The only difference is that the United States accumulated a huge amount of financial derivative, which China didn't.
China cut this off, obviously 100 % in the past 10 years.
China's government and financial authorities kept on saying to the financial market, no, you can't have financial derivatives.
This is entirely different from what we got back into 2008.
We call this active government action.
It's been really good.
It stopped the financial markets to be dragged into the property market.
Back to the property market of today.
At least we've already seen some silver lining, but going forward, I think our guests are all cautiously optimistic about the future.
But is there any external factors that could hinder this recovery process like the inauguration of Donald Trump?
We've already seen China's capital market outflow hitting a record high in November, which makes the liquidity injection work to some extent a failure, I would say.
So Yan, what's your take there, the potential risks down this path?
Right. So I would say that any impact from the external environment would be in a way secondary.
So in other words, if the tariff war comes into effect, if that affects China's growth and income, then I think that might have a dampening effect on the housing market.
But alternatively, I think it's also interesting that if the external environment gets worse, I think that would even galvanize more the policymakers to boost domestic demand, which means they might have even more incentives to roll out policies to support the housing market and the stock market.
I don't think the capital outflow itself would have any direct impacts on the real estate markets.
I know that some people would worry, for example, for real estate developers for offshore finance, it would be harder for them to get.
But I think at this point, I don't think that real estate developers should aim to get a lot more external financing, just because the external financing cost has been rising so much.
Whereas in China, the rate cuts are in the horizon.
So it would be cheaper if they raise funds domestically.
Not to mention this real estate businesses, you try to avoid a currency mismatch as much as you can.
So to me, I don't think there is any sort of direct impact as far as the capital flows is concerned due to external environment.
But if there is any negative impact on income, jobs and prospect of the broader economic growth, that could lower the confidence and lower people's incomes and so on and so forth.
And that could have a negative impact on the housing market.
Right. I didn't expect that the extra tariffs could play some positive role there in some part, if not overall.
Bao Ching? Well, I think one thing that may really have a correlation is the interest rate because Donald Trump is determined to bring down their interest rate.
So therefore that really incentivizes the capital outflow from China, particularly for those people who post big money.
And other than that, I agree with Ching, is that external factors are secondary, because much is dependent on the Chinese policy directions and also the continued improvement of the business environment in which investors have a predictable landscape as how to improve their services and also have a stable supply
of bank loans, because that's the particular nature of the real estate.
So now with more of the silver lining, we expect more signsides from the policymakers in relieving some of the restrictions and giving a more predictable business environment.
And last but not least, Jacqueline.
Well, I'm not really sure where the probably price is going to be.
I mean, it's really a very difficult thing for us to predict.
But there is one thing that might affect the future performance of the public market is that it's actually the stock market.
I mean, China stock market has been undergoing quite a few years of bear market before this year.
And this year, we got a small bull market, it's been rising about 10 % or 20%.
And we see that especially the actively trading stocks, like what we called the low price in dices has been increasing by about 40 % to 50%.
So that's partly increased some kind of wealth effect that people started getting more money from the stock market.
And if we look at what's mentioned in the recent economic meeting, it has been saying that the government will also try to increase the investment return of people in the coming year.
So that means when people getting more money with their accounts, I mean, there are not many things that you can invest in this country because stocks you bought bank deposit, which is offering a very low interest rate at the moment, about one to 2%.
And you get protein markets.
So that means if the stock market goes up by a very large extent next year, it might generate a lot of positive impact to the property market.
Okay, on that note, we end our chat for this session.
Many thanks to Chen Jiagh, the Chief Investment Officer of Beijing based Novam Arcade Technologies.
Professor Liu Baochung, Director of the Center for International Business Ethics, University of International Business and Economics and Dr.
Geng Liang, Professor of Economics, Willamet University, United States, for sharing your thoughts.
The show is available on all major podcast platforms.
Please email us your comments at radio at cgtn .com.
I'm Tye Yun. Thank you for listening.
We'll have more chat at the chat lounge next week.
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