What is the fundamental reason for the skyrocketing real estate prices in China?

In fact, the core question that everyone is concerned about is nothing more than "When can real estate controls be relaxed?" Because anyone who knows anything about economics knows very well that as long as the government allows commercial housing to exist, the so-called "purchase restrictions" will not last long. No matter how determined the central government is, its purpose is only to suppress and promote the return of housing prices to a reasonable level, rather than preventing the construction of commercial housing and shutting down the real estate market. In the past two decades, the mainland's real estate market has grown from scratch, from small to large, until it has become a disaster and is out of control. After experiencing the crazy rise in real estate in the last round (2007-2008) and the short-term decline following the financial crisis, we had a premonition that a larger real estate crisis would occur. Two basic principles of real estate: 1) Housing demand "1+1" means that any person in a city must have at least one bed and a room; 2) China's housing demand = 1.3 billion population × GDP "1.3 billion" refers to refers to the population base in the process of urbanization; "GDP" refers to the increase in the number of wealthy people brought about by China's rapid development for more than three decades; the central government began macro-control of real estate in 2003, and the actual results are known to everyone. This is stated. So what is the reason that leads to repeated attempts and failures in regulation and no final results? To sum up, the policies formulated by the government have never really found the root cause of China's skyrocketing real estate. Every regulation is just a headache and a pain. The root cause of China's real estate problems lies not in real estate but in urbanization, the country's political system, and the GDP-oriented economic development model for many years. There are too many complicated factors involved. Therefore, to solve the problems that arise in real estate, just applying medicine to real estate will always be a headache and it is impossible to solve any problem. Among these complex factors, the most important points are listed below: 1. Political and policy issues: land finance, current land transfer system, fiscal and tax system, real estate tax system, urban and rural land dual system, officials in land transfer and development Corruption, etc. It is still unclear whether these problems can be improved. 2. The relationship between policy and market: To establish a complete housing supply system, the government needs to invest in solving the basic housing security for low- and middle-income groups; at the same time, market-oriented solutions are provided for the housing of middle- and high-income groups and reasonable real estate investment. The central government only really realized the problem of affordable housing after 2009 and began to solve it. However, the initial practice was too impatient, and its decision-making level and solution methods are still childish. The current "Great Leap Forward" approach will need to be revised sooner or later. The commercial housing market is currently in a state of turmoil. As demand remains unresolved, it will surely rebound and increase volume if the energy is relaxed a little. Although an affordable housing policy was launched in 1999, due to extensive construction and relevant supporting mechanisms, the implementation of affordable housing was completely out of shape. In 2003, at a symposium held by the Real Estate Department of the then Ministry of Construction, I said that I believed that affordable housing itself was creating a bubble. For example, Beijing's Tiantongyuan affordable housing includes some film and television cultural celebrities who bought the entire building for investment. Another affordable housing, Jindian Garden, where many senior officials from government agencies bought houses, many for investment, and the parking lot is full of luxury cars. In 2011, the central government set the task of building 10 million affordable housing units across the country and issued policies to severely suppress the real estate market. It is not known whether the number of affordable housing construction finally reported by various local cities is true. Effective oversupply that meets the existing security conditions is inevitable. Behind the deserted real estate market, demand has not really been suppressed. Huge demand is waiting to emerge, and its accumulated energy will only be stronger than that of 2009, and will never be second. Taking such an extreme approach to deal with the relationship between affordable housing and the real estate market shows the central government's determination to suppress the real estate bubble and carry out economic transformation, but the approach is too arbitrary. The result may be something that no one wants to see, and both the affordable housing and commercial housing markets will go to the other extreme. 3. Problems with the land and fiscal and taxation systems: Land transfer fee income has long been the main source of income for local cities, and it is also a strong backing for the large-scale infrastructure construction that has emerged in cities in recent years. This round of severe real estate regulation has instantly cut off the financial resources of local governments. In a sense, the biggest resistance to real estate regulation is not developers, but local governments. The impulse for local development is the engine that drives up real estate prices, and it is not easy to curb it. The factors listed above that mainly affect China's real estate are actually a complex map of China's real estate interests. I think many people have already discussed the details countless times, so there is no need to repeat them here. The core of this article is to explain a simple "real estate principle" that is rarely mentioned but is the most applicable to China's real estate, which is "1+1 of housing demand" and "China's housing demand = 1.3 billion population × GDP”. First let’s talk about “1+1 of housing demand”. When a person lives in a certain place, he must at least have a bed, and if he has some conditions, he must have a room to live in. This is a simple truth in the world. "China has the largest population in the world, so the number of houses must also be the largest." Sorry, this is not the conclusion I am trying to say. What I want to emphasize is that in contemporary China, the key to affecting housing demand is the movement of the population. Mobility brings incremental demand and also creates a contradiction between urban housing supply and demand that is difficult for us to solve. Here it is necessary to mention again the word "Spring Festival" that makes Chinese people extremely sensitive once a year.

Official data: In 2012, the national Spring Festival travel passenger flow reached an astonishing 3.1 billion. This number was 2.5 billion in 2010 and 1.79 billion in 2005. The total number of passengers during the Spring Festival Transport is a direct reflection of the country’s employed floating population. I believe no one will question this. In other words, in addition to the houses and beds in their hometown, this huge migrant population also needs at least one bed and a room for them in the place where they work and live. The rapid changes in the number of Spring Festival travel figures from 2005 to 2008 and then to 2012 can undoubtedly lead us to the conclusion that in the past seven years, with the rapid increase in China's migrant population, the employment destination cities have Housing demand must also be growing rapidly in parallel. Let’s look at the real estate in Chinese cities. In the past seven years, China’s real estate has experienced the fastest growth. In an international city like Beijing, the demand for mid- to high-end commercial housing in the city is directly related to the city’s airport passenger volume variables. Since the completion of Terminal 2 of Beijing Capital Airport, although T3 was rushed to be built for the 2008 Olympic Games, the capacity has not been able to catch up with the demand, and the lack of capacity has always troubled the airport authorities. The latest news is that the passenger volume of Beijing Capital Airport is expected to reach 93 million in 2012, ranking first in the world. This number was only 65 million in 2009! For Beijing, Shanghai and Guangzhou, which are the core cities with urban rail and high-speed rail, the opening of urban rail and high-speed rail has brought a larger and larger migrant population to these cities than before. You can take high-speed trains to and from the capital in just over an hour from Shanxi, Shandong, Henan, Liaoning and other places. Improved transportation conditions and “people who don’t want to leave once they come” have objectively further increased the pressure on long-term housing demand in central cities. The rapid improvement of material conditions such as information and transportation has played a huge role in promoting China's urbanization process that affects the world. Especially with the rapid construction of high-speed rail in recent years, what impact will high-speed rail have on the cities it connects? What changes has it brought to urban economic development and people’s lives? What is the pattern of population flow in connected cities? I really hope that the country’s most authoritative research institutions, such as those scholars at the Chinese Academy of Social Sciences who spend taxpayers’ money, will carefully and systematically study the series of issues such as GDP and whether there is any deviation or transfer of the industrial economy. Do more research instead of spending all day and night talking about whether housing prices are going up or down, or whether developers are good or bad. Let’s talk about the principle of “China’s housing demand = 1.3 billion population × GDP”. The interpretation of this equation is much more complicated than the previous "1+1" principle. Because population and GDP correspond to a series of factors such as: urban-rural gap, household loan system, resource allocation, administrative system, fiscal and taxation system, urbanization strategy, as well as humanities, population mobility, Maslow's demand theory, etc. A passage from U.S. President Ronald Reagan's "Last Speech" before leaving office: Why do so many people risk bullets to climb over that wall (Berlin Wall) and come to our country? Why do so many people drift across the Pacific Ocean and come to our country in a small boat, even at the cost of their lives? ...Because children in our country can eat whatever ice cream they want to eat. …Because we know that it is the right of each of them to pursue a happy and beautiful life. People go to higher places and it is everyone's right to pursue a happy and beautiful life! I think this truth is more applicable to contemporary China. Because after nearly three decades of rapid economic growth in China, we are still facing the huge gap between urban and rural areas, the gap between east and west, and the gap between coastal and inland areas. We still have and even continue to expand the gap between urban and rural people. The gap in access to education, the gap in medical care and first aid, the gap in the enjoyment of living resources, the gap in the enjoyment of social public facilities, and the gap in individuals' search for development, employment, and entrepreneurial opportunities. "People move to higher places" constitutes the base scale of the population flow to cities driven by the current economic and social development status of China. The need for wealth creation and security has caused contemporary China's wealth and wealthy people to pour into large cities too densely. Looking back at the rapid growth of real estate in China over the past seven or eight years, it is not difficult to find that most of the cities with the fastest real estate development and leading housing price increases have a very direct relationship with the radiation power of these cities. In other words, the stronger the radiation range of a city, the greater the pressure from the influx of foreign population, and the faster the real estate will rise. For example, cities such as Beijing, Shenzhen, and Shanghai radiate foreign residents all over the country and even the world; cities such as Hangzhou, Chengdu, Dalian, and Qingdao are regional central radiation cities, and the real estate markets in these cities are mainly occupied by foreign residents. Dominated by home buyers. From the perspective of Maslow's Hierarchy of Needs theory, people who get rich first in towns and small cities migrate to big cities, which is in line with the "security needs" of Maslow's theory. After a Shanxi coal boss became rich overnight in the mountains, his first thought was to move his wife, children, parents and his property to a relatively safe big city; farmers in Jiangsu and Zhejiang who accumulated wealth through handicraft workshops in small counties also wanted to move their children Only if you are sent to Shanghai or Beijing to go to school will your future be guaranteed. The improvement in material living standards due to reform and opening up has enabled the 1.3 billion people in mainland China to meet their basic needs for survival. But for the huge number of wealthy and middle class people who have emerged under a population base of 1.3 billion, leaving "small places" and entering big cities is an inevitable choice for most people.

Therefore, there is an unprecedented and huge immigration wave route in the world: "people from the village go to the county, people from the county town go to the provincial capital, people from the provincial capital go to Beijing, Shanghai, and Shenzhen, and people from the big cities immigrate abroad." picture. In a sense, due to the gap between urban and rural areas, as well as the widening gap in resources between big cities and small cities, real estate is actually just a material manifestation of the "wealth-Matai effect" in mainland China, which is the growing gap in China's current situation. The materialization of the gap between rich and poor. There has always been a point of view that controls the government's decision-making, which is to use the "house price-income ratio" to judge whether there is a bubble in real estate, or whether housing prices are too high. I have always believed that this theory applies to any other country, but it never applies to China. There is only one reason: the force driving the rapid rise in housing prices in Chinese cities is not local residents, but the influx of "immigrants" from outside the city. If you compare the income of coal bosses in Shanxi with the housing prices in Beijing or Sanya, everyone will know whether the housing prices are high or not. One saying in the industry is that at least 80% of the country's "county magistrates" have their own real estate in the capital; two ordinary cadres from the health bureau of a city in Liaoning jointly bought an entire floor in Jianwai SOHO opposite the International Trade Center for investment. . Survey data before this round of regulation showed that more than 60% of customers buying luxury homes within Beijing’s Fourth Ring Road were non-Beijing borrowers. Therefore, if we want to truly understand China's housing demand and formulate correct real estate control and regulation policies, we must correctly determine China's population flow trends and numbers. Without rational analysis and judgment on the floating population, adopting measures such as suppression and restrictions will definitely be counterproductive.