Why is the house price hard to say? "Top pdf in history.

In 20 15-20 16, the real estate sales market in China was booming again. According to the price index of 100 cities, in recent two years, the national average house price has increased by more than 20%, the first-tier cities have increased by more than 40%, and some hot-spot second-tier cities have even increased more than the first-tier cities.

The mainstream view is that China has entered an aging period and urbanization is coming to an end. Excessive money and leverage are the main reasons for the rise in housing prices, so the rise in housing prices is unsustainable. With the introduction of a new round of real estate control policies, China's housing prices will have a "historical peak". We all hold a negative attitude towards the above views.

Christina price Channel believes that high housing prices cannot simply be regarded as a "real estate price bubble". The high housing prices in China's first tier cities are essentially the contradiction between "the tendency of mega-urbanization caused by industrial agglomeration and resource agglomeration" (determining demand) and "strictly controlling the scale of mega-cities" (determining supply).

Before the government's urbanization policy is fundamentally changed, the price distortion in first-tier cities will exist for a long time. Similar to the real estate regulation of 20 10-20 1 1, this real estate regulation may lead to short-term stagnation or even decline of housing prices in first-tier cities, but it cannot change the long-term rising trend of housing prices in first-tier cities.

In this paper, the author focuses on five common misunderstandings of mainstream views:

Myth 1, the real estate market only considers demand, not supply;

Misunderstanding 2, that "population mobility" can represent real estate demand;

Misunderstanding 3, that "aging" will lead to a decline in housing prices;

Misunderstanding 4, that the urbanization of China is coming to an end;

Myth 5, that adding leverage must be equal to "real estate speculation" and bubbles.

Mainstream real estate analysis framework

There are two main methods to analyze the real estate problem in China: one is to study the supply and demand of real estate and policies from a macro perspective to judge the turning point of the real estate market; The other is to use the ratio of house price to income and leverage ratio to judge the valuation level of China's real estate market relative to the world and the inflection point of the real estate market. In this paper, I mainly focus on the macro perspective and question the current mainstream real estate analysis framework. In the following series of articles, we will discuss the valuation indicators.

From a macro perspective, the mainstream analysis framework of China real estate in the market is "population flow+monetary phenomenon". The essence of this analytical framework is that real estate prices are determined by demand, which is divided into rigid demand and investment demand. Among them, "population flow" corresponds to "rigid demand" and "monetary phenomenon" corresponds to "investment demand" or reflects the degree of price bubble.

Among them, "population mobility" includes two parts, one is "aging" and the other is "urbanization", which both determine the changes of urban population. The mainstream market view holds that the change of urban population can represent the change of real estate demand.

The mainstream view of the market is that China has entered the turning point of aging and urbanization is coming to an end, so the number of people buying houses or the growth rate will drop, and the demand for real estate will drop for a long time, so the real estate in China is at the top of history. At the same time, the mainstream view is that due to the decline in real estate demand, the rise in real estate prices is a "monetary phenomenon", that is, the real estate price bubble.

Christina fact believes that the above-mentioned real estate analysis framework seems complete and sufficient, but in fact there are many specious problems, which do not reveal the essence of China's real estate problems at all. The following focuses on five misunderstandings in the framework of "population mobility+monetary phenomenon".

Myth 1: Can real estate only look at demand and not supply?

Under the framework of "population flow+monetary phenomenon", only from the perspective of real estate demand, and completely ignore the supply factor.

In fact, supply is one of the keys to the real estate problem in China. The most direct evidence is that Beijing and Shanghai have less supply and higher housing prices, while Chongqing has more supply and lower housing prices.

Beijing and Shanghai have implemented strict policies to control the scale of land supply, while Chongqing has not restricted the land supply, resulting in the low real estate sales area in Beijing and Shanghai since 20 10, while the real estate sales area in Chongqing has continued to rise.

Figure 1 Sales in Beijing and Shanghai decreased, while sales in Chongqing increased.

Compared with Beijing, Shanghai and other first-tier cities and even most second-tier cities, Chongqing's housing prices have increased very little. We believe that the land supply and housing supply in Chongqing are sufficient, which is an important reason why its house price can remain basically unchanged during the period of 20 10 to 20 15.

Figure 2. Housing prices in Beijing and Shanghai have skyrocketed, while housing prices in Chongqing have remained basically unchanged.

20 14-20 15 "ignoring the real estate supply" is quite prominent, and it has been corrected since 20 16. The factor of "insufficient land supply" is more and more accepted by the market, and there are more and more voices calling for relaxing the control of population and land scale in megacities.

Since 20 16, the misunderstanding of the mainstream market lies in the demand side. These misunderstandings include: "Population mobility determines rigid demand", "Aging leads to falling house prices", "China's urbanization is coming to an end" and "adding leverage is real estate speculation and bubbles". The following misunderstandings 2 to 5 will be discussed.

Myth 2: Can "population mobility" determine the rigid demand of real estate?

We believe that it is not "population flow" but "purchasing power flow" that determines the rigid demand of real estate.

At the beginning of 20 16, many people regarded Shanghai's "net outflow of population" as the main basis for Shanghai's housing prices not to rise, but the result was surprising. In fact, since 20 1 1, the population growth rate of first-tier cities has been declining, but the price increase of first-tier cities is still in the forefront of the country.

Figure 3 The population growth rate in Beijing and Shanghai continues to decline.

Why is the population declining, but house prices have risen sharply? Because we only pay attention to the population decline, but not to the reasons behind it. Is it because people are not eager for education, medical care, employment and entertainment conditions in Beishangguang? The answer is obviously no!

There are two fundamental reasons for the decline in population growth in first-tier cities:

First, limiting the population size of megacities is a basic national policy, and "strictly controlling the population size of megacities" has been clearly written in the Third Plenary Session of the 18th CPC Central Committee, the central government's decision on comprehensively deepening reform, the national new urbanization plan (20 14-2020) and other important documents. Beijing's population ceiling is 23 million; Shanghai has a population ceiling of 25 million.

Second, the super-high housing prices in first-tier cities make it difficult for many people to live a decent life in first-tier cities and have to "escape from the North to the South".

In other words, the decline in population growth in first-tier cities is the result of government policies and high housing prices to prevent the inflow of low-and middle-income people. If everyone in the north, Guangzhou and Shenzhen can afford to buy a house and everyone has the conditions to buy a house, is it possible for the population growth rate in first-tier cities to decline?

Although the reality is cruel, we have to admit that it is the low-and middle-income class who left Beishangguang, while the middle-and high-income classes all over the country continue to enter Beishangguang. Only those with extremely high incomes really want to leave China's first tier cities and emigrate.

Our core view is that to measure the rigid demand for real estate in first-tier cities, we should look at the "purchasing power flow" rather than the "population flow". Even if the total population of first-tier cities decreases, as long as the population who can afford housing is increasing, the rigid demand of first-tier cities is increasing. Simply equating "population mobility" with "housing demand" has serious problems.

Myth 3: Will "aging" really make house prices fall?

At the macro level, "aging" has always been an important basis for demonstrating the "historical peak" of China real estate market. Many viewpoints believe that "aging" leads to a decline in the proportion of school-age buyers, which in turn leads to a decline in real estate demand and a decline in real estate prices.

The main evidence of the above view is Japan. After 1970s, Japan's aging population accelerated, which eventually led to the bursting of Japan's real estate bubble in 1980s. At the same time, Japanese housing prices have been depressed for nearly 20 years.

Does the above theory and evidence seem reasonable and sufficient? But this is not the case. From the global data, "aging" has little to do with real estate prices, and Japan is more likely to be a special case.

Looking at the United States first, aging can't stop the rise in housing prices. After 1990, the aging in the United States has obviously intensified, and the proportion of the housing-age population has continued to decline, but the rise in housing prices in the United States has not stopped or even accelerated. Even if the subprime mortgage crisis led to a phased decline in housing prices, the current housing prices have also rebounded to the pre-crisis level.

Fig. 4 The aging in the United States has intensified, but house prices have risen.

Looking at Britain, house prices have accelerated after aging. After 1990, Britain's aging accelerated. After 2000, the proportion of school-age home buyers declined, but house prices in Britain rose all the way. Similarly, after experiencing the staged plunge of the subprime mortgage crisis, the current house price has rebounded to the pre-crisis level.

Figure 5 The aging in Britain is getting more and more serious, but house prices are rising.

Finally, looking at Germany, the most serious period of aging is the fastest period of rising house prices. After 1980, the aging population in Germany continued, and the proportion of school-age housing population reached its peak at 1995, and then it continued to decline for 20 years. However, from 20 10, that is, when the aging population is the largest and the proportion of school-age housing population is the lowest, the housing prices in Germany have soared.

Figure 6 Germany's aging is intensifying, but house prices are rising.

From the examples of the United States, Britain and Germany, we can see that "aging" can never be equated with "falling house prices". If we simply look at the pictures and talk, we can draw the conclusion that the housing prices in the United States, Britain and Germany have shown a long-term upward trend regardless of aging or economic crisis.

Whether the above conclusion is true or not, at least we have been able to prove that it is a big mistake to regard "aging" as the reason for the high housing prices in China; Except for Japan, the "aging" in most countries has nothing to do with the rise and fall of house prices.

Myth 4: Is China's urbanization really coming to an end?

From a macro perspective, the coming to an end of urbanization rate has always been an important reason for bearish on China real estate. But the fact is, from the international comparison, we can't come to the conclusion that "China's urbanization has come to an end".

Judging from the urbanization rate of household registration, the urbanization rate of household registration in China is less than 40%, which is obviously far from the end of urbanization.

However, the urbanization rate of household registration obviously underestimates the degree of urbanization in China, especially in third-and fourth-tier cities. Due to the household registration system, many farmers have bought houses in third-and fourth-tier cities, but they are unwilling to give up rural hukou, because rural hukou is more valuable than third-and fourth-tier cities.

If we look at the urbanization rate of permanent residents instead of household registration, the urbanization rate of China in 20 15 is only 56%, which is far lower than that of developed countries and some developing countries. In contrast, the urbanization rate in the United States is 80%, Japan is 93%, Germany is 75%, France is 80%, Britain is 82%, and South Korea is 82%. Even in developing countries, the urbanization rate in Russia is 75%, Brazil is 86% and South Africa is 64%. The urbanization level of China is still low among developing China countries.

Figure 7 The urbanization rate of China is much lower than that of other countries (all by the United Nations).

Judging from the growth rate of urbanization rate in China, we can't draw the conclusion that urbanization is coming to an end. From 1996 to 20 15 years, the annual growth rate of urbanization rate in China is about 1.3%. The latest growth rate of urbanization rate in 20 15 is still 1.33%, and the lowest growth rate is above 1%. Obviously, China is still in the process of urbanization.

Figure 8 The urbanization rate of China is still high.

From the international experience, no matter in developed or developing countries, the urbanization rate must reach at least 70%, and urbanization will come to an end, while China is still far from 70%.

Figure 9 According to the global experience, the urbanization rate is in the stage of rapid urbanization before 70%.

If 70% is regarded as the end point of urbanization in China, there will still be 10- 15 years of urbanization. At present, China is 56%, and there is still a distance of 14% from 70%. In the past, the average annual growth rate of urbanization in China did not exceed 1.5%, which means that the urbanization of China will end at least 10 years. If calculated according to the growth rate of urbanization rate 1%, it will be nearly 15 years.

10- 15 is not a very short time? How many changes have taken place in China in the past 10- 15 years? How much did the house price increase in the past 10- 15? How is the conclusion that "China's urbanization is coming to an end" drawn?

Myth 5: Is it necessary to add leverage to "real estate speculation"?

The first four misunderstandings are all about rigid supply and demand or real supply and demand, and the last misunderstanding discusses the monetary factor. Is China's high housing prices really the result of excessive currency or leveraged real estate speculation?

The first question to be discussed is, what is the cause and effect of rising house prices and excessive currency? Judging from the data, there is indeed a so-called "currency overshoot" in China, that is, "M2 growth rate" is higher than "GDP+CPI growth rate". Many people think that the excessive currency is the cause of the real estate bubble.

But the truth may be just the opposite. Rising house prices are the cause of money supply, not the result. Not every year, the central bank prints money, and then everyone takes it to buy a house; But in the process of buying a house with a loan, M2 was born. In chronological order, only buying a house can increase the money supply. This means that high housing prices lead to high M2, not high M2.

Although we don't think that too much money (high M2) leads to high housing prices, we admit that there is a positive correlation between housing price rise and monetary easing. The difference between money surplus and monetary easing is that monetary easing only pays attention to the cost of capital, not the money supply.

We believe that the loose currency of 20 14-20 16 reduces the cost of capital and relaxes the down payment ratio, which is an important factor to aggravate the price increase. But does this mean that there is a national bubble? We are skeptical.

We believe that the national real estate market cannot be generalized and must be discussed in categories.

First of all, first-tier cities, we think it is unlikely that first-tier cities will "speculate in real estate", and adding leverage in first-tier cities does not mean real estate speculation. The main reason is that all the first-tier cities did not cancel the purchase restriction in the wave of canceling the purchase restriction in China from 2065438+04 to 2065438+05. Starting from 20 1 1, first-tier cities have restricted the purchase of two or more houses, making it extremely difficult to speculate in real estate. Levers in first-tier cities can only be used for the first or second set, which corresponds to the demand for living or improving; Unless the buyer leaves China's first tier cities permanently in the future, buying a house with leverage is at most an early release of rigid demand, rather than "real estate speculation" for the purpose of future sale.

Followed by third-and fourth-tier cities, it is unlikely to "real estate speculation" under high inventory. Although the third-and fourth-tier cities have no restrictions on purchases, they have been in a state of oversupply. Even now, the inventory destocking cycle is generally two or three years or even longer. I have never heard of "speculators" speculating on things that are seriously in excess of supply.

It is the so-called hot second-tier cities that are really likely to "real estate speculation". On the one hand, these cities canceled the purchase restriction on 20 14-20 15, making it possible to "speculate in real estate"; On the other hand, the periodic shortage of land supply and housing inventory in these cities provides space for "real estate speculation". Historically, every round of real estate price increase is the highest in first-tier cities, while in 20 15-20 16, some hot second-tier cities rose more than first-tier cities, which also reflects the possibility of overheating or bubble. If second-tier cities adopt the policy of "restricting purchases and restraining demand+increasing land supply", "real estate speculation" will ebb, and it is possible to repeat the sharp drop in housing prices in Wenzhou or Ordos that year.

Therefore, we believe that:

(1) For first-tier cities, monetary easing and the relaxation of loan restrictions make the rigid demand cash in advance and accelerate the rise of house prices, but it is essentially different from the "real estate speculation" that should be sold in the future. Even if house prices in first-tier cities fall, it is difficult to exceed the decline of 20 12 or 20 14;

(2) For the third-and fourth-tier cities, the motivation of "real estate speculation" does not exist at first, and the future is still a game of urbanization and high inventory, and there is not much room for growth;

(3) For second-tier cities, there is a certain degree of "real estate speculation" bubble, and "restricting purchases and expanding land supply" may lead to a sharp drop in housing prices in second-tier cities, which is the result of the normalization of the real estate market.

Is there a "real estate bubble" in China?

Finally, talk about whether there is a "real estate bubble" in China. We don't quite agree with the statement that there is a systemic bubble in China's real estate, especially the statement that high housing prices in first-tier cities are equal to bubbles.

The high housing price in China's first tier cities is essentially the contradiction between "the mega-urbanization demand caused by industrial agglomeration and resource agglomeration" (determining demand) and "strictly controlling the scale of mega-cities" (determining supply). Before the urbanization path of "strictly controlling the scale of megacities" in China has not changed, the price increase in first-tier cities will exist for a long time, which is essentially different from the "bubble burst due to leverage".

The so-called "asset price bubble" needs two elements: first, "the price deviates from the value", and the price rises are divorced from the fundamentals, that is, the price rises due to the unrealized speculation expectations; Second, "there is leveraged investment behavior". The purpose of leveraged buying is to sell in the future, and leveraged interest can only be repaid by rising asset prices. When asset prices stop rising, there will be serious deleveraging, which will lead to the bursting of the bubble and the collapse of asset prices.

The latest asset price bubble was the China stock market in 20 15 years. The stock price rose because of false expectations such as "national bull market", and there were leveraged investment behaviors such as fund allocation, which was finally reflected in the skyrocketing and plunging.

It is also skyrocketing, but unlike the stock market, 20 16 black goods are not necessarily asset price bubbles. At the beginning of 20 16, we wrote in "The Dollar Cycle Peaks &; Commodities have bottomed out. "Why can't overcapacity stop the skyrocketing of commodities?" (Deng Haiqing, Chen) and other articles suggest that, based on the logic of "supply-side reform+economic stabilization and recovery+the peak of the US dollar index", black goods have indeed skyrocketed, but the market has always regarded it as an "asset price bubble". At that time, the logic of the market was that "the black system has a serious overcapacity, and the price cannot rise sharply. It must be a bubble". But in the second half of 20 16, with the trend of black strength becoming more and more certain, the argument that "black rise is a bubble" in the market basically disappeared.

When measuring the first factor of asset price bubble, we must pay attention to the fact that government policy factors should be reflected in value. This is just like when analyzing the bond market, we must consider the monetary policy of the central bank, and when analyzing the stock market, we must consider that the registration system has not been implemented. It is meaningless to talk about value without government policies. The root cause of the surge in the black series is "supply-side reform." This policy factor will indeed change the long-term value of black series goods, so the price increase is in line with the fundamentals, rather than the price deviating from the value.

Under the condition of "price does not deviate from value", adding leverage will only "accelerate the return of price to value", but will not "aggravate the deviation between price and value" and will not lead to asset price bubble, which is the same as the logic that "adding leverage arbitrage" can smooth out wrong pricing and realize market efficiency. Especially in the case that first-tier cities have limited purchase policies, adding leverage only accelerates the release of rigid demand and will not lead to deleveraging and collapse in the future.

The logic of real estate is similar to the logic of black household appliances, both of which are price distortions caused by policy factors, and this distortion can exist for a long time. It is hard to imagine that policies such as "strictly controlling the population size of megacities", "Central Committee's decision on comprehensively deepening reform" and "National New Urbanization Plan (20 14-2020)" written in the Third Plenary Session of the 18th CPC Central Committee will change in the next few years, although these policies are really reasonable.

Christina's FICC channel does not think that there is a systematic real estate bubble in China, especially the high housing prices in first-tier cities can never be easily equated with a "real estate bubble", and the isolated case of Japanese real estate crash cannot be easily applied to China.

Of course, as mentioned above, there may be a real estate bubble in some hot second-tier cities, because the rise in house prices is related to "unlimited purchase+phased low inventory", and these two factors have been or will soon change. The possibility of reappearing the housing price crash in Wenzhou in some hot second-tier cities is not ruled out, but similar to Wenzhou 20 12, the possibility of the crash spreading to other cities is very low.

In order to fundamentally change the long-term rising trend of housing prices in first-tier cities, we think there are two solutions:

First, give up the policy of "strictly controlling the population size of megacities" and the policy of "strictly controlling the land supply of megacities", but this possibility is extremely small;

The second is to decouple "controlling population size" from "controlling land size". "Controlling land scale" has always been used as a tool to "control population scale". In the future, we may only control the population scale, not control the land scale or control the land scale less, and accelerate the transfer of population from megacities to surrounding areas.

Summing up the full text, our conclusion is:

1. The mainstream macro-level real estate analysis framework-"population movement+monetary factor" ignores the supply factor, which plays an important role in China's real estate problems.

2. "Population mobility" cannot determine the real demand of real estate, only "purchasing power mobility" can reflect the real demand of real estate. The slowdown or negative growth of population growth in first-tier cities does not mean the decline of housing demand in first-tier cities, nor can it be used as the basis for the decline of housing prices in first-tier cities.

3. International experience shows that "aging" is by no means equal to falling house prices. The cases of the United States, Britain, Germany and other countries show that the "aging" stage is precisely the period when the real estate prices in these countries rise; Japan's special case cannot be used as the basis for the decline in house prices caused by "aging".

4. It is wrong to argue that the real estate peaked with "urbanization is coming to an end", and "urbanization in China is coming to an end" is a false proposition. According to the global experience, the urbanization rate below 70% is the accelerated stage of urbanization. The urbanization rate of China is far lower than that of developed countries and some developing countries, and there will be urbanization in 10- 15 years in the future.

5. Adding leverage does not necessarily mean "real estate speculation" or a bubble. (1) First-tier cities need to release leverage in advance, which is essentially different from "real estate speculation" bought for sale. Even if it falls in the future, it is difficult to exceed the decline of 20 12 or 20 14; (2) Real estate in third-and fourth-tier cities has been in a state of high inventory and oversupply, and the premise of "real estate speculation" does not exist; (3) Only some second-tier cities have real bubble risks. On the one hand, there is no purchase restriction for 20 15-20 16. On the other hand, the short-term supply shortage provides a reason for "real estate speculation". In the future, the normalization and just-needed real estate in second-tier cities may lead to a sharp drop in second-tier housing prices in the short term.

6. We can't simply think that high housing prices are "real estate price bubbles". The high housing prices in China's first tier cities are essentially the contradiction between "the tendency of mega-urbanization caused by industrial agglomeration and resource agglomeration" (determining demand) and "strictly controlling the scale of mega-cities" (determining supply). Value should include policy factors. On the premise of sustainable policies, high housing prices in first-tier cities may not deviate significantly from the value. When "the price does not deviate from the value", adding leverage will only "accelerate the return of the price to the value" and will not cause asset price bubbles.

Before the policy of "effectively controlling the scale of new construction land in megacities" changes, the distortion of housing prices in first-tier cities will exist for a long time, and real estate regulation can only lead to short-term price fluctuations, but it cannot fundamentally change the long-term upward trend of housing prices in first-tier cities. One possible way to fundamentally change the rising trend of housing prices in first-tier cities is to decouple "controlling population size" from "controlling land size", relax land supply while controlling population size, and accelerate the transfer of population from megacities to surrounding areas.