This weekend, a report entitled " overtly subsidy for super20 towns, local rescue approach 2008 " was widely reproduced. It was reported that more than 20 cities, such as shao xing, hangzhou, changsha, nanjing, shenyang, wuhan and ningbo, had introduced measures such as housing subsidies and tax incentives. In this sense, local government efforts to rescue municipalities are close to the 2008 level. A lot of readers are asking if there's a chance that house prices will go up again
To be sure, there was no exaggeration in the report, which very clearly used a qualifier: local government. But in today's era of “light reading”, “quick reading”, the article, in the subconscious of many readers and netizens, says that “the government has been able to save the city, which is close to its 2008 level”. Will there be a new rebound in housing prices following the introduction of government measures to save the city? I think it's very unlikely。
First, the high level of central bank water discharges and the expected rise in inflation in that year have caused fear of home purchases. The dramatic reversal of the market in 2008 and 2009 was not due to the introduction of local government policies such as tax reductions on buying houses, home occupancy, and lowering the threshold of the provident fund, but rather to the launch of a banknote machine. In the two years leading up to 2008, the m2 growth rate was 16. 9 per cent and 16. 7 per cent, respectively, but suddenly increased to 17. 8 per cent, 27. 7 per cent and 19. 7 per cent between 2008 and 2010
GDP growth from 2008 to 2010 was 9 per cent, 8. 7 per cent and 10. 3 per cent, respectively. If you accept that m2 growth minus GDP growth in the year was “real inflation”, then “real inflation” has reached 8. 8 per cent, 19 per cent and 9. 4 per cent, respectively. In general, the purchasing power of the original 100 yuan became 67 yuan after three years! Fearing such a rapid devaluation, many people had to enter the market to buy housing against inflation。
Therefore, the most fundamental reason for the “no-return” rise in housing prices in china is the financial push. In the final analysis, it was caused by the continued expansion of the broader currency (m2) or by inflation. By the end of 1999, china's m2 was 12 trillion, and by the end of september this year it was 1. 2 trillion, a tenfold increase in 14 years。
On the other hand, the size of the currency stock has increased tenfold, largely as a result of the average increase in housing prices in china during this period. Of course, since some houses are located in “powerful” cities or areas, the increase is much greater. Housing prices in downtown shanghai, for example, have risen more than 10 times since 2002, while those in the suburbs have risen 7-8 times。
So what's the m2 rate this year? The first half of the year saw an increase of 14. 7 per cent. But in the second half of the year, it was clear that the centre was stepping on the brakes. The m2 at the end of september stood at 120. 2 trillion, representing a decrease of 0. 7 trillion from the end of june, which has been relatively rare in history (the m2 growth rate has dropped to 12. 9 per cent). As a result, even when the m2 is slowing down significantly and even negative, even the policy of saving the market will continue the process of falling home prices and will not hold up high housing prices。
Moreover, the previous government had reinvested and the current government had recast its structure. In the two or three years since 2008, the previous central government had supported investment to boost economic growth, not only putting enterprises at risk of debt, but also investing in fixed assets close to an alarming 80 per cent of GDP. This is like a high blood pressure patient whose blood pressure has reached a critical point and continues only with a blood spill. The current central government is determined to reform and transform the way in which economic growth takes place, from high liquidity and investment to the tertiary and modern services sectors。
So, do not be confused by the constant stimulus policies of local governments and by successive waves of targeted reductions, psls and slfs. Overall, the currency was not relaxed and even tightened in the second half of the year. The new administration has indeed changed the “playing method” and is really trying to promote development through reform rather than simply re-routing! Under these circumstances, it is clearly not possible for the city to repeat the dramatic reversal of 2008。
Finally, the world economic situation has changed fundamentally, and in response to the global financial crisis, the federal reserve launched quantitative easing policies (qe) four times in the course of the year in an attempt to revive the united states economy, but to the contrary, massive liquidity flows, on the one hand, to large commodity markets and to the united states stock market, led to a wave of cattle markets. Another part of the hot money flowed to the interior of the country, boosting the domestic market because it looked forward to the appreciation of the renminbi。
But now there has been a fundamental shift in the fed’s monetary policy, with the fed announcing in july that it would phase out qe, and next year it will begin to promote interest-rate hikes to attract domestic and external capital flows by allowing dollar assets to appreciate. According to the data, in september the bank had a deficit of $10. 6 billion, which was the second consecutive month since the current year。
The possibility of domestic housing prices continuing to rise will not exist in the context of the massive flow of foreign and domestic capital out of china, which has left our central bank largely indeterminate from the history of “foreign currency” as the basis for the issuance of the currency, but rather incentivizing society through other means, such as psl and slf。
In the two or three years since 2009, china's m2 has been growing at an average rate of 20 per cent, which has led to rising housing prices, while m2 is now growing at less than 13 per cent, and this funding alone does not boost high housing prices. It is even more critical that the current administration pursues economic development through reforms, that the share of real estate investment in GDP will gradually decrease and that consumption and private investment will drive the economy. Moreover, the fed’s withdrawal from qe would result in substantial liquidity leaving china, leaving society with insufficient social mobility, and the central bank would have to find alternative ways to place its base currency. Taken together, there is no possibility of a reoccurrence of the 2008 house price ban, despite the fact that the market liberalization policy continues and that short-term trade will rebound。
Zhang ping, a well-known financial blogger in the country, q446957993: the zhang financial and economics survivor, a prominent qianxi, an expert in financial and economics from a think tank, a chinese-language columnist from the bwchinese network, and a special op-ed by business magazine, financial affairs magazine, business journal and kyohua times people
Responsible editor: zhang dei
