Says past pursuit of maximum profit Academics: Housing firms not doing ‘common wealth’

By Eric

2021.10.14

In China, if the “three red lines” and “two red lines” are a straitjacket for real estate companies, “common wealth” may be a big question mark. The real estate industry is observing the long-term implications of this keynote. Some mainland academics believe that high property prices have hindered the flow of factors of production and social innovation in the past, and that real estate developers need to rectify their role in the future.

Real estate has become a ‘barrier’ to the flow of factors of production
“There has been a lot of over-interpretation of the relationship between wealth and real estate, but it is clear that the era of being a pillar industry in 2009 is over, and it will be replaced by other high quality economic development, rather than real estate being the only one. Sun pointed out that in the past, real estate companies only wanted to choose good locations and good properties to get high prices, but only to maximise the interests of the company and its shareholders, without rising to the level of the common wealth of the society and the level of entrepreneurs with a big heart and a big vision.

Real estate companies need to ‘get their roles right’
He added that real estate companies should now set their roles straight and not look for resources wherever they can find them, causing a housing price bubble. For example, they should play a role in rural construction, education and infrastructure development in third- and fourth-tier cities, “not just building ‘ghost cities'”, but having something concrete to offer.

The key word “common prosperity” became the focus of public opinion when President Xi Jinping chaired the 10th meeting of the Central Finance Commission on August 17, emphasising the importance of common prosperity and increasing the proportion of middle-income groups. However, not much was said about solving the housing problem, only that “the housing supply and protection system should be improved”.

Property market fever “on the train” now fall back after 90 owners: buyers did not benefit
Property investment as the driving force of economic growth, while driving up property prices, the situation of young people in the Mainland “buy a flat on their father’s back” is common. A young man from Peking University was worried about the rapid rise in property prices and rushed to buy a car a year after graduation, “but in retrospect, he was coerced by property prices”. However, he believes that buyers have not actually benefited from the government’s curbs on property prices in 2017.

Mr Zhang, a young post-90s man from Anhui province, graduated from Peking University’s School of Information Technology and Engineering. But during the early years of the property boom, property prices in Beijing soared. “The average price of a flat in 2015 before I graduated was 3 million, but within two years it had risen to 6-7 million. I was so scared that I wondered if the price would double again in two years’ time, so I wanted to buy a flat first, regardless of its size”.

Parents subsidise 80% of the purchase price of a flat in a hurry
Mr. Cheung: being “dragged” by housing prices
With his parents subsidising 80% of the price of his home, he bought a second-hand home a year after graduating and made a monthly payment of RMB12,000. However, with the implementation of the “no speculation in housing” policy, Beijing, as the capital city, is enforcing the policy more stringently and property prices are relatively stable. “I think about it now, but I was caught up in the momentum of property prices, because when they were rising too fast, ordinary people could not make decisions rationally.

But on the other hand, although property prices have come down or slowed down in recent years, he believes that buyers have not actually benefited. From a practical point of view, after the government’s regulation in 2017, there have been some problems with houses since then. I feel that the government wants to do a good job, but also does not want to suffer losses, land sales are the bulk of the fiscal revenue, the loss is transferred to developers and buyers.

The government wants to do a good job, but it doesn’t want to lose money. Later, with the growth of age, hope to pursue personal space, property prices rose to more than 20,000 a square meter, can not afford to buy, “now go to rent, even if you buy a house, but also rarely do not rely on parents, only rely on their own to buy”.

Academics: property prices in first-tier cities will not come down
The new direction of “rent and sell”
The Ministry of Housing and Construction pointed out in August this year that city governments should be “determined and make an effort” to solve the housing problems of new citizens and young people. According to economist Zhang Jun, the pressure of rising property prices in first-tier cities is enormous and is unlikely to fall in the future. The focus of real estate development should be shifted from the single commodity housing market in the past to a market where rentals and sales go hand in hand. This is similar to Singapore’s “rent first, sell later” model, which solves the housing problem of young people.

(Ming Pao)