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Why real estate is so special and important in our time?
China's economic reality is often characterized by many paradoxes, and it is difficult to explain its origin and speculate on its evolution by common sense. China's real estate is precisely a synthesis of such paradoxes, and at the same time, it is also a wide-angle mirror through which one can observe the marketplace of the general public, as well as the difficult and painful choice of social values between efficiency and fairness. Why is real estate so special and important in our time??
In the difficult transition from traditional to modern society, each specific period has its own special historical mission: industrialization was the core proposition of the first three decades of reform and opening up, that is, the need to change the traditional mode of production, which was based on farming, and to free workers from the constraints of non-renewable land resources, so as to break through the Malthusian trap, in which the rich are born rich and the poor are poor for the rest of their lives, and to embark on the road of modern economic growth, in which the average per capita income is constantly rising. The road to modern economic growth with rising per capita incomes.
Insufficient share of agricultural output15%Industrialization has largely been achieved, with the majority of the agricultural population having been reintegrated through the expansion of the industrial sector. Consequently, urbanization will be a central issue for future development.
And real estate is the most direct manifestation of urbanization. Behind a few stormy figures calling the shots is the wheel of history rolling forward, hundreds of millions of peasants either passively or actively changing their lifestyles, gathering from the countryside to the city, which is the theme of the era of development in the next few decades, in terms of its scale and impact, even in the world is also unique. It is against this backdrop that China's real estate market is in the ascendant, and the rapid development over the past decade or so is just the beginning of what is likely to be a big show yet to come.
Why Real Estate Prices Are Rising Faster Than Incomes?
Rigid demand for real estate triggered by urbanization partly explains why China's real estate has remained firm against the backdrop of the world economic crisis and China's slowing economic growth, and why house prices were already on the fast track when the economy showed slight signs of recovery.
However, basic economic principles indicate that commodity prices are determined by both supply and demand scissors, and if an increase in demand causes a sharp rise in prices, then supply must have been hampered.
In fact, for most of the past three decades, while production and demand for most products have grown exponentially, the prices of industrial goods, with the exception of food, have remained basically stable, especially relative to rising incomes, and because of this there has been an increase in the overall standard of living of the general population. The price of real estate, on the other hand, has risen not only faster than other ordinary consumer goods, but also faster than the increase in people's incomes, and such a rise is not essentially due to structural contradictions between supply and demand, but rather to the fact that the total amount of supply is lagging behind the rapid growth in demand.
The lack of real estate supply is clearly not due to unprofitability or lack of capital and labor, but to the scarcity of land resources available for development. Although there is a large amount of arable land and rural collective construction land around cities, it must be converted to State-owned land before it can be legally developed, and under existing law the Government monopolizes this conversion process and reaps huge benefits by relying on the difference between the transfer of the land and its expropriation. In many areas, the government"operate"The city is effectively reduced to"operate"land, and land revenue has become an important supplement, if not the main source, of local finance.
In fact, when the Government monopolizes the supply of land, like a shrewd businessman, it does not offer all its goods at once, but rather sells oddly, waiting for the price to rise, so that the price of land keeps rising in order to maximize the total gains from land transfers. Competition for land resources monopolized by the Government is a hotbed of power and money transactions and a breeding ground for corruption. Such a system, which is neither efficient nor fair, naturally triggers questions and indignation in the community.
Real Estate, Stabilizing or Disturbing the Economy?
Bubble generation, bubble expansion, bubble bursting, a scene in the real estate market tragedy and comedy repeated around the world, real estate fluctuations caused by the impact of the speed of the speed of the scope of the extent of the depth of the people to marvel at.
Real estate is a special bond in the modern economy, linking finance to the real economy: real estate is one of the most important types of collateral, real estate lending is an important form of creating the money supply, and money is the blood necessary for the functioning of a modern economy.
When the money supply increases, corporate profits and workers' incomes rise accordingly, leading to higher investment and consumption and faster economic growth.;Conversely, a contraction in the money supply leads to a slowdown in the economy. Thus, through money supply, real estate is closely linked to economic performance. When the money supply increases, a portion of the money will in turn flow into the real estate market, while economic growth will also drive real estate demand, and the supply of real estate is inelastic in the short term due to the long construction cycle, which will cause a further rise in real estate prices, raising the value of real estate as collateral, so that the commercial banks can issue more money and stimulate further acceleration of economic growth.
Real estate is like a "particle gas pedal"that accelerates the flow of money between the financial system and the real economy during economic booms, but it is a"bi-directionality"particle gas pedal--If real estate prices fall, it will cause commercial banks to create less money and the economy to fall into a recession, which will cause real estate prices to fall even further, thus triggering an economic crisis.
However, it does not mean that real estate is the culprit that triggered the economic crisis. On the contrary, it is an ingenious mechanism for ensuring stable economic growth under the spontaneous regulation of the market. Since the total land supply is limited, the size of the real estate market will steadily increase as the economy develops, and issuing money as collateral can maintain the stability of the money supply and the stability of economic growth. It is only when there are major changes in the real estate market or the financial market and the above stabilizing mechanism is undermined, making real estate prices fluctuate abnormally, that sharp fluctuations in the economy will result.
In the Japanese and East Asian crises, this destructive force came from an overly rapid process of financial liberalization or the wrong sequence of financial liberalization, and in the United States subprime crisis, the destruction came from a sharp increase in the money supply due to so-called financial innovations represented by asset-backed securitization.
Similar to other countries, China is in the process of financial liberalization, deregulation of the financial sector and the intensification of competition will make the money supply higher than the normal level, which creates a suitable macro-environment for the rise in real estate prices, while the systemic problems of land supply make the rise in real estate prices become an inevitable trend, and at the same time is accelerating the process of urbanization continues to create a huge demand for real estate, a combination of factors have led to China's real estate like a wild horse flying against the market seems to have gone beyond the bounds of the general economic laws. These factors together, resulting in China's real estate as a wild horse against the market soaring, seems to have been beyond the bounds of the general economic laws.
However, this unconventional mode of operation also carries great risks, and there is only an indiscernible thin line between stimulating growth and forming bubbles. Regulating the economy by regulating real estate is a powerful but exceptionally dangerous tool.
Why are there so many land kings??
2009The most eye-catching event in China's real estate market in 2010 was the""king of real estate" (refers the reigning king of Jiangsu province)"The record of the bidding price is constantly being set. In fact, the emergence of the king of the land its social people's psychological implication is far greater than the actual impact on the real estate market.
Real estate is a special market that offers a great diversity of"heterogeneous"Commodities, location, house type, surrounding environment and other factors have a significant impact on real estate prices. In a particular period of time, restricted by location and space, compared with the demand, the supply is always limited, such as the houses around the famous schools are always in short supply. The king of land is the product of a large amount of money chasing this scarce resource.
As a result of differences in income distribution, people's actual demand for real estate is varied according to their purchasing ability and willingness to buy, and as a result, the real estate market has formed different levels and structures, ranging from luxurious luxury flats to small, barely accommodating flats, which is a structural problem of the market.
When the structure of the real estate market is presented to the public in sharp contrast, its conformity with the principle of social equity is often questioned, but the root of the problem does not lie in the profit-oriented developers, but in the structure of demand determined by income distribution that makes it profitable to provide such a vastly different product. Therefore, this is ultimately a problem of income distribution, and the solution lies not in regulating the structure of the real estate market, but in regulating income distribution. Regulating the structure of the real estate market while keeping the existing pattern of income distribution unchanged can only lead to further distortion of the market mechanism.
Given the established wide gap in income distribution, the only way out for real estate to cease to be an obstacle to the process of urbanization is to increase the total supply and leave the structural problems to be solved by market mechanisms. By increasing the total market supply, especially the land supply, making it equally profitable to build houses for the poor and for the rich, it is possible to calm real estate prices and improve social welfare, which may be more important than the construction of economically secure housing.
Another benefit of increasing aggregate supply lies in defusing the real estate financial risks that are accumulating. With supply constraints, high demand for real estate can cause sharp price fluctuations, making real estate a playground for speculators. However, when the economy tightens, speculators do not bear the corresponding losses, and commercial banks, which have seen an increase in bad and doubtful debts, become direct victims. When the losses are so huge that the banks are unable to bear them, it is the government that ultimately pays the bill, and the provider of the rescue funds is the taxpayers as a whole. When a recession is triggered by a contraction of credit by the banks, the interests of all will be jeopardized to varying degrees, and when the macroeconomic situation declines, even prudent lending banks are not immune to the downturn.
Saving for a rainy day. In the long term, the Government should lift the institutional barriers in the land supply process, break the direct chain of interests between the Government and real estate development, guarantee the scale and growth rate of the total land supply, and remove the obstacles to accelerating the urbanization process. In the short term, try to avoid using real estate as a macro-control tool and reduce direct intervention in the market.