The real estate sector reintroduces 'de-inventorying'; what changes can we expect?

The central government has set the tone, reintroducing 'de-inventorying' in real estate. Many people feel afraid when they see this term because, in previous rounds of 'de-inventorying,' price increase strategies were adopted; the higher the prices rose, the more buyers there were.

However, this time, there is no need to worry about price increases for de-inventorying. Why? Because previously, 'price increase for de-inventorying' was due to people having money; price increases could still stimulate sales. But now? Price increases can no longer stimulate sales, and de-inventorying through price increases is even less likely.

So, how can we de-inventory? It mainly revolves around two aspects:

First, government storage. When the public lacks purchasing power, who has the purchasing power? Only the government possesses significant purchasing power. Therefore, to stabilize housing prices, the government must engage in storage. Why storage? Because there are not too few houses in the market; rather, there are too many, resulting in severe oversupply.

If other goods are in oversupply, we can simply sell them at low prices. But houses are different; behind housing, there are large amounts of loans. If housing prices keep falling, these loans cannot be sustained. Whether for families or real estate companies, they will fall into a situation of insolvency. Therefore, to stabilize housing prices, we must engage in storage. Whose storage? Primarily that of real estate companies.

What we refer to as 'de-inventorying' is to reduce the inventory of enterprises, not the speculative buyers who hold several properties. These houses have already been sold and are no longer inventory. Historically, de-inventorying has always aimed at helping real estate companies reduce their debt pressure and avoid further downturns in real estate.

Second, enhance the purchasing power of the public. For many young people today, it's not that they don't want to buy a house; it's that they can't afford it. Our core issue to solve is to help those who cannot afford homes become able to do so. However, housing prices cannot keep falling, and we still need young people to be able to afford them; how can we achieve this?

One way is to expand the scope of using housing provident fund. For example, you can withdraw from the provident fund for renting or buying a house. Additionally, we need to ensure that the provident fund follows the person; wherever they go, the provident fund goes, making it more convenient for use. Renovations of old houses, adding elevators, etc., can also allow for withdrawals from the provident fund.

The second way is to lower interest rates. The interest rates for housing provident funds and commercial loans will be further reduced, lowering financial costs. Anyone who has taken out a loan to buy a house knows that housing prices are merely one mountain, while bank interest is another mountain. When housing prices have fallen to the lowest point, lowering bank interest becomes even more critical.

The third way is to optimize supply to create better houses for the wealthy. In China's first-tier cities, houses over 20 years old account for more than 40%. In another ten years, these houses will become older, and living conditions will worsen. For those with urgent needs, a renovation may suffice, but for those who have made money, they want to switch houses.

In the future, China's real estate market will primarily focus on improving housing. What characteristics do improved houses have? First, they should have large spaces. Second, the decoration should be beautiful. Third, the community design should be standardized, with separation of vehicles and pedestrians, good greenery, responsible property management, and complete surrounding facilities, etc.

The core of optimizing supply is to create better houses that attract wealthy buyers. Additionally, land supply must also be optimized; large-scale land sales cannot continue, and land supply must be controlled and reduced. As the land available for buying houses decreases, there will be a greater need for meticulous cultivation, improving housing quality and property service quality. Not only must good houses be built, but good communities must also be created.

In summary, it boils down to controlling growth, de-inventorying, and optimizing supply. Housing prices must stabilize; they cannot continue to fall; real estate companies must stabilize; they cannot face more crises; houses must be of good quality; they cannot be poorly constructed; we must move towards premium products. This also means that China's real estate market is truly beginning to mature from its rough beginnings.

Good houses can sell at high prices. The era of universally rising housing prices is completely over.