An Easy-to-Understand Analysis of the New Real Estate Policy (Related to the Sale of Existing Homes)
Summary of Key Points
After the introduction of the new real estate policy on August 28th, whether it was the extension of mortgage loan terms to 40 years or the promotion of the sale of existing homes, the initial reaction from the internet was almost universally one of mockery and pessimism, with the worst-case scenarios being speculated. This article specifically debunks four of the most widespread and extreme rumors about the sale of existing homes, using real transaction data and past industry trends to show that these claims are purely emotional and do not reflect the actual market situation. It reminds the public not to be misled by extreme content that either predicts a collapse or a skyrocketing market. Domestic policies are always implemented gradually, and there is no possibility of sudden, dramatic negative consequences, so there's no need to rush to draw extreme conclusions.
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Point-by-Point Explanation
1. Why do people immediately think the worst when new real estate policies are announced?
This phenomenon is known in psychology as "defensive pessimism." Simply put, people have become accustomed to the negative trends in the real estate market over the past five years. For example, when your child comes home half an hour later from school, your first thought is often that something bad has happened, so you're mentally prepared for the worst. If nothing happens, it's a pleasant surprise. Essentially, it's a way for ordinary people to prepare themselves for uncertainty.
However, it's important to be wary of two types of people who spread extreme opinions: those who claim the industry is about to collapse no matter what the policy is, and those who predict housing prices will soar and urge people to buy houses immediately. These people are either trying to generate traffic or have interests in selling or speculating on real estate. Their conclusions are not based on facts. Ordinary people should just ignore such content and not let their emotions drive their decisions.
2. "The sale of existing homes will reduce the number of new homes and cause housing prices to skyrocket?" This is completely contrary to the reality.
Imagine there are 10 fruit shops in your neighborhood, and now two of them are required to only sell ripe fruits, not pre-sale ones. You might worry that all the fruits on the street will become more expensive, but you forget that the other eight shops already sell ripe fruits, and there's also a large inventory. In the real market, the proportion of transactions involving existing homes has already exceeded 52% nationwide, and in 20 key cities, this figure is over 65%. In Beijing, 80% of house transactions are for existing homes. The market is no longer dominated by new homes. Additionally, there is a surplus of 760 million square meters of unsold new homes, with most of them in remote areas and in low-demand housing types. Even if the supply of existing homes decreases in the future, this massive inventory will suffice, and there won't be a shortage of houses for at least 1-2 years. New homes will have to be sold at prices similar to those of existing homes in the area, so there's no basis for sudden price increases.
3. "The sale of existing homes will force developers to rush construction and result in poor-quality houses?" This is the opposite of the truth.
The problems with substandard houses in the past were not due to fast construction; rather, it was the pre-sale system that was to blame. Developers used to rush the construction process, especially the preliminary stages like foundation work and basement digging. Once they obtained the pre-sale permit, they would collect the buyers' money and use it for other projects, leaving the construction work unfinished. This led to quality issues. The problematic developers have already been eliminated over the years. Those remaining in the market are either state-owned enterprises with stable finances or private companies with a good reputation for their products. With the new policy requiring houses to be fully built and inspected before sale, developers who cut corners will suffer significant losses and will be more cautious about quality, which is actually good news for consumers.
4. "The sale of existing homes will cripple developers' cash flows and doom the real estate industry?" This has already been factored into the market.
The proportion of existing home sales has been increasing steadily over the past three years, from 10% to 32%. The high-leverage practices of borrowing money to buy land and collecting payments before construction are no longer feasible. Developers that rely on such tactics are either state-owned enterprises with stable finances or private companies with a good reputation. The new policy will provide a transition period, and the industry won't be completely ruined overnight.
5. "The sale of existing homes will lead to a lack of land acquisitions and local governments having to impose property taxes to fill the gap?" This is an overreaction.
The decline in developers' interest in acquiring land is not a new issue caused by this policy. In third- and fourth-tier cities, private developers are no longer interested in buying land; local governments are stepping in to support the market. The pressure on local land revenue has been there for several years. Our country approaches policy changes gradually, and a sudden imposition of a property tax is unlikely. The adjustment of land revenue has already been piloted, so ordinary people won't be suddenly affected by these measures.