Be vigilant against signs of distortion in the inventory reduction process

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This post was last edited by cflt111 on 2016-3-3 at 15:06. Since \"development\" once again became the policy focus for China’s real estate industry, real estate markets across the country are gradually emerging from the sluggish state they were in over the past few years. The revival is first reflected in changes in the bidding prices for land sales and in real estate transaction prices across various regions. According to statistics, in key cities in 2015, housing prices in Shenzhen rose by as much as 33.37%, while those in Shanghai increased by 17.60% and in Beijing by 8.14%. In second-tier cities, places such as Wuhan, Nanjing, Tianjin, Suzhou, and Hefei also saw price increases of around 10%. Since the beginning of this year, housing prices have seen another surge in many cities. In January, the month-on-month increase in housing prices in 70 major cities across the country widened, with increases of 20% in first-tier cities and some second-tier cities. Data from the China Index Academy and Weiye I Love My Home show that in January, housing prices in the four major cities of Beijing, Shanghai, Guangzhou, and Shenzhen once again reached record highs. \"Land kings\" have reappeared in cities such as Shanghai, leading to the abnormal situation seen during the previous real estate boom, when flour was more expensive than bread. 　　The revival in real estate transactions is, to a certain extent, a prerequisite for reducing inventory in the housing market. However, it is important to be cautious: rising housing prices do not equate to inventory reduction; on the contrary, they may even become an obstacle to such reduction. This is because, on the one hand, the main \"battlefields\" for reducing real estate inventory are in cities at the second, third, and fourth tiers, while first-tier cities do not face inventory reduction pressures aside from price factors. In fact, the target of inventory reduction policies is cities at the second, third, and fourth tiers, rather than first-tier cities; this is also the main reason why the condition of \"excluding cities with purchase restrictions\" was added to the relaxed regulatory policies. The current market shows active transactions in first-tier cities and some second-tier cities, while other key cities remain relatively sluggish. This clearly goes against the original intention of reducing inventory in the real estate sector. On the other hand, as trading becomes more active, some new regulatory risks are beginning to accumulate again. Incidents such as Shanghai Lianjia’s illegal provision of high-interest lending services, as exposed by CCTV, and Xinqi Assets’ packaging of real estate project revenue rights into financial products that led to a payment crisis, show that an approach to real estate development driven by short-term gains can also give rise to financial risks.