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PBC "Approved Interest Rate Hike", Where Will 2017 Property Market Go

2017-02-06No. of Hits:630Author:www.people.com.cn

In the happy Chinese New Year 2017, I was chatting warmly with siblings and relatives returning home after long journey from many places, amid making fun with my childhood playmates after cups of wine, we couldn't help talking about the tendency of local housing price in China.

Sure, after another skyrocketing of housing price in all first-tier cities and some second-tier cities in 2016, domestic housing price was too expensive to dizzy the buyers. At this time, it's a headache for them to decide where to buy a cost-effective house in the city and area to their satisfaction.

The puzzle to house buyers is that, on one hand, gross area of domestic vacant houses is up to 700 million square meters, which means destocking of redundant housing will take at least 10 years, let alone new houses under construction; on the other hand, like selecting suitable shares in stock investment, it's a troublesome problem for the buyer to decide on the place and time of buying house, in that it's more advisable not to buy a house with no potential of appreciation; after all, housing price is too high, and property investment cost is not low at all.

Before discussing the problem of where to buy a house in 2017, let's take a look at research report published by authoritative prediction agency. On January 05, "Press Release on China Economic Forecast for 2017" was held by CAS Center for Forecasting Science, when yearly predicted values of 2017 were published with regard to China's economic growth, investment, consumption, import & export, domestic price, international commodity price, real estate sector, grain output etc. It's predicted that in 2017, national average selling price of commercial housing is about ¥7687 per square meter, 3.4% year-on-year rise; average selling price of residential housing is about ¥7435 per square meter, 4.1% rise than in 2016. With the impact of macro-control policy, it's predicted that in 2017, sales area of commercial housing will recover steady growth, and growth rate of investment in property development will maintain low-speed growth.

Look, the rate of housing price rise predicted by CAS Center for Forecasting Science is only 3.4% in 2017, is your motive to buy a house is frustrated by such forecast, for your property investment cost is hardly recovered by the low growth rate? More terribly amid slowdown of housing price rise, unexpected interest rate hike approved by PBC is another bad news against housing price rise.

On the first business day after Chinese New Year 2017, PBC raised reverse repurchasing rate and SLF rate. MLF rate was raised even before the New Year leave. The terms of such rates are unfamiliar to ordinary people, maybe most of them have no idea about such terms, but property market was drawn with much attention to consecutive raise of these rates. Frankly speaking, such act of PBC was a clear signal to property market that the time of monetary easing is over, and the overflow of funding liquidity will never return.

In simple words, the "object" of PBC's "act" is monetary market among financing institutions like banks, instead of deposits and loans having immediate impact on the public and business entity. In other words, the rate hike is receiving rate by PBC when lending money to financial institutions, which is not increased base rate of deposits and loans. So, the rate hike by PBC is not equal to raising interest rate. Although no interest rate is raised directly by PBC, property market is sensitive enough to feel the upcoming raise, except at an appropriate time.

For property market fully dependent upon bank loan, PBC's signal of raising interest rate is more painful to its nerve, for lower bank lending rate was one of the main causes for tremendous growth rate of domestic real estate market in the first half of 2016. Once explicit instruction on raising interest rate is given by PBC, the buyers will be able to do nothing but sigh about expensively high housing price in current time.

When talking about property market during paying New Year call to friends and relatives, most of us agreed that housing price will probably rise in first-tier and second-tier cities, of which the most important factor is the reducing market demand. Such reduction of market demand, on one hand, is originated from the impact of purchase quota policy on new houses, which prevents many affordable buyers from buying new houses; on the other hand, many new buyers who are eligible to buy houses in first-tier cities are hopelessly unable to gather sufficient funds for down payment due to call-off of down payment loan. Stagflation of housing price in first-tier and second-tier cities does not imply no price rise in these areas, except the momentum of price rise holds off, without rapid rise of housing price as in the first half of 2016.

In addition to new policy on purchase quota, call-off of down payment loan and PBC's rate hike having major impact on property market in 2017, haze weather disturbing Chinese people is forcing potential buyers in first-tier and second-tier cities to consider whether it's worthy to stay and settle down in big cities, many options are proposed on the internet, such as emigration, displace to a place of beautiful landscapes of mild weather, like Lijiang in Yunnan. Many Chinese nationals are motivated to emigration or transmigration, leading to new investment opportunity in third-tier and fourth-tier cities with tremendous stock of vacant new houses. These small cities have oversupply of new houses as a result of insufficient demand, but due to the impact of haze weather, many people are forced to return to small cities, for living a lifestyle of "while picking asters beneath the Eastern fence, my gaze upon the Southern mountain rests". For this reason, housing price is hopefully to rise in small cities from 2017, especially those with beautiful mountains and clear waters; due to these small cities not affected by purchase quota policy, and with much lower housing price than in first-tier and second-tier cities, many hard workers in big cities are willing to buy their houses in small cities for spending holidays, by enjoying investment return from potential housing price rise, and spending holidays with their families for leisure.

In addition to the new favorite of holiday spending property in the haze driven economy, B&B projects will become the most prominent highlight in property market in 2017. In the end of 2016, central government first called for the development of "manorial economy", the value of B&B as an important component of manorial economy is emerging. Taking B&B projects in Mount Mogan region as an example, investment is intensified in featured towns and featured B&B projects in various places, B&B projects are new development objects of property developers. In the tide of sharing economy in particular, good and inexpensive B&B is hopefully to become the new model of accommodation of domestic tourists.

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