China: Local government land sale revenue plummeted: House prices fall
-Big cities rescue real estate decline-
December 3, 2021
Big cities in China:
House prices have fallen in China, and there are moves to bail out the real estate market in big cities.
Limit the price reduction of newly built properties,
Loosen restrictions on real estate lending.
A sense of crisis over the deterioration of local finances:
“If the price of condominiums goes down, the income from selling land to the local government will decrease.”
Local governments are lagging behind in economic recovery due to population outflow.
Not only small and medium-sized cities, but also large cities are becoming more cautious.
The capital of Sichuan
Chengdu
On November 23, it announced deregulation of real estate finance.
Loans for development funds and loosen the upper limit of mortgages, and provide loans promptly.
Priority companies are also allowed to extend the loan period and reduce the interest burden.
Direct control of the central government
Tianjin
In November, at a meeting of real estate companies, he instructed to limit the amount of price cuts.
It is forbidden to discount new properties by more than 15% from the price notified to the authorities in advance.
Even when conducting a large-scale sale, it is mandatory to report to the department in charge.
Capital of Jiangsu Province
Nanjing
He ordered the developers who sold at a discount to stop disturbing the market.
Since this summer, more than 20 cities have already set price cuts.
Declining apartment prices:
The “decrease in prices of new condominiums in 70 major cities” compiled by the National Bureau of Statistics of China is remarkable.
In May 2021, only five regions were down from the previous month.
However, in October, it increased 10 times to 52 regions.
This is the highest number since February 2015.
Deterioration of real estate company cash flow:
The reason for the drop in condominium prices is not just because the demand for purchases has fallen due to the stricter examination of mortgages.
“The tightening of government regulations has worsened the cash flow of real estate companies,” casts a shadow.
China’s land is state-owned:
The local government sells the land use right to the real estate developer.
A trader builds and sells condominiums and commercial facilities.
Important financial resources of local government:
The income from the sale of land is one of the important financial resources of the local government.
If the price of a condominium drops, it will affect the price of land.
Financial supervisory authority
People’s Bank of China
The management of major real estate companies such as the Evergrande Group in China is shaking.
The People’s Bank of China, the financial regulator, has revised its policy.
urged banks to correct the excessive narrowing down of real estate lending.
Currently, bank lending has reached the regulatory limit, and some banks have forgotten new lending.
70 major cities:
“The price of new condominiums dropped in 52 areas in October,” which is three-quarters.
If this happens, the decrease in income from land sales by local governments will increase accordingly.
China is heading for a rapidly aging society in the future.
The financial resources will reach the required time as much as possible.
For that reason, the decrease in income from land sales will be a big blow.
Nihon Keizai Shimbun
https://www.nikkei.com/article/DGXZQOGM303DP0Q1A131C2000000/
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