Opinion |
Housing Market: A Bottom Price Needed for Destocking | |
Experts have their says on destocking China's housing market | |
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China's homes listed for sale are estimated total about 6.62 billion sq m now, a supply enough for 5.19 years at the current sales rate (CHINA DAILY) Zhang Hongming, member of the CPPCC National Committee, member of the MOHURD committee of experts China's stock of housing represents bank loans worth 24 trillion yuan ($3.68 trillion). According to my own estimate, China's homes listed for sale total about 6.62 billion sq m now, a supply enough for 5.19 years at the current sales rate. These spaces represent 40 trillion yuan ($6.14 trillion) in assets. One third of the money has been invested by property developers and two-thirds are bank loans. Liu Zhibiao, member of the CPPCC National Committee, economics professor of Nanjing University, Chang Jiang Scholar A bottom price is needed for housing destocking in third- and fourth-tier cities. Price reduction is not targeted at first- and second-tier cities with low stock and big demand, but third- and fourth-tier cities that have limited demand and huge stock. But houses won't be sold if the price slumps. There should be a bottom price which will help form a stable expectation to make gradual destocking possible. Houses are special products, because price expectation can greatly influence their sales. Destocking of homes won't be possible in a market where the price is dropping. In such a market, stock will only increase. Due to people's expectation of ever-lower prices, destocking cannot be realized by means of price reduction. On the other hand, housing prices should not allowed to rise fast, as this will threaten economic and financial stability. In a sentence, we should use prices to balance supply and demand, ensuring a limit to price rise. The property developers are entitled to a normal investment return, but not excessive profits; otherwise destocking will be impossible. Huang Hongyun, member of the 12th National Committee of the CPPCC, Chairman of the Jinke Group, chair of the Federation of Industry and Commerce of Chongqing Municipality Copyedited by Bryan Michael Galvan Comments to chenran@bjreview.com |
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