Understanding Finance from scratch

Chapter 44 Under the control of the real estate market, whether the housing price is going to the left or to the right—Finance that needs to be learned when paying attention to the direction of real estate (1)
China's Housing Reform Roadmap

In January 1980, the central government publication "Red Flag" published an article signed by Su Xing "How to Solve the Housing Problem Quickly". The article pointed out that housing is an important part of personal consumer goods and should be commercialized.A stone stirs up a thousand waves.Since then, discussions and debates on issues such as housing attributes and rent have been vigorously carried out in theoretical and practical circles across the country.While the northerners were keen to argue about theories, the southerners who were not so good at it quietly carried out experiments.This year, the Shenzhen Special Economic Zone, which is also troubled by housing difficulties, did something unprecedented: let the real estate company in the special zone cooperate with the Hong Kong Miaoli Group, Shenzhen will provide land, and the other party will pay for the joint development of Luohu Community.One year later, China's first quasi-commercial housing complex - Donghu Liyuan was completed and sold.This community is a "starting point" of China's real estate industry: the starting point of housing commercialization, mortgage loans, and property management.But the land is still allocated by the government, and it is not a commercial housing in the full sense, but this is already a big step forward.

What kind of background did China's housing reform come into being?How is it done?

When we talk about housing prices in China, housing reform is an unavoidable topic.The full name of housing reform is housing system reform.The meaning of housing reform is literally to reform the old housing system and establish a new housing system.For ordinary people, this means the end of the era of housing welfare distribution.

Before the housing reform, the state had to spend a lot of money on building houses. After the houses were built, they distributed them to workers free of charge, and charged very low rents, which were too low to maintain the reproduction of houses, and finally became a heavy burden for the state.According to statistics, in the nearly 30 years since the founding of New China, the cumulative investment in housing in China was 374 billion yuan, and the annual per capita housing investment was less than 10 yuan.By 1978, the per capita living space of Chinese urban residents was 3.6 square meters, while this figure was 1949 in 4.5. In the past 30 years, the average residential space of Chinese urban residents not only did not increase, but was 1949 square meters less than that in 0.9.The deteriorating trend of housing supply has made people realize that it is time to change the old low-rent system of public housing.

From 1982 to 1984, my country successively carried out pilot projects of full-price public housing sales and public housing subsidy sales in Changzhou, Zhengzhou, Shashi, Siping and other cities.Vanke, China Merchants Real Estate, Poly Real Estate, Guangzhou Urban Construction, Zhejiang Guangsha, Songdu Group... These real estate companies were also established in 1984.

Afterwards, a symbolic event happened: in May 1990, the State Council’s “Order No. 5” “Provisional Regulations on the Assignment and Transfer of Urban State-owned Land Use Rights” was promulgated, and it was implemented in 55, which promoted the paid transfer of land, and the confinement of land was finally completely open.

What followed was the "blowout" development of the real estate industry: According to statistics, in 1988, there were 3124 real estate companies across the country, and in the following three years, this number was basically maintained; at the end of 3, this number suddenly became 1992 homes, and by 1.2 it had become more than 1993. In 3, the sales of commercial housing across the country reached 1992 billion yuan, an increase of 440% over the previous year. In the first five months of 80, China's investment in fixed assets increased by 1993% on the basis of the previous year.

July 1998, 7 was a watershed in the reform of China's housing system.On this day, the State Council issued the "Notice on Further Deepening Urban Housing System Reform and Accelerating Housing Construction".From this moment on, the original welfare housing allocation system was completely abolished.Market-oriented "commercial housing" has become a key word in urban housing construction.

Because the real estate industry chain is very long, involving dozens of industries, it will have a driving effect on building materials, chemicals, and steel.Zhu Rongji made a major decision - to start a real "housing reform" and activate the real estate market.In the subsequent economic construction, real estate has always been the "locomotive" driving economic growth, and it has also become the most profitable industry.In this way, the real estate industry has gradually evolved from a new growth point to an "important industry". It is an unchangeable fact that the economy depends on real estate.

Demand for home purchases awakened by mortgages

29-year-old Mr. Ding recently bought a 65-square-meter house with his wife outside Beijing's Sixth Ring Road for a total price of 140 million yuan.The down payment and handling fees for the house are made up of the savings accumulated by myself and my wife in the past 4 years, as well as the "sponsorship" of the parents of both parties.Mr. Ding said with a smile that after buying the house, most of the mortgage still needs to be paid, and his life as a house slave is about to begin.

In recent years, when China’s real estate prices have risen faster than wages, there are often three families behind the new house buyers like Mr. Ding and his wife. Four plus two" house buying model.

Buying a house with a mortgage has become the choice of the vast majority of home buyers. As the saying goes, spending today's money to realize tomorrow's dream, so how does the mortgage work?

There was a popular story in 1999, to the effect that there was a Chinese old lady and an American old lady. The Chinese old lady had saved all her life, and she didn’t save enough money to buy a new house until she was dying. The old lady in the United States first took out a loan and moved into a new house, and the loan was paid off at the end of her life, so she lived in a new house for the rest of her life.

With a mortgage loan, even if you do not have enough financial resources to buy a house, you can rely on your credit to realize your dream of living in peace through a personal housing loan.Here are some basics about personal home loans:
loan amount.According to the regulations of the People's Bank of China, the maximum loan for home purchases should not exceed 80% of the house price, which means that home buyers must prepare at least 30% of the down payment (requirements vary from place to place).As for how to determine the ratio of loan and down payment within this range, it should be considered comprehensively according to one's actual ability and future income.

Loan method.There are three types of personal housing loans, namely personal housing commercial loans, housing provident fund loans and personal housing combination loans.Personal housing commercial loans are loans issued by banks with credit funds.The funds of housing provident fund loans come from the housing provident fund deposits deposited by employees, so this type of loan is only loaned to those depositors of housing provident fund, but there is a limit on the amount.A personal housing portfolio loan is a combination of the above two types of loans.

Lending rates.When the benchmark interest rate changes, the personal housing commercial loan interest rate and the provident fund loan interest rate will generally be adjusted accordingly. In theory, loans using this interest rate are called floating rate loans.The specific adjustment method of the floating interest rate shall be determined through negotiation between the borrower and the commercial bank when signing the loan contract.In recent years, some commercial banks have introduced housing loans with fixed interest rates.The so-called fixed interest rate loan means that within a certain period, no matter how the country adjusts the interest rate, the lender only pays interest according to the loan interest rate stipulated in the loan contract.There are pros and cons to both fixed-rate and variable-rate loans.If the interest rate increases in the future, it is more cost-effective to choose a fixed-rate loan and pay less interest; if the future interest rate decreases, it is more appropriate to choose a floating-rate loan.If you want to choose between these two loans, it is best to estimate the trend of interest rates in the future period of time.For fixed-rate loans, the penalty for early repayment is much higher than that for floating-rate loans, which also needs attention.

Repayment.Generally, there are three repayment methods: one is to pay off the principal and interest at one time, which is relatively rare; the other is to repay the principal and interest in equal amounts every month, and the amount is clear each time, which is convenient for home buyers to arrange income and expenditure, suitable for future income Stable house buyers; the third is the equal amount of principal, that is, the principal is repaid in equal amounts every month, and the interest is calculated on a monthly basis. The total interest expense of this method is smaller than that of the previous method, but the repayment pressure in the early stage is greater.

loan term.The People's Bank of China stipulates that the maximum term of personal housing loans is 30 years.Buyers can repay the loan in advance, but they need to submit a written application to the bank and obtain the consent of the bank.

Mortgages are a deceptive way to buy.It brings in people who simply can't afford to buy a home and shouldn't buy it so early, and it creates an imbalance between supply and demand.During the mortgage process, the developer completes the house sale, gets the money from the bank, invests in the new real estate, and then asks consumers to mortgage... In this cycle, the developer's interests will not suffer any loss.And the bank does not have too much risk-once the consumer cannot repay the mortgage, the big deal is to take back the house.In this way, all the risk of the mortgage rests with the consumer.Although they have their own houses, it is still difficult to say whether the houses are their own, so "house slaves" are born.

That is to say, mortgage is only a technical means, it cannot increase wealth itself but can only balance wealth; or mortgage loan can only help those who have the ability to buy a house to fulfill their wishes in advance but cannot help those who cannot afford to buy a house.

For some consumers, the delusion of mortgages is that they may be too optimistic about their future income and underestimate the possibility of not being able to repay the bank mortgage.Therefore, without any savings, many people, even fresh graduates, will borrow money for a down payment and then mortgage to buy a house.

It should be seen that the mortgage process sometimes lasts for 20 to 30 years, which not only has a huge impact on the current life of the family, but also affects the next generation.It is precisely because the risk of "mortgage" has been hidden in the long years, so it is particularly important to have a clear understanding of it.

Today, the concept of loan consumption is gradually accepted by Chinese people, especially young people.Among the current buyers of houses and cars, a considerable number are young people who have not worked for a long time and have little accumulation.Save a little by yourself, borrow some from your parents, relatives or friends, get together the down payment, and then apply for a loan from the bank, and you will soon be able to own a house or a car.In the eyes of the older generation, this is almost unimaginable.Young people spend tomorrow's money to realize today's dream, which is the credit of bank loans.

But things have two sides.Loans help you realize your dreams in advance, but at the same time, you are burdened with debts and burdened with the pressure of repayment.If there is no guarantee of stable income in the future, the feeling of being a "negative man" is also uncomfortable.Therefore, for loan consumption, we must have a correct understanding, treat it rationally, have a long-term vision, be prepared for danger in times of peace, do what we can, and leave room for it.

Urbanization Can't Pay for Rising House Prices
(End of this chapter)