Yesterday, I discussed how a reduction in housing prices would directly impact certain industries, and many people messaged me, questioning how housing prices could possibly fall. They told me not to spread alarmist views. So today, I will use the principles of economics to thoroughly analyze several issues related to housing prices. Please be patient and watch until the end, as this episode will be packed with valuable insights.
To understand the future trends of housing prices, one must first clarify how housing prices have risen. Understanding this logic will make future trends much clearer.
So, what are the reasons for the increase in housing prices?
I believe there are only two main reasons:
One is the urbanization process following the demographic dividend. As the most populous country in the world, the rapid growth in the birth rate brought about a significant demographic dividend. Coupled with the correct measures of a series of reforms after 1978 in China, our country's economy has developed rapidly.
However, an increase in population does not necessarily lead directly to a rise in housing prices, because in the past, China has always been an agricultural powerhouse, with most people living in rural areas. Houses were essentially self-built, so following the past development model, even with a larger population, it had little to do with the growth of housing prices.
But then, China accelerated the process of urbanization, especially starting from the 1990s, with the cancellation of urban welfare housing policies. A large number of rural populations moved to cities to work, bringing the possibility of the first wave of housing price increases. Subsequently, as urbanization continued to deepen, more and more people flocked to cities, and the demand for housing became increasingly strong, providing a continuous driving force for the rise in housing prices.Secondly, there is the government's will, which goes without saying. For many years, land finance has supported governments at all levels, with income from land sales sufficient to cover the expenses of cities. At the same time, the higher the land revenue, the more funds the government has for urban construction, investment attraction, and creating a business environment, which in turn creates more employment for local residents, increases their income, and provides a safeguard for the development of the urban economy.
Therefore, the development of the real estate market has become inextricably linked to the economic development of our country and the lives of each and every one of us. Thus, in the past, regardless of the perspective, the rise in housing prices was clearly inevitable.
However, as we have developed to this point, will housing prices continue to soar in the future?
Do not rush to conclusions. Now that we understand the reasons for the rise in housing prices, let's see if we can analyze the future trend of housing prices through these reasons. Stay tuned, the exciting content is about to begin.
Firstly, let's talk about the demographic dividend. Data indicates that the number of newborns in our country is gradually decreasing, from 17.86 million in 2016 to a predicted drop below 10 million in 2021. It is evident that the demographic dividend is gradually disappearing.
After more than 20 years of rapid development and expansion, housing is no longer a scarce resource. The current situation where many families own multiple houses has become the norm, and the decline in demand has significantly reduced the driving force behind the rise in housing prices.
Furthermore, regarding the government's will, the land finance of many years has indeed solved significant financial issues for local governments. However, the problems that have arisen in its wake cannot be ignored. The high housing prices not only deplete the savings of several wallets but also burden many people with substantial debt. After paying off their loans, the money earned each month is already tight for normal living expenses, so the funds available for other consumer spending will be greatly reduced.In this way, the key link to drive economic growth, the consumer market, will become sluggish. A large number of stores and shopping malls will be deserted or even go bankrupt. The decline in people's consumption levels is not enough to support the development of the real economy, which will lead to slow economic growth or even regression.
Therefore, the land finance policy of the past is obviously not suitable for the future. The future development trend should be gradually towards high-end manufacturing, intelligent technology, and other directions. After the government gradually gets away from the reliance on land finance, the driving force for housing prices to rise will be seriously insufficient.
Analyzing here, does it mean that housing prices will fall in the future?
In fact, it's not necessarily the case, because in the latter half of the previous discussion, we ignored a problem, which is the urbanization process mentioned earlier. With the continuous increase in the development gap between cities, more and more mega-cities and first-tier cities are attracting more and more young people because of their complete supporting facilities, more employment opportunities, and rapid development vitality, causing a new round of population transfer in China.
That is, young people in big cities gather in mega-cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, young people in second and third-tier cities gather in first-tier cities, and third and fourth-tier cities attract young people from rural areas. If this development trend continues, rural areas and villages will gradually become hollowed out, and a large number of talents will eventually flock to big cities, bringing huge consumption demand, including houses.
After all, a house is also a commodity and must follow the basic supply and demand relationship. It is clear that in the future, the housing prices in big cities and provincial capitals with increasing population will still be strong, and there is enough room for increase.
On the other hand, the possibility of a sharp decline in housing prices in third and fourth-tier cities and below, as well as in rural areas, will gradually increase. Therefore, the trend of housing prices in the future will gradually show a polarization situation.Someone might ask, will this day come soon? I believe not, because the real estate market is, after all, a pillar industry of our country, related to various industries. Before local governments can break away from land finance and before the importance of housing fades, changes in housing prices will certainly be moderate. This can be verified from the recent national economic work conference, where the emphasis was on "stability".
So, what do you all think about the trend of the real estate market? When will it fall?
Feel free to leave your comments and discuss.
