Ren Zeping: Suppressing the housing bubble to strengthen supervision rather than strengthen regulation

In mid-2015, we predicted that “the first-line housing prices will double, and the third-fourth line will not move.” Then, the first-line housing prices skyrocketed, and the pressure on the third-fourth line was still large. On July 26, the Politburo meeting proposed a suppression of asset bubbles. Recently, Xinhua News Agency has reviewed the property market for three consecutive days.

Investment points:

The Politburo meeting proposed to curb the housing bubble and raised concerns about real estate regulation.

Recently, the news of the property market policy continued: Xinhua News Agency reviewed the property market for three consecutive days. On July 26, the Politburo held a meeting, pointing out that the focus of cost reduction is to increase labor market flexibility, curb asset bubbles and reduce macro tax burden. The market is about to start a new round of regulation and control policies. The policy seems to face a choice between “de-stocking”, “steady growth” and “anti-bubble” and “cost reduction”.

The central ZF is the main body of macro-control of real estate.

1) Since the housing reform in 1998, China's real estate market has experienced rapid development. The staged overheating has always triggered the call of “regulation”. After the market is weak, all circles have called for “saving the market”. It is often confused with the daily regulation of the market and the regulation of counter-cyclical.

2) The first document on the macro-control of the real estate market is the “Opinions on Strengthening the Macro-control of the Real Estate Market to Promote the Healthy Development of the Real Estate Market” issued by the Ministry of Construction and other six ministries and commissions in August 2002. The document was the “Notice on Further Strengthening the Management of Real Estate Credit Business” issued by the People's Bank in June 2003. Since then, the Ministry of Construction and the People's Bank have assumed the main functions of the housing market regulation.

3) Since September 2014, the second suite certification standard was adjusted, and in February 2016, the transaction link tax was adjusted. In terms of differentiated credit, transaction tax and fee concessions, etc., the housing construction, finance, and central bank have already played a series of policy combinations. . The policy has stimulated the recovery of the real estate market. Since the beginning of this year, the real estate market has continued its upward trend last year, but the regional differentiation, uneven heat and cold situation is more obvious. In the face of regionally differentiated markets, as the main body of macroeconomic regulation and control, the central ZF is unlikely to take control, and more responsibilities will be handed over to the local ZF, the so-called "street policy."

The local ZF is the main body of GDP appraisal, and it will only regulate and control the big flag and implement supervision.

1) Since the Central Economic Work Conference held at the end of last year, the real estate market regulation has set the tone for “total destocking and local anti-risk”. The regulation has already been laid out, and the rest is handed over to the local ZF “Because of the city policy” Do a good job in market supervision. However, housing prices in first- and second-tier cities have skyrocketed, and local ZF shoulders two important tasks of “de-stocking” and “suppressing the housing bubble”, so they have to control the banner and implement supervision.

2) A closer look at the policy direction since this year reveals that the policy has not changed significantly. Suzhou's "Regulations and Ten Articles" emphasizes controlling the growth of housing prices and strengthening market supervision. It requires real estate companies to disclose their prices and prices at one time, to prevent reluctance to sell and to take advantage of price increases. Nanjing’s “Ning 17 Articles” is to strengthen the supervision of the supply of commercial residential land and regulate the sales price behavior of the real estate market. Hefei’s “Eight Eight Articles” is concerned with the record management of commodity housing prices and the implementation of differentiated credit policies. The policies of second-tier cities still follow the differential credit, standardize the development of corporate behavior, and regulate the supply of land. There is no “restricted purchase” to avoid accidental injury. The Xinhua News Agency has issued three articles on real estate, and the Ministry of Housing and Urban-Rural Development has seen the opening of the small-scale real estate. It is more to show that ZF pays close attention to real estate trends, masters public opinion, and strengthens supervision over market volatility. If the market is wrong, it is thought that the regulation of the reins will have to be tightened, which will not only stabilize the market, but will also increase panic.

Distinguishing between market regulation and market regulation is the key to identifying future housing market policies.

On July 3, 1998, the "Notice of the State Council on Further Deepening the Reform of Urban Housing System and Accelerating Housing Construction" was officially issued, marking the beginning of China's real estate marketization. Today, 18 years later, ZF still has two roles, regulation and supervision.

Regulation and regulation are fundamentally different.

First, the use scenarios and purposes of the two are different. Real estate regulation and control is a policy adopted in the event of market failure. The direct purpose is to guide market expectations and correct market failures. Real estate supervision is to regulate the market subject policies of buyers and sellers. The direct purpose is to correct the misconduct of micro-subjects and prevent possible market risks. .

Second, the specific means of the two are different. Real estate regulation and control mainly includes demand-restriction, price limit, credit measures, taxation policies, financial subsidies, land supply at the supply end, and supply of affordable housing. Real estate supervision, on the demand side, includes regulation of real estate transaction procedures, prohibition of high-leverage behavior such as down payment and capital allocation, and regulation of intermediary behaviors. On the supply side, it includes regulating developers' land acquisition, pricing and pre-sales.

Third, the intensity and direct effects are different. Real estate regulation and control is an active intervention-type measure that directly affects the short-term supply and demand of real estate. Real estate supervision is a passive preventive measure. It only imposes constraints on the behavior of market entities that disrupt market order. Under normal circumstances, it rarely impacts the overall operation of the market.

Policy outlook for the second half of the year: There will be no major turning point in the regulation of the housing market, but the supervision will be strengthened; regional policy differentiation; cooling the land market; property tax and interest-to-tax policy will be difficult to launch in the short term

1) At present, the main ideas of real estate regulation and control are “total inventory, local risk prevention, urban policy, and classification guidance”. In the current stage of market differentiation and market participants are not expected to undergo a fundamental change, market regulation policies will be introduced, and regulatory policies may not undergo major changes. If regulation and control policies are introduced too frequently, increase the uncertainty of market development, increase market volatility, and even affect normal investment and consumption, and increase speculators' arbitrage. Under the background of economic downturn, heavy inventory pressure on the third and fourth tiers, and rapid growth of first- and second-tier housing prices, it is expected that ZF's style in real estate policy will be: strengthen industry supervision, dilute administrative regulation, and moderately intervene in some places. .

2) Market differentiation and policies are also differentiated. In terms of destocking, although the area of ​​commercial housing sold by the Bureau of Statistics was reduced by 4.37 million in the first half of the year, the area for sale of residential buildings decreased by 16.5 million square meters, and the narrow inventory of commercial housing and commercial housing remained as high as 71.36 million and 435,980,000, considering that the construction is not for sale, and It has been planned to be undeveloped, and the potential stock of real estate is huge. In the first half of the year, the inventory of first- and second-tier cities will be very fast, but the destocking of third- and fourth-tier cities and even second-tier cities in the central and western regions will be a long-term battle. In terms of risk prevention, first-tier cities have returned to rationality, and the effects of control measures have begun to appear, but there is still pressure on housing prices. ZF will continue to monitor and pay attention to it; demand for hot-spot second-tier cities will be released, and investment speculation demand will emerge under consensus expectations. Supply and demand are tight, and prices are rapidly pushed up. Therefore, it is still the main tone of the second-tier cities to prevent developers from taking the opportunity to raise prices and increase effective supply.

3) Persuading the state-owned enterprises to fight for the land and cool the land market. At the beginning of the year, we talked about "the logic of the land king", emphasizing that in the context of the integration of central enterprises with "big fish and small fish", taking cash for assets and mastering ample land reserves not only has an advantage in valuation, but also has the right to speak. In the first half of the year, the frequent occurrence of the king has caused great concern from public opinion and ZF. In the second half of the year, some cities will not rule out the use of “administrative talks” and land auctions to persuade central enterprises to cool the land market. However, the decreasing supply of land and the dependence of local ZF on land finance have determined that the land king will only be postponed and it is difficult to be banned.

4) Property tax does not have the conditions for introduction in the short term. The Third Plenary Session of the 18th CPC Central Committee proposed to speed up the real estate tax legislation and promote reforms in a timely manner. Since then, the rumors of the introduction of property tax have been heard. We believe that the property tax reform should be preceded by legislation and meet the six preconditions: First, carry out a nationwide housing census to grasp the basic situation of housing in the country; second, establish a national unified real estate registration system, accurately and timely collect housing registration and Transaction data to achieve nationwide networking, real-time query; Third, the definition of the nature of the house, due to historical reasons, currently only in Beijing, there are different types of housing, such as central production room, military production room, affordable housing, two limited housing, property rights The difference is large, the tax base is not uniform; the fourth is to complete the real estate tax reform. At present, there are 11 kinds of taxes in the real estate taxation. The construction, trading, and retention links should be reset to avoid double taxation. Fifth, the urban housing security should be completed. The legislation of the Regulations clearly defines the “basic housing standards” of residents to determine the exemption conditions for property taxes. Sixth, the completion of the revision of the "Tax Collection and Administration Law" provides a basis for taxation according to law.

5) Interest-to-tax is currently not a suitable time to launch. As early as 2003, the Third Plenary Session of the 16th CPC Central Committee proposed that the direction of China's personal income tax reform is to implement a personal income tax system that combines comprehensive and classified policies. In 2011, the Individual Income Tax Law was amended to raise only the tax threshold. At 3,500 yuan, its taxation model has always been a classified income system. The Third Plenary Session of the 18th CPC Central Committee decided to propose again, gradually establish a personal income tax system that combines comprehensive and classified, and the individual tax reform should be on the arrow.

The so-called "integration and classification" is to calculate the total income of individuals, and take into account the difference in family types, determine the scope of pre-tax deduction. From the international experience, pre-tax deductions generally include rent, interest expenses, medical expenses, specific commercial insurance and social security expenditures, etc., taking into account the support of the population, mortgage loans, etc., covering housing, education, pension, etc. .

The mortgage interest tax is in line with the overall reform of the individual tax. It needs to be clear that the pre-tax deduction is not only the mortgage interest, but also the possible deduction.

In the current market environment, if interest tax is introduced, the first- and second-tier cities with higher mortgage utilization rates will take the lead, but the house prices will be fueled. High-inventory third- and fourth-tier cities have low leverage ratios and limited destocking. Therefore, at the current time, it may not be a suitable timing for launch.

6) The transaction tax will not be raised in the first-tier cities, and the third-fourth line may be requisitioned and restocked. At present, in the real estate transaction, there are six types of taxes, such as value-added tax, urban construction tax and education surcharge, land value-added tax, corporate income tax, personal income tax, and deed tax. Among them, the transfer of housing to individuals is exempt from land value-added tax. The taxation of trading links is intended to combat short-term speculative demand, but in a market situation where supply and demand are tense, the seller will pass the taxes and fees to the buyer and cannot achieve the purpose of regulation. Due to the fear of accidental injury, the transaction tax is naturally "ceiling" and there is no room for upward adjustment in the short term. The deed tax and business tax reduction at the beginning of the year have largely excluded first-tier cities. In the second half of the year, cities with large inventory pressures may pass the “first levy and then make up” to reduce the transaction tax and encourage the purchase of houses.

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