This question was inspired by Professor Sun Liping of Tsinghua University, but the analytical framework and logic are my own. A true entrepreneur must be born and grow in a completely competitive market environment. In addition to the fact that land is a monopoly, real estate can be said to be a highly competitive market. For more than 20 years, a number of outstanding entrepreneurs have emerged in the real estate market. They are shrewd, perceptive, resolute, have strong judgment, the ability to draw resources, know what they want and don't want, and know what means must be used to achieve their goals. But it is such a group that has seriously misjudged the real estate adjustment since 2021. It is normal for one or two people to misjudge, and every round of small market adjustments will be encountered, but it should be the first time that such a large area of collective deafness has fallen, and since the housing marketization. There is a phrase called "the law does not hold the people accountable," which does not really mean that the "people" who break the law cannot be punished, but emphasizes that there is an external force above the "people" that plays a major role, so that the punishment of the "people" can be reduced or even exempted. Real estate developers collectively fell, and a large number of thunderboltsThey like to find such an external force that they can't control, and blaming others is an instinctive reaction, or at least a natural reaction to cover up their incompetence. But in reality, no one can stay out of it: we are both the dust crushed by the crisis and the creators of it. How to understand the current real estate situation?First, real estate has not completed a complete cycle. The real marketization of real estate was only a few years after the abolition of the physical distribution of housing in 1998, and it took about a year for it to take off in full swing. From 2000 to 2020, it has only been 20 years. A complete industry cycle takes about 30 years. In between, they are all small cycles that cannot be fully examined. In the past 20 years, real estate has really been too smooth. Although there have been short-term twists and turns, such as the adjustment in 2008, it was only a few months, less than a year. I have heard a senior expert say many times that in the prosperous period when the industry as a whole is growing rapidly at a 45-degree angle, you are lucky enough to enter the industry, as long as you don't make big mistakes, you will definitely be able to achieve good results. Real estate is one such industry. To a large extent, it is the industry that supports you and pushes you away. Some people say that this is the "dividend of the times", but in fact, it is "the dividend of the industry." "Don't lean on the grand narrative of the times for everything.
But that's not how many real estate developers thinkThey believe that they are talented and powerful, and they can climb from 10 billion to 100 billion or even higher in the fierce market competition.
20 years of good times will make real estate bosses overestimate their abilities and ignore various warning signs. Because they have never experienced a real trough and do not know what "bad" is. Hong Kong real estate developers are the enlightening teachers of the mainland real estate market, and they are also the most important real estate investors in the mainland in the 90s of the last century. ButThey collectively missed the subsequent era of the mainland property market. I once asked a Hong Kong real estate developer why he is so conservative in the mainland marketHe replied: Because we have experienced a real crisis. For example, after the Asian financial crisis in 1997-1998, Hong Kong's property market was generally at a low price. Why do the debt ratios of Hong Kong's major property developers often remain below 30%?Because they have gone through several rounds of big cycles, and those who are alive have crawled out of purgatory. By 2023, a group of real estate developers in the mainland will finally understand. ButThere are also a large number of people who don't quite understand, feel that they haven't done anything wrong, and are always complaining. The only explanation is that the price they paid was not deep enough. Second, what did they misjudge?As mentioned earlier, it is not difficult to know what is going on. But in fact, many real estate developers have a prediction of market adjustmentThey misjudged the magnitude and length of the adjustmentI didn't expect this round of adjustment to be so drastic and so long. Many real estate developers entered the real estate development industry in the 90s, and in the past 20 years, they have also encountered problems and ups and downs. But as I said earlier, the adjustment of these small cycles in the middle, some of which only took a few months, cannot be regarded as really "difficult". After the Asian financial crisis, how long has Hong Kong's property market adjusted?6 years. The last round of real estate regulation on the mainland started in October 2016, but after 18 months, it was not until the second half of 2018 that the market reacted a little, and the houses were not so easy to sell. A senior executive of a well-known real estate company told me that the company misjudged the situation, which is why it took so much land in 2017. But unexpectedly, in 2019, it reversed again, and the sales area and sales of commercial housing across the country hit a new high. Driven by optimism, mainstream real estate companies continue to amplify leverage and grab land everywhereIn the first year of the epidemic, the sales office was closed for three months, but the sales volume in 2020 actually hit a new record. I still can't understand how this miraculous phenomenon happened. It would be too mean to say that it is a return to the light. So,Sometimes you have to admit your ignorance, there are so many things that human beings don't understand. If you are ignorant, but you refuse to admit it, or even indulge your own stupidity, you will inevitably attract the retaliation of the market, sooner or later, big or small. Therefore, in 2021, 2022, and 2023, real estate will usher in a three-year adjustment. Some real estate developers predicted the adjustment in 2021 or even 2022, but did not predict that it would last until 2023;Some developers predicted that there would be a 20% adjustment, but they did not predict that there would be a % adjustment. In three years, the total scale has been cut in half. So,The past three years have not been a simple adjustment, this is a fall, a cliff-like fall. As for next year, few people will dare to **. Third, why misjudged, and why fell off a cliff. On the surface, they are two problems, but in essence they are two sides of the same problem. The official statement is that the old real estate model is unsustainable, that is, the development model of high debt, high leverage and high turnover, has come to an end. But real estate friends will ask, why did this model work well in the first 20 years, but it won't work in the second half of 2020?Success before does not guarantee success after;Real estate has prospered for 20 years, and it can prosper for another 20 years, which is self-defeating. Specifically, I summarize it into a few overlays:First, housing consumption, which has been overdrawn for many years, has finally exhausted. Someone must buy a house after building it, and the house price has been **. It's a myth. We all used to believe in it. There are a large number of houses around the city, a large number of them vacant, and we all deliberately turn a blind eye;According to the Central Bank's survey on urban household assets (released in April 2021), the average household owns a house15 sets, we all deliberately turned a blind eye. It is impossible for any industry to continue to grow rapidly and never look back. What plain common sense. What's more, China's real estate has grown for more than 20 years, which is rare in the world. Second, the economy has turned to medium-low growth. Officially, this is called the high-quality growth stage. China's rapid economic growth has lasted for more than 20 years, and the medium-high growth has lasted for more than 10 years. However, it is neither objective nor realistic to always demand that such medium-high growth be maintained. Economists say that we are in the "L" side, but we don't know how long the line is. Economic growth is linked to employment, and if the growth rate is low or even low, it will be relatively difficult for employmentEmployment is linked to income expectations, and shrinking income expectations will reduce the desire to consume, including buying a house. What a simple truth. The third is the synergy of policies. It is mainly for the three red lines for real estate enterprises and the two red lines for banks. Some people say that it is these red lines that determine the depth of this round of real estate adjustment. Judging by the timeline, it makes sense, becauseThe crisis of real estate companies is the depletion of liquidity, and the reason for the depletion is due to several red lines. Moreover, it is from the demand side of enterprises and the supply side of banks to tighten at the same time, which is really fatal. But from the perspective of macroprudential management, you will also understand. You have a real estate industry that occupies a quarter of the credit resources for a long time, and the development of other industries also needs money!Since October 2016, I have thought of any way, but real estate just can't come down. If it weren't for the violent slamming on the brakes, it really wouldn't have been able to brake. Of course, in hindsight, the brakes were slammed. Another policy factor, purchase restrictions, is limited, because purchase restrictions have been imposed since 2010, but house prices have been risingFrom this point of view, on the other hand, several red lines have actually been suspended this year, and the purchase restrictions in various cities should have been withdrawn long ago. The four and five factors account for a weaker proportion. Fourth, negative population growth. The negative population growth that began in 2022 has had an impact on many industries, including real estateBut not the immediate impact, it's a slow impact. Fifth, the international economic and trade situation is becoming more and more complicated. The global industrial chain is being reshaped, the outward space is compressed, and the pressure is transmitted and accumulated inward, so we are becoming more and more involuted. Involution compresses demand, including housing demand. The superposition of multiple factors such as economy, industry and policy, together with the force, has led to a cliff-like fall of real estate. And why it started in 2021, I can't really explain. Like, why did World War II start in 1945?Real estate developers collectively misjudged, first, the signal of "housing is not speculation", they have misread, and I don't know that this is a completely different guiding meaning from the past;Second, I didn't expect the superposition of the above factors to be so powerful. There is no gas, and the old locomotive of the real estate is halfway away. Many people say that the property market is a "policy city", but the 2011 ** Economic Work Conference actually sent a signal to correct the property market policy, and the 2022 ** Economic Work Conference issued a signal of a comprehensive relaxation of the property market policy. Why is the policy turning, and the real estate in the past two years is still adjusting, and it is getting more and more difficult every year?The reason may be, as mentioned earlier,The cliff-like fall is caused by the superposition of multiple factors, and the turn of real estate policy alone is far from enough. For example, the economy, employment, income, population, housing consumption, etc., any of these aspects are difficult to show a V-shaped reversal in a short period of time. Not to mention the scarring effect. This is a different time and requires patience. If the recent rumors are true, the banks will give a large number of unsecured loans to real estate companies, which is essentially an injection of liquidity, which of course can solve the big problem. The real estate companies in these whitelists basically survive without worry. However, how to solve the problem of injecting liquidity without collateral is a world-class problem, and it is expected that regulators can learn from the practices of mature economies (such as issuing warrants) to find innovative solutions.