Recently, the hot topic in the Chinese economic sector continues to be the fluctuation of the real estate market. A speech by Nomura Securities’ Chief Economist in China, Lu Ting, has been circulating wildly on mainland social media. The public has interpreted his views as indicating that the mainland real estate market is “in a death spiral.”
The video of Lu Ting’s speech at the 2024 annual conference of the Dushuihu Advanced Finance School at Shanghai University of Finance and Economics on May 25 has gone viral on Chinese websites. In his speech, Lu Ting discussed the pressures facing the Chinese economy, citing the downward trend in the mainland property market as a major challenge. He expressed pessimism towards the Chinese real estate market.
Lu Ting stated in his speech, “I can now make a judgment: Chinese real estate companies have almost no ability to self-repair, and I do not think that a monetary policy such as interest rate cuts can help the real estate industry break out of this situation. In fact, we have maintained this judgment for over a year now.”
On May 17, the Chinese Communist Party introduced a combination of new real estate policies that many have dubbed an “epic” market rescue. The new policies focus on reducing down payments for home purchases, lowering provident fund interest rates, and commercial housing loan rates, among others.
Lu Ting highlighted the severity of China’s “unfinished housing” issue, for which official statistics are not available. “Last year, I conducted some statistics and conservatively estimated that there are between ten to twenty million houses with overdue deliveries,” he said.
He pointed out that local governments are already in dire straits, accumulating a large amount of debt and hidden liabilities. Some well-known large state-owned real estate enterprises are also facing funding shortages.
Lu Ting’s video speech has generated widespread discussion on Chinese websites, with some self-media outlets reporting under titles like “Real Estate Is in a Death Spiral, Fasten Your Seat Belt,” sparking resonance among a large number of netizens.
Lu Ting’s views have garnered support from many internet users.
“A few days ago, during the lunch break at work, everyone agreed that house prices will continue to plummet for many years, it’s too scary.”
“Whether the economy can stabilize is one thing, but the real estate market collapse is a big problem.”
“The real estate we own is no longer wealth for ordinary people, but their debt.”
In reality, experts, scholars, and the general public are not optimistic about the Chinese government’s latest market rescue policies.
Many people believe that lowering the down payment for home purchases only reduces the threshold for buying a house, but the monthly mortgage payments have not decreased. With pessimistic expectations about future employment, it’s easy to get on the property ladder but difficult to get off, so many are choosing to continue observing. Why does real estate regulation policy lean towards stimulating the market through interest rate cuts and down payments for house purchases, rather than directly lowering house prices? Although house prices in mainland China have generally plummeted in the past two years, with the market on the verge of collapse, current prices are still too high for ordinary people to afford.
Some internet users jest, “Officials provide all kinds of benefits except for lowering house prices, while residents offer all kinds of support except for buying.”
Regarding the authorities’ latest market rescue policies, renowned financial expert Wang Siyuan questioned whether the drastic measures could transfer the property market from the intensive care unit to a karaoke bar.
He pointed out that the current issue is that those with money do not lack homes, while those lacking homes do not have money. Even if banks significantly reduce mortgage rates, the effectiveness is uncertain, as what people lack is stable employment for the next 30 years and sufficient income to cover mortgage payments, something many do not have confidence in. Forget about the next 30 years, many people may not even have confidence in the next three years.
Wang Siyuan graduated from Purdue University in the United States with a master’s degree in finance and later obtained an MBA from the University of Toronto in Canada. Wang Siyuan previously served as an investment manager at GF Securities Co., Ltd., and was engaged in institutional trading and direct equity investment business.