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All SOEs` money is owned by the Chinese people， all banks` money is saved by ordinary people， and it is definitely a good stage performance of pushing up Chinese house prices.
The Chinese real estate market these months has been very boisterous and ordinary people are all filled with confusion. On the one hand， official media are completely on the side of ordinary people， call for de-stocking， criticize strong stimulus， criticize pushing up house prices， Xinhua Agency even directly warns of the possibility of joint scheme of local government and developers. On the other hand， ridiculous statistics reveal that there are some priceless land bidders and house prices will hit new historical high in the future， but transactions in Beijing， Shanghai and Shenzhen improve thin. What the hell is the situation？
The first question would be “Will the central government take any measure as house prices continue to go up？” What ordinary people usually respond to house prices is that the government will not let house prices fall because numerous and complicated interest entities are involved. Actually， the government wants to control house prices. The first and second tier cities run the risk of real estate market bubble and it will one day trigger serious siphonic effect if prices continue to increase insanely； and ordinary people are selling to their house in third， fourth， or fifth tier cities in order to afford one house in first and second tier cities. Further evolution like now definitely harms the house destocking and China market will be mixed with fire and ice.
Some cities with serious inventory have been troubled by house sales， and the inventory buildup would be much more serious if ordinary people sell houses for one house in first and second cities. Therefore， the final picture would be more pressure on destocking in poor cities and higher prices in rich cities. As a result， the dilemma occurs for many entity economies in first tier cites such as Huawei who has to move outside Shenzhen and Apple whose agents are forced to resettle in India. This couldn`t be good things for the entire economy.
The second question would be“Why do key SOEs scramble for lands with successive foreign capital outflows？” The Chinese market has already formed a bubble of high level and the ratio of renting and sales in first tier cites has reached 50-100 times， that is to say， the money used to buy a house is enough for renting the house for 100 years without even considering interest rate. Confronted with upsurge in house prices within the Chinese real estate industry， international capitals having witnessed countless bubble burst leave the Chinese market with gorgeous manners after making enough money. Statistics prove that foreign direct investment in real estate market has been minus since last Sept and foreign capital outflow has been expediting as house prices continue to go up. Then who is going to invest in the market？
The largest proportion of the invested capital is undefined and very possibly belongs to banks` Off-balance Sheet Activities. Haven`t you seen that the top bidders are all key SOEs？ Poly Group seizes the Shanghai market with tripled prices， China Overseas grasps the Beijing market， and SOEs such as China Resources Greenland Group， Overseas Chinese Town， etc. perform aggressively. Where does the money come from？ From banks undoubtedly. There are rumours that banks support key SOEs to buy when the market bottoms out， even at the cost of exempting their interests. In other words， banks don`t earn any money from this at all as key SOE`s are only offered with interest rate of 5% and banks` profitability from bank financing is around 4-5%.
As key SOEs` borrowing cost is low and the money is not their own， they won`t care much about how the money is spent. Some local SOEs even promise local governments to undertake the task of pushing up land prices， and that`s why Land King occurs one after one. If house prices don`t go up， how could these key SOEs repay to banks？ Seemingly， it`s about to witness another upsurge of house prices in first and second tier cities.
The third question would be that“Only key SOEs and banks can play in the real estate market as in a senior casino？” The financing cost of private investment basically exceeds 10% and therefore its competitive edge was lost long time ago. Together with foreign capital outflows， only key SOEs and banks are left to perform in the market， and coincidently the money is not directly owned by them.
These two market players are wasting the savings of ordinary people， but ordinary people taste the bitterness of high house prices and worried about the sudden bubble burst. Why do these two rich players care so little about the money？ For banks， obviously they are not afraid of losing money， as bank governors are free of responsibilities if key SOEs couldn`t repay. For key SOEs， their borrowing cost is low， and being the Land King could help propel house prices to go up and become the best advertisement carrier as ordinary people would fear that it would be more difficult for them to afford a house if prices go higher. As a result， financing mortgages for key SOEs will be easier.
According to relevant statistics， hot 20 first and second tier cites， including Beijing， Shanghai， Shenzhen， Guangzhou， Suzhou， Nanjing， Hefei， etc.， have experienced constant land market upsurges and lands of three “Upsurges”（High total price， High unit price， and High premium） are frequently reported. There are as many as 118 land deals with the premium rate （（Traded Price– Land Cost Price） / Land Cost Price） of 51 deals as high as above 100%， the highest rate being 400%.
All SOEs` money is owned by the Chinese people， all banks` money is saved by ordinary people， and it is definitely a good stage performance of pushing up Chinese house prices. The first step for the central government to suppress house prices is to have a good control of SOEs and also the small treasury of banks.
The Chinese real estate market these months has been very boisterous and ordinary people are all filled with confusion. On the one hand， official media are completely on the side of ordinary people， call for de-stocking， criticize strong stimulus， criticize pushing up house prices， Xinhua Agency even directly warns of the possibility of joint scheme of local government and developers. On the other hand， ridiculous statistics reveal that there are some priceless land bidders and house prices will hit new historical high in the future， but transactions in Beijing， Shanghai and Shenzhen improve thin. What the hell is the situation？
The first question would be “Will the central government take any measure as house prices continue to go up？” What ordinary people usually respond to house prices is that the government will not let house prices fall because numerous and complicated interest entities are involved. Actually， the government wants to control house prices. The first and second tier cities run the risk of real estate market bubble and it will one day trigger serious siphonic effect if prices continue to increase insanely； and ordinary people are selling to their house in third， fourth， or fifth tier cities in order to afford one house in first and second tier cities. Further evolution like now definitely harms the house destocking and China market will be mixed with fire and ice.
Some cities with serious inventory have been troubled by house sales， and the inventory buildup would be much more serious if ordinary people sell houses for one house in first and second cities. Therefore， the final picture would be more pressure on destocking in poor cities and higher prices in rich cities. As a result， the dilemma occurs for many entity economies in first tier cites such as Huawei who has to move outside Shenzhen and Apple whose agents are forced to resettle in India. This couldn`t be good things for the entire economy.
The second question would be“Why do key SOEs scramble for lands with successive foreign capital outflows？” The Chinese market has already formed a bubble of high level and the ratio of renting and sales in first tier cites has reached 50-100 times， that is to say， the money used to buy a house is enough for renting the house for 100 years without even considering interest rate. Confronted with upsurge in house prices within the Chinese real estate industry， international capitals having witnessed countless bubble burst leave the Chinese market with gorgeous manners after making enough money. Statistics prove that foreign direct investment in real estate market has been minus since last Sept and foreign capital outflow has been expediting as house prices continue to go up. Then who is going to invest in the market？
The largest proportion of the invested capital is undefined and very possibly belongs to banks` Off-balance Sheet Activities. Haven`t you seen that the top bidders are all key SOEs？ Poly Group seizes the Shanghai market with tripled prices， China Overseas grasps the Beijing market， and SOEs such as China Resources Greenland Group， Overseas Chinese Town， etc. perform aggressively. Where does the money come from？ From banks undoubtedly. There are rumours that banks support key SOEs to buy when the market bottoms out， even at the cost of exempting their interests. In other words， banks don`t earn any money from this at all as key SOE`s are only offered with interest rate of 5% and banks` profitability from bank financing is around 4-5%.
As key SOEs` borrowing cost is low and the money is not their own， they won`t care much about how the money is spent. Some local SOEs even promise local governments to undertake the task of pushing up land prices， and that`s why Land King occurs one after one. If house prices don`t go up， how could these key SOEs repay to banks？ Seemingly， it`s about to witness another upsurge of house prices in first and second tier cities.
The third question would be that“Only key SOEs and banks can play in the real estate market as in a senior casino？” The financing cost of private investment basically exceeds 10% and therefore its competitive edge was lost long time ago. Together with foreign capital outflows， only key SOEs and banks are left to perform in the market， and coincidently the money is not directly owned by them.
These two market players are wasting the savings of ordinary people， but ordinary people taste the bitterness of high house prices and worried about the sudden bubble burst. Why do these two rich players care so little about the money？ For banks， obviously they are not afraid of losing money， as bank governors are free of responsibilities if key SOEs couldn`t repay. For key SOEs， their borrowing cost is low， and being the Land King could help propel house prices to go up and become the best advertisement carrier as ordinary people would fear that it would be more difficult for them to afford a house if prices go higher. As a result， financing mortgages for key SOEs will be easier.
According to relevant statistics， hot 20 first and second tier cites， including Beijing， Shanghai， Shenzhen， Guangzhou， Suzhou， Nanjing， Hefei， etc.， have experienced constant land market upsurges and lands of three “Upsurges”（High total price， High unit price， and High premium） are frequently reported. There are as many as 118 land deals with the premium rate （（Traded Price– Land Cost Price） / Land Cost Price） of 51 deals as high as above 100%， the highest rate being 400%.
All SOEs` money is owned by the Chinese people， all banks` money is saved by ordinary people， and it is definitely a good stage performance of pushing up Chinese house prices. The first step for the central government to suppress house prices is to have a good control of SOEs and also the small treasury of banks.