Abstract:
As China’s real estate sector steps down from the peak over its course of development, speculation and excessive fund inflow are no longer the major challenges standing in its way. Going forward, the market will become “easier to cool and harder to boom” - contrary to the situation in the past. Two big bottlenecks are stemming its development today and in the near future: 1) inelastic housing supply has pushed up prices in metropolitan areas, making it hard for migrant population to settle down in their places of employment; and 2) real estate developers are so indebted that it has become almost impossible for them to pay back debt with sales and operating revenues, which at the same time suppresses social credit expansion, pares down demand, and disrupts macroeconomic stability.
To address these problems, this report proposes a series of “new urban residents-oriented” solutions to metropolitan cluster development that leverage spontaneous market forces without causing excessive burden on government spending. Recommended measures include 1) increase the supply of houses and public services for new urban residents, and boost their purchasing power by setting up special institutions for housing finance; 2) restructure the debt of real estate developers with a two-pronged plan, first by implementing market-based interest rates for mortgage loans to reduce the debt repayment pressure on residents and stabilize housing demand, and second by disposing of the existing stock of housing with an “interest subsidy + REITs” model to resolve the developers’ debt risks while increasing housing supply for middle- and low-income groups.
Key words:
Real estate; metropolitan clusters; new urban residents
