Hexun News: The Center for China and World Economy (CCWE) at Tsinghua University recently released its Q3 macroeconomic report, stating that since 2014, China's real estate market has gradually entered a long-cycle adjustment process, the overall landscape of real estate has changed, forcing the transformation of real economic growth.

Some question whether urbanization has reached阶段性 saturation, some say real estate is no longer working. Mao Daqing, Senior Vice President of China Vanke Co., Ltd., believes that one cannot persistently badmouth China's real estate like Xie Guozhong does; in fact, its problems are very complex.

The CCWE report states that overall, the homeownership rate of Chinese residents is already high, and the housing demand of urban residents is gradually being met. At the same time, China's demographic structure is quietly changing, with the proportion of young people in urgent need of housing declining. Second, and most importantly, the advancement of interest rate liberalization has objectively reduced the investment demand for real estate. The continuous emergence of various wealth management products and other financial investment products has increased the investment channels and returns available to people, and investors' preferences have changed from buying houses to preserve value in the past to preferring to hold cash. Based on the above judgments, the conclusion is that the turning point of the real estate market has arrived.

In response, Mao Daqing (property market) believes that the first issue is indigestion. From 2003 to 2013, the country issued a total of 179 regulatory policies, targeting 60-70 cities. These cities have undergone great differentiation in the past two years. First, land was oversold, resulting in current demand not keeping up, and then indigestion. "Cities like Beijing (property market) are selling land again this week, and there will definitely still be competition. Why are people still competing when real estate is not good? Because land resources are highly scarce, everyone is still optimistic about the future. But houses in Beijing are also not selling well, because Beijing's housing prices have overdrawn consumption capacity and the market. This all needs time to adjust. In the past years, we relied on policy adjustments, which covered up many real market conditions."

Which cities are suffering from indigestion? Among the 50 targets emphasized for regulation in the National Five Measures, mainly second-tier cities, about 27 are weak regulation targets. In 2012, the government catered to investment and sold a lot of land, and the market absorbed a lot of land. In fact, such cities have strong economic cohesion; provincial capitals are not weak in science and technology, education, and medical capabilities. Why do they suffer from indigestion today? First, too much land was sold too quickly; second, the imported population is insufficient. The economic structures of these cities are mostly traditional; some cities are dominated by steel, coal, ceramics, and building materials, and transformation is difficult, so digestion is very tiring.

"At present, these cities have relaxed, and purchase restrictions have become nominal, because these cities did not have strong price limits to begin with. What truly drives the economy is not these houses, but industrial structure adjustment," said Mao Daqing. "China's real estate market will definitely have no problem developing for another ten or eight years, but this good depends on real changes in the real economy."

Taking Beijing as an example, 60% of the market is monopolized by 30% of the population. "If this situation disappears, the market structure will change again. Perhaps products will become 70% or 80% of products facing 70% or 80% of the population. At that time, what is faced is the real money in ordinary people's wallets, and this is the problem of the real economy," Mao Daqing believes. No matter how many houses are built in Beijing, Shanghai, Guangzhou, and Shenzhen, it is not enough, because the degree of urban resource aggregation is high, and it is difficult to break up this aggregation through administrative orders or subjective wishes.

Although this degree of aggregation cannot be changed for the time being, the market's buyer population is also changing. Taking high-end properties as an example, their buyer population is declining. First, the asset saturation of the main buyer group is already quite high, and subjective purchasing willingness is decreasing; second, it is related to anti-corruption; third, it is related to the real economy. Those who can afford these houses are all related to the coal, oil, and steel industries, and now these fields are saturated and need transformation. Only in new mainstream industries will new purchasing power emerge.

CCWE research shows that some small real estate developers will face greater pressure, while large developers are under less pressure, and the overall risk of the real estate market is controllable.

This actually relates to changes in the real estate business format. Mao Daqing believes that in the future, some real estate developers will become service providers. Vanke is 30 years old this year, and in the next 30 years it aims to become an excellent urban supporting service provider. This concept is very large and the field has a very broad market. The logic of developing these assets into residential properties will not work, so it is necessary to open up the international market and seek a better asset-light model to move forward.