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The Undercurrent Flow of Cooling in Second-tier City Property Market

Inventory in the real estate market has always been the barometer of the market, which directly affects the market land supply and the sale of commercial housing. Shanghai Yiju Real Estate Research Institute in May, "China's Baicheng Inventory Report" showed that the inventory of second-tier cities, which has been hot for 47 months, is growing year-on-year for the first time, and some cities have stepped out of the previous low inventory situation.

In response, industry insiders explained that due to changes in policy in some second-tier cities, in May, as the market cooled down, trading volume began to decline, resulting in a rebound in inventory data. Therefore, it is foreseen that the second-tier real estate market will begin to turn under the undercurrent of cooling down in the second-tier urban real estate market.

Inventory is growing year-on-year for the first time in 47 months

On June 19, Shanghai Yiju Real Estate Research Institute released its May "China Baicheng Inventory Report" (urban residential inventory for pre-sale licenses but not for sale of residential projects, including futures and existing housing) which showed that by the end of May, the total inventory of newly built commercial residential buildings in 100 cities on the first, second and third tiers was 28.05 million and 221.31 million respectively. In 2000.69 million square meters, the annual growth rates were -2.5%, -0.1% and -0.6% respectively, and 33.6%, 0.3% and 8.2% respectively.

It is worth noting that the second-tier cities have ended the 46-month decline in inventory over the same period of last year. At present, for the first time, there is a positive growth over the same period of last year. The stock fundamentals of the second-tier cities are beginning to change, reflecting the expected turn of the second-tier cities from the side.

In response, Yan Yuejin, director of research at the think tank center of Yiju Research Institute, explained that the first positive increase in inventory data was an important signal. In other words, house prices in second-tier cities have been rising in the past few years, and inventory digestion has been rapid, which in turn has led to the continued rise of house prices. Especially in the second-tier cities, the talent settlement policy has made the real estate digestion in all parts of the country good.

However, "the policy risk of the second-tier cities has changed recently, the most typical one is that Suzhou has adopted restrictions on the sale of Suzhou Park and Chengdu has adjusted the interest rate of bank loans, which shows that some of the second-tier cities have found changes in policy." Yan Yuejin said that by May, with the market cooling down, housing transactions in second-tier cities began to decline, and some inventory data rebounded.

According to the data of Haiyiju Real Estate Research Institute, 57 of the 100 cities in May showed a positive increase in inventory over the same period of last year. Similar to Nanjing, Fuzhou and other low-inventory provincial capitals, inventory growth rate reached 81% and 72% respectively. However, there have also been inventory declines in Jinan, Hefei, Zhengzhou, Nanning, Hohhot and other provincial capitals.

Real Estate Market Cooling Momentum Appears

With some cities out of the low inventory stage, 58 cities and settlers released the May National Housing Index Report, which also shows the cooling trend of second-tier cities.

The above report shows that in May, the "Xiaoyangchun" of the real estate market ended, the heat of the real estate market was polarized, and the driving force of house price rise was weak. In May, China's new housing search fever fell by 2.4%, in the first-tier cities by 0.5%, and in the second-tier cities by 4.1%.

During the short and long Dragon Boat Festival holiday in 2019, the data of the first and second tier cities also showed signs of steady decline. According to the market report of the Central Plains Real Estate Research Center, Chengdu, Nanjing and Jinan are the cities with obvious adjustment in the second-tier cities.

In fact, in addition to demand, the previous housing boom in second-tier cities was also hinted by the land market.

According to the Central Plains real estate data, as of June 17, the total amount of land sales in 40 hot first and second-tier cities in China reached 1.4 trillion yuan, up 20.7% year-on-year. Most of these are land transactions in second-tier cities.

It is reported that since April, the land market has been warming up in some second-tier cities, especially in Suzhou, Wuhan, Hangzhou and other second-tier cities.

In terms of urban distribution, Hangzhou sells 122 billion yuan, Suzhou 82.7 billion yuan, Tianjin 80 billion yuan and Wuhan 75.8 billion yuan respectively. These second-tier cities have sold more land than 71.4 billion yuan in Beijing and 67 billion yuan in Shanghai.

Policy tightening, expected to "cool down"

Under the influence of the fierce land market, some urban policies have been tightened again since May.

According to Zhongyuan Real Estate Statistics, in May, 41 real estate regulation measures were taken by all localities, including ministries and commissions.  Although less than 60 times in April, real estate is in a period of intensive regulation for two consecutive months.

On June 20, Xi'an launched a real estate control policy aiming at housing speculation under the household loan policy, housing speculation by some immigrants and housing speculation in some suburban markets. Among them, it is mentioned that non-registered persons need to satisfy the conditions of social security for five years to buy houses in Xi'an restricted area.

In this regard, Yan Yuejin believes that the important reason for the tightening of Xi'an's policy is that in the ranking of 70 cities'house price index in the whole country, Xi'an's newly built commodity housing price index ranks first in the ring-to-ring growth rate for six consecutive months and belongs to the city where house prices are rising too fast.

Yan Yuejin said that at present, some second-tier cities have relatively loose household policies, which has led to a sharp increase in the demand for house purchases and speculation demand. Follow-up provincial capitals or second-tier cities, for talent purchase or will fill the loopholes, which will inevitably affect the follow-up market transactions, and then drive up the inventory of second-tier cities.

Because of the continuous tightening of the regulatory policy affecting the market, the enthusiasm of home buyers to enter the market in May has significantly decreased. As a result, Zhang Dawei said that Xiaoyangchun, which was caused by the easing of funds at the beginning of 2019, had a rapid fever abatement under the influence of policies.