Chai Qiang: Real estate sector to bounce back towards level in keeping with its actual value
The following is a summary of Chai Qiang's comments during a roundtable discussion at the 47th Tsinghua University Forum of China and the World Economy held at Tsinghua University, Beijing, on July 6, 2024. Chai is President of the China Institute of Real Estate Appraisers and Agents (CIREA).
On July 6, 2024, the 47th Tsinghua University Forum of China and the World Economy, hosted by Tsinghua University's Academic Center for Chinese Economic Practice and Thinking (ACCEPT) in partnership with the School of Economics and Management Alumni Center, was held on campus. President of the China Institute of Real Estate Appraisers and Agents (CIREA), Chai Qiang, participated in a roundtable discussion at the forum alongside other distinguished guests where he commented on the state China's real estate sector.
On July 6, 2024, the 47th Tsinghua University Forum of China and the World Economy was held inside the Weilun Building's main lecture hall on campus at Tsinghua University's School of Economics and Management. The biannual event was hosted by Tsinghua University's Academic Center for Chinese Economic Practice and Thinking (ACCEPT) under the theme of China's 2024 Mid-Year Economic Update. During the forum's proceedings, Chai Qiang, President of the China Institute of Real Estate Appraisers and Agents (CIREA), participated in a roundtable discussion alongside other distinguished guests where he commented on the state of China's real estate industry.
Chai Qiang considers the predicament facing China's real estate market to primarily derive from the inevitable patterns that underpin an industry’s development. After multiple decades of large-scale urban development and construction, the Chinese people have more or less resolved the problem of “having or not having housing,” and are now gradually transitioning towards the new criterion of “having superior or inferior housing.” Therefore, the real estate market is inevitably facing a transformation from a continual expansion in the development of new housing stock to the reconsolidation of existing housing stock, with the development model of the past that focused on large-scale expansion and construction no longer being applicable. In the past, real estate companies turned a blind eye to their expansionary behavior, which became manifested in their “three highs” approach to development, i.e.,“high leverage, high debt, and high turnover rate,” having failed to adapt themselves to the transformation of the market in a timely manner. This situation has thus given rise to the current predicament and has in turn also created a drag on the overall macroeconomy.
Chai observed that last year and this year's optimization and readjustment of real estate policy, despite being quite robust, nonetheless did not produce the intended effect, which mainly reflects the fact that the macroeconomy composes multiple components, with any stimulus policy focusing solely on the real estate market therefore being limited in its effectiveness. Any upturn in the real estate market depends first and foremost on making an overall recovery in the macroeconomy; that is to say, an improvement in Chinese residents’ employment, incomes and other indicators. Therefore, the injection of short-term stimulus cannot fundamentally reverse the downturn in this sector. When taking a longer-term outlook, Chai asserted that he remains optimistic about the future development prospects for the country’s real estate market. Given that housing in the real estate sector first and foremost of all stands for “living and working in peace and contentment,” and represents an interest-bearing asset with practical everyday value, housing simply cannot be compared to other assets such as gold or cash. Judging from the experience of Japan and the U.S., high-quality real estate properties will eventually “bypass cyclicity” to reinvigorate the market back towards a level more in keeping with its actual value.
