Whether from the perspective of demographic factors, income factors, monetary environment or credit policy, the conditions supporting the continuous rise of real estate prices in the future no longer exist. In this case, it is only a matter of time before the expectation of rising house prices changes.

The ceiling on rent depends on income rather than house prices

According to the statistics of major cities around the world, the rent accounts for 40-45% of the income of the rental group, which is the upper price limit that the tenant can afford. In other words, if the rent price exceeds 40% of their income, such groups usually give up their existing houses and choose worse living conditions, such as living further, living in the basement, sharing or even group rent. At present, there are two types of urban rental groups: first, young people who have just entered the society and participated in work (including college, undergraduate, master and doctoral graduates); Second, although working for many years, low-income people with low income and unable to afford a house, or a very small number of foreign enterprise executives with strong job mobility.

According to the data of the National Bureau of statistics, in 2017, the number of people living in private housing accounted for 67.3% of the floating population, with a total number of nearly 160 million. According to the survey statistics, in terms of education background, the proportion of bachelor’s degree is the highest among the rental population, with about 52%, followed by college and master’s degree, accounting for 23% and 14% respectively. These three types of education together account for about 90% of the rental population, of which 78% are under the age of 30. It can be seen that the first group of people, that is, young people who have just entered the society and participated in work, are the main force of urban rental at present.

In the first tier cities, the average monthly income of such groups is about 5000-8000 yuan. From their average income level, it can be inferred that the rent ceiling that most renters in China’s first tier cities can afford is about 2200-3600. Once the rent is higher than this level, they may choose to rent together or other poor living space. The rental income ratio is less than 30%, and only 16.8% can afford higher rents.

Theoretically, rent is essentially determined by supply and demand, but for the stock market, the change of rental demand is very important, and the demand depends not only on the rental population, but also on the income level of tenants.

The ratio of rent to house price determines whether a large number of investors are willing to hold houses for a long time to obtain rental income

From the perspective of the supply of rental housing, the rental housing in developed countries such as the United States, Japan and Germany accounts for more than 35% of all houses, while only 17% in China. On the one hand, the low proportion of rental houses is related to the Chinese people’s attention to real estate. No other country in the world likes houses more than traditional Chinese people and regards houses as the most important asset in life. On the other hand, the relatively low proportion of rental houses is related to the rapid rise of house prices since the commercialization of housing. When the rise of house prices has become the main income or even the only income of concern for the purchase of housing, the rental income of housing has been ignored for a long time.

Will the rental housing supply increase significantly in the future? In the long run, it depends on the ratio of rent to house price, that is, the return on capital of investing in real estate. For the incremental market, the change of housing supply is very important, and the supply depends not only on the expectations of investors for future house prices, but also on the ratio of rent to house prices. The ratio of rent to house price is higher than risk-free income, which is an important factor for landlords to hold investment houses for a long time and stably.

At present, in the prime location in the center of Beijing and Shanghai, the rental yield is as low as 1.5% - 1.8%, which is seriously lower than the risk-free return. Once the expectation of house price rise is no longer, most investors will choose to sell the real estate and replace it with other assets with higher yield.

In short, in terms of the current rent to house price ratio, the cash flow generated by real estate investment is not attractive to investors.

Judging from the growth rate of residents’ disposable income, there is limited room for rent rise in first tier cities in the short term

In the past five years, with the slowdown of macroeconomic growth, the growth of disposable income of Chinese residents has also decreased accordingly. It fell to 9% in 2014 and then decreased year by year. It is expected that the growth rate in 2018 will be 7.5%. From the downward trend of income growth, it is not difficult to infer that the growth rate of rent in the future is relatively limited.

As long as there is no serious inflation, there is a high probability that house prices will fall

First of all, from the population, age structure, urbanization rate and other factors, the era of rapid population growth supporting the simultaneous growth of housing demand has ended. Since 2015, not only the number of married home buyers aged 25-39 began to decline, but also the number of home buyers aged 35-49 for housing improvement. The decline in the natural population growth rate, combined with the reduction of rural to urban population, has significantly reduced the basic driving force of housing demand growth.

Secondly, in 2017, the proportion of residents’ total liabilities in disposable income increased from 31% in 2008 to 79%. The sharp increase in residents’ debt ratio combined with the decline in the growth rate of disposable income has seriously weakened residents’ housing purchasing power.

Third, with the rise of interest rate center and the end of housing credit preferential policies, the loose monetary environment supporting the continuous rise of house prices no longer exists.

Fourth, the purchase and loan restriction policies in the first and second tier cities have severely restricted the demand for investment house purchase.

To sum up, no matter from the perspective of demographic factors, income factors, monetary environment or credit policies, the conditions supporting the continuous rise of real estate prices in the future no longer exist. In this case, it is only a matter of time before the expectation of rising house prices changes.

Therefore, we can expect: in the future of first tier cities, house prices will fall, but rents will not soar.

(the author introduces: chief economist of Hua’an fund.)

Among them, the revenue from subscription solutions was about 220 million yuan, a year-on-year decrease of 14.4%, and the revenue from merchant solutions was about 139 million yuan, a year-on-year decrease of 11.1%.

In addition, the company’s operating loss in the first quarter was 344 million yuan, an increase of 76.6% year-on-year.

As of March 31, 2022, the total volume of commodity transactions generated by merchants through youzan solutions has reached about 23billion yuan, of which the total volume of commodity transactions from non Kwai channels has increased by more than 25% compared with the same period in 2021. The total commodity trading volume of store SaaS business was about 9 billion yuan, accounting for 39%, with a year-on-year increase of about 70%.

By the end of the first quarter of 2022, the number of stock paying merchants of the company was 89200, a slight increase from the number of stock paying merchants at the end of 2021. Among them, the proportion of businesses subscribing to e-commerce SaaS is about 63%; About 37% of stores subscribe to SaaS (including youzan retail, youzan chain, youzan industry, youzan education and prosperous small stores).

In the first quarter of 2022, the number of new paying merchants was 9621, with a year-on-year increase of about 21%. Among them, the proportion of new paying merchants in store SaaS was about 53%, which doubled year-on-year.

According to the financial report, in the first quarter of 2022, the company adjusted its organizational structure: Based on the company’s five core sectors - Social e-commerce, new retail, American industry, education and international market, the company built a business division including sales, business services and product R & D. On the premise of not affecting business development, the company has optimized the configuration of middle and back office departments, sorted out post responsibilities and division of labor, optimized cooperation processes and improved organizational efficiency.

It is worth noting that the financial report shows that as of March 31, 2022, there are 3833 employees in total. Previously, youzan disclosed that as of December 31, 2021, the number of youzan employees was 4494; In January this year, youzan conducted a round of layoffs.

Among all employees, sales and marketing personnel account for 52%, R & D and product personnel account for 30%, service and operation personnel account for 13%, and functional and management personnel account for 5%.

The company said that the primary business goal of 2022 is to reasonably arrange sales and R & D investment and strictly and finely control expenses, so as to improve per capita output and operating cash flow and operating results.

When asked by a reporter, US State Department spokesman price said on the Ukrainian issue that China should respect the principles of national sovereignty and territorial integrity. China has the obligation to urge Russia to make concessions on the Ukrainian issue, but the development direction of China Russia relations is worrying. The Sino Russian joint statement shows that China is trying to use Russia’s influence to achieve the purpose of creating world order between the two countries. What is the speaker’s comment on this?

Source: Ministry of Foreign Affairs

Hua Chunying said that I have taken note of the relevant statements made by the spokesman of the US State Department. First of all, on how to respect national sovereignty and territorial integrity, I’m afraid the United States is not qualified to tell China what to do. The Chinese people have a particularly real and profound understanding and feelings on the issue of national sovereignty and territorial integrity. Since modern times, China has suffered colonial aggression by the Allied forces of the eight powers and foreign countries, and has an unforgettable and tragic memory of losing power and humiliating the country. Not far away, more than 20 years ago, the Chinese Embassy in the Federal Republic of Yugoslavia was bombed by NATO, resulting in the sacrifice of three Chinese journalists and the injury of many people. The northern covenant still owes blood debt to the Chinese people. Today, however, we still face the real threat that the United States, together with several so-called allies, wantonly interferes in China’s internal affairs and undermines China’s sovereignty and security on issues related to Xinjiang, Hong Kong and Taiwan. China is also the only permanent member of the Security Council that has not yet achieved the complete reunification of the motherland. That is why China has always firmly upheld the purposes and principles of the Charter of the United Nations and the basic norms of international relations, the sovereignty, security and territorial integrity of the country, and international fairness and justice.

Hua Chunying pointed out that in less than 250 years since the founding of the United States, the United States has not launched military operations abroad in less than 20 years. Sometimes the name of military intervention is democracy, sometimes human rights, sometimes simply using a small bottle of washing powder, sometimes even making up a false message. Such a country’s understanding of respecting national sovereignty and territorial integrity is certainly different from ours, which is also very clear to the international community.

“As for the US side’s suggestion that Russia only acts with the support of China, I believe Russia will be very unhappy to hear this.” Hua Chunying said that Russia is a permanent member of the Security Council and an independent power. Russia independently formulates and implements its own diplomacy and strategy based on its own judgment and national interests. China Russia relations are based on non alignment, non confrontation and non targeting at third parties. They are fundamentally and qualitatively different from the United States in drawing ideological lines, helping to form small circles and group politics, and creating confrontation and division. China is not interested in and has no intention of following the Cold War mentality of “friends or enemies” and the practice of patching up so-called alliances and small circles.

Hua Chunying said that as for the Sino Russian joint statement, it is suggested that the United States should read it carefully and carefully. China and Russia should strengthen strategic communication and coordination, firmly safeguard the international system in which the United Nations plays a central coordinating role in international affairs, and firmly safeguard the international order based on International law, including the purposes and principles of the Charter of the United Nations, It is a positive factor in safeguarding international strategic security and stability.

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