Zhang Wuchang: It is recommended to issue house purchase vouchers to those who need to buy a house

Original link: http://zhangwuchang.blog.caixin.com/archives/257822

Saying that the property price is high is because the land price is high, of course, but saying it means not saying it. It is not necessarily true that the high land price is due to the high population density, because in the early days of China’s opening-up and reform, the population density was similar to today’s, but the land price was very low. It is certainly true to say that an increase in people’s income will lead to an increase in property prices, but it is nothing new. What’s new is that the huge infrastructure project more than ten years ago came up with a lot of attention, especially the emergence of highways and high-speed rail, which reduces the time distance between regions, which is equivalent to shortening the distance between the population, thus bringing Land and property prices have risen.

Here I want to point out a strange phenomenon. This is the price of property in two big cities in China that I know, and the rise came very suddenly. One is Shanghai. The rapid rise in property prices there began around 2003. Property prices in Shanghai fell sharply in the 1990s, with the lowest point being around 2000. But since 2003, land prices in Shanghai have jumped. To give an interesting example, in 2006, I was discussing the price of a house with an American professor friend in Shanghai. At that time, the price of a house with a garden in the Silicon Valley of the United States was about twice that of a similar house in Shanghai. The price is only half of Shanghai. This reflects that the speed of wealth accumulation in China is much higher than that in the United States. The second example is Shenzhen. Property prices in Shenzhen rose for a while in the early 1990s, but then fell sharply. Shenzhen’s property prices began to jump significantly in 2006, and today it has risen about tenfold!

The above is my personal random observation, probably should be correct. I would also like to point out that within a city, the changes in property prices in different regions can be very different.

Here is an interesting question. This is due to population density, economic growth and infrastructure development, which cannot be explained together. In China, property prices in certain areas jumped in a certain period of time. Why is this so? In the 1970s, the answers I got from discussions with several American economic masters should be able to explain the phenomenon of property prices jumping in a certain area of ​​China at a certain time. Back then everyone knew that the rise in property prices was mainly due to the rise in land prices, but why did the land prices continue to rise for decades after World War II? This phenomenon has never occurred in human history. After a period of discussion, everyone agreed that the answer was that after the Second World War, the development of science and technology had never seen anything before. This situation was the result of two important breakthroughs in the 1950s. One is the discovery of the double helix structure of genes in biology, which has contributed to the rapid progress of medical research and development, resulting in the extension of life expectancy. This extension of lifespan is important, because a person’s knowledge accumulation generally has a large investment cost, and an early death is all wasted. The second major breakthrough, of course, was the invention of the semiconductor. The discovery of the double helix of genes does not contribute so much to China’s economy, because the study of biology and genes is a profound knowledge, and universities can only be successful if they do very well, and China’s development in these areas is disappointing. On the other hand, the invention of the semiconductor brought about the development of digital commerce, but it is another matter: China should be the best in the world. This is because the research and development of digital business does not require reading a lot of books, but requires many smart people, and people in their early twenties can be experts. The second important condition for the development of digital business is that the market must be large enough. In this regard, China also has the upper hand: in terms of daily consumer goods, I estimated a few years ago that China’s market accounted for about half of the entire planet.

Based on the above, if you were to ask me to choose only one of the most important factors to explain the rise in property prices in China, my choice would be the development of digital commerce. Therefore, I think that from the perspective of economic development, suppressing the property market is not good for economic development. The difficulty is that the sharp rise in property prices will lead to the phenomenon of wealth inequality, which is detrimental to the stable development of society.

Let me first talk about the issue of “speculation”. Judging from the past experience of Hong Kong, China, “real estate speculation” refers to real estate speculation, that is, if the building is not well-built, you place a bet, and you can also transfer it to make money. As far as I know, China today does not allow this phenomenon of speculation. On the other hand, if a person buys a house in China and sells it within five years, if he makes money, he has to pay a very high tax. When the property market prospects are good, it is possible to queue up to buy a new property in rotation. It is possible to make a little money by selling it in a short period of time. However, because of the high cost of changing hands, the so-called profit from speculating on the property is currently not available in China.

In today’s China, the sale of second-hand houses usually starts from a higher price and gradually lowers the price during negotiation before closing. Interestingly, in the United States, the sale of second-hand properties is the opposite, generally from low prices up and sold. I thought that the price of houses sold in the United States is called up from the bottom, because they have a very high property tax, usually more than 1% of the property price every year. People who sell houses usually offer low prices, indicating that the property tax to be paid is low, and then ask buyers to bid up, and the final transaction price reported to the local government can be negotiated separately. So their starting bids are usually low. The above-mentioned different bidding arrangements between the United States and China due to different tax systems explain why the United States sells buildings much faster than China. This is in contrast to the fact that the Netherlands auctions flowers from high to low in order to gain speed.

In general, an increase in property prices in a country represents an increase in wealth. Originally not a bad thing, but for those who didn’t buy a house, the rise in property prices was unfortunate. How to deal with this problem? The government provides low-rent housing. The experience of Hong Kong, China is not good. People who live there will have no sense of security because they have no property rights.

Far more desirable is for the government to provide HOS. “HoS” is short for Home Ownership, and the government sells it at a low price to some people whose incomes are disadvantaged. The purchaser has property rights, which can be sold after a number of years, and of course also have the right of inheritance. Both Hong Kong and Singapore provide a large number of HOS, which are generally well done. A few years ago, I suggested that China might consider imitating Hong Kong and Singapore in providing such HOS housing to citizens with suitable conditions. I heard that China’s current limited competition for housing, two-limit housing, affordable housing, shared property housing, etc., are too complicated. In this complicated situation, we also have to point out that many large cities in China have a large floating population and generally do not have household registration. How to deal with these compatriots is a very difficult problem. Because in fact, the cities that have developed considerably in China today are basically built by the floating population.

The conclusion is obvious. Rising property prices reflect good economic development and are the main evidence of rising wealth accumulation. I have followed China’s impressive development for many years and know that the contribution of the floating population is great. Government authorities, of course, know it. The problem is that because of rising property prices, many people cannot afford to buy a property. The only way I can think of at the moment that does not have much negative impact on economic development is to provide a voucher (voucher, here can be called a house purchase voucher) to some people who need help to buy a house. This purchase voucher (voucher) does not need to replace the entire property price, but can also replace part of it. Just give these vouchers free to anyone who needs help buying a home. Those who sell their houses can hold these vouchers to the government to cash in. It’s a diversion from the voucher system that Friedman has been advocating years ago to help children go to school. As far as I know, housing vouchers like the above have appeared in several cities in China. What I suggest here is that if the coupons are used properly, the government does not need to consider intervening in property prices.

Where did the money for the housing vouchers provided by the above-mentioned local governments come from? A small portion of the allocation from the government’s sale of land used to be. Today, more than 90% of the property prices of new real estate in China’s bustling markets are land prices. The suggestion is that some municipal governments should charge less land prices.

This article is a transcript of the author’s speech at the “2022 Phoenix Finance (Summer) Cloud Summit” hosted by Phoenix.com, undertaken by Phoenix.com Finance, and exclusively strategically cooperated by Qinghualang from June 16 to 18. It has not been reviewed.


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