Over the past decade or so, due to work, I have been able to encounter, meet, and interact with many real estate speculation groups. Of course, I have also become real-life friends with some of them.
From the perspective of a true real estate industry practitioner, the mentality and behavior of real estate speculation may be different from some mainstream views that appear to be righteous on the surface but are actually hypocritical and good at inciting public emotions.
In fact, the mentality and motivation to obtain property income and grasp the certainty of personal and family wealth growth through buying a house are too reasonable and too common.
There is no need to pretend to be a high-end righteous person. Reality is just like this.
Of course, universality corresponds to a high base. As soon as the quantity comes up, the ranks naturally come out. It is more appropriate to say that the real estate market in China is a big stage for human nature to be displayed, rather than saying that the mentality and behavior of real estate speculation have become something with a negative color in the public opinion environment.
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In reality, there are very few people who regard real estate speculation as the only means to make a living and get rich. The vast majority are actually the same as you and me, and the same as the many people we meet on the way to and from work every day, all of whom are ordinary people.
In essence, any asset speculation, and even long-term investment, is a wealth attempt outside of one's own job. It is worth trying before financial freedom, but after financial freedom, the thoughts of speculating, taking risks, and arbitrage have actually faded.
If you are already financially free, why bother to take risks?
Working and doing small business cannot make a big fortune, so why not take risks?
Some things, some essences, require people with social experience and experience in the real world to understand.Real estate appreciation, price arbitrage, and passive income from value increase—on a small scale, these can be seen as one of the few clear paths in China's domestic economic environment over the past 20 years. It is not unreasonable to pursue such opportunities. On a larger scale, it is an inevitable and necessary phase that China, as a nation, must experience and go through in its market-oriented development process, similar to what Japan, South Korea, and the United States have all undergone.
However, times have changed, and with them, the era is different. Some things are destined to evolve accordingly.
In the present of 2024, for those who entered the market around 2019 with such a mindset, it may not be an era and environment that feels pleasant.
For this group, the most pressing concern at the moment is: In 2024, do we still have the opportunity and possibility to break even?
Reality and trends cannot be altered or wished away by self-entertainment, self-intoxication, or self-persuasion.
This article will start with an analysis of the tactics and logic of the typical Chinese real estate speculation group, combined with the current changes in China's real estate economy and housing market, to conduct an in-depth, opinionated, and well-supported discussion and analysis.
More importantly, through this article, we can also share with everyone some outdated perceptions and concepts of the Chinese real estate speculation group that have become disconnected from the times.
If you haven't eaten pork, haven't you seen a pig run? If it's an obvious pitfall that everyone can see, how can you not know to avoid it?
This article contains no clichés, nor will it speak any polite phrases. It will use plain language that everyone can understand to talk about real estate speculation, these people, and this money.The truly seasoned real estate speculators gather in "old, dilapidated, and small" properties. Are there still opportunities in 2024?
In the realm of property investment, and even speculative trading, there are actually several groups with completely different approaches.
Those who can truly be considered "good at speculating," who understand the operation of asset value and the logic of premium, are basically concentrated in products like old, dilapidated, and small properties in good school districts with good locations.
What do you think? Isn't it very subversive to many people's perception of the real estate speculation group?
In fact, the logic of speculation in this is very reliable. To speculate commercial housing into a valuable asset, the most critical thing is to speculate on the rigid demand of these four words.
The reason why old, dilapidated, and small properties have long been favored is mainly due to the educational resources they correspond to.
Educational resources sell an expectation. How much is a house worth? But the imagination of the achievements of one's own children in education in the future is valuable. For such an expectation, isn't the price specifiable?
When this invisible, but existing, expectation of real demand pressure becomes a market consensus, doesn't the housing price go up?Of course, the school district is one aspect, and there is another approach, which is the "rotten on the outside but exquisitely carved on the inside" strategy. This model was also publicly shared by the famous "real estate speculator god." It involves using old, dilapidated, and dirty buildings with good locations, such as old small and old large apartments, to carry out internal renovations that suit the aesthetics of young people. Then, by leveraging the advantages of low total price and convenient transportation, they achieve arbitrage through price differences.
Whether it's the hard speculation of school district value or the "carving on the dung" strategy, to be honest, in the past 20 years, especially in first-tier and provincial capital cities, products like old small and old large apartments have reaped countless families and wealth.
However, in 2024, the real estate speculators holding old small apartments may no longer have the opportunity to get ashore.
In fact, since a few years ago, this trend has been very obvious: there is a kind of pain called buying an "old small" apartment, which cannot be sold or lived in, and has completely become immovable property.
1. With major cities such as Beijing and Shanghai introducing policies to crack down on the speculation of school district housing, the advantage of the school district is no longer stable.
Once the allocation of relevant educational resources changes, the real estate price bubble based on this advantage will also burst, and those who own old small apartments will face the continuous shrinkage of asset value.
The bubble value is the most fragile, and a change in policy rules may lead to an immediate collapse.
2. In the current real estate market, there are indeed some difficulties in obtaining loans for old communities with a building age of more than 20 years. On the one hand, for banks, old houses may have various unknown quality issues due to long-term wear and tear, which increases the risk when providing loans. On the other hand, for homebuyers, purchasing houses in old communities requires more time and effort for renovation and maintenance, which increases their additional costs.
Many people say that the building age of my house is less than 20 years? But when you plan to sell, the building age has exceeded 20 years, or even 30 years. If someone wants to buy your house, but it is difficult to get a loan or cannot get a loan at all, it will also affect the sale of your house, after all, there are still a few people who buy houses in full.
3. Many old small apartments have hard injuries in hardware and environment, including the residential group, which cannot be cured:In many old residential areas, due to the lack of unified property management, the maintenance of public facilities is inadequate, and the environmental hygiene is also poor. For example, in some old residential areas, there is no access control at all, and outsiders can enter and leave at will, bringing a sense of insecurity to the residents of the community.
In addition to this, there are indeed many problems with old and dilapidated houses, including the lack of separation between people and vehicles, no elevators, poor sound insulation of floor slabs, poor seismic resistance, aging of sewer pipes, a large number of rats and cockroaches in the community, a large number of elderly people, monthly funerals, a lack of children's supporting facilities in the community, a mixed community population, and no property management, etc. You will find that when housing prices rise, it rises slightly, but when housing prices fall, it falls terribly. The liquidity of such houses will become increasingly poor in the future.
In many old residential areas, parking spaces are often in short supply. Moreover, there is little room for improvement and adjustment.
4. Many cities are betting on the demolition of old and dilapidated houses, but with the end of the shantytown renovation wave, it has become an unattainable illusion.
After August 2021, the treatment of old houses is no longer mainly by demolition, but by the method of "retaining, modifying, and demolishing". Unless it is identified as a dangerous house that is not suitable for living, large-scale shantytown renovation is basically difficult to appear again. This also means that the opportunity to buy "old and dilapidated" houses and expect to obtain high compensation through demolition has been greatly reduced, and the risk has increased accordingly. The main focus is on renovation, and most of the so-called old and dilapidated community renovations are just painting, drawing, and repairing roads that were not bad in the first place, with very little change to the internal environment of the corridors.
In 2024, the group of speculators who pin their hopes and funds on such products as old and dilapidated houses may find it difficult to run.
Nowadays, young people and the main home-buying group have too many choices, and their cognition has also improved:
Buying "old and dilapidated" may seem economical in the short term, but in the long run, "old and dilapidated" is not a wise choice.Can "Internet Celebrity Housing Projects" Flocked by Speculators Still Make a Comeback?
In China's four first-tier cities, Beijing and Shanghai are relatively decent in the matter of real estate speculation, and of course, the capital background involved is also quite complex. Therefore, the characteristics of local speculation and group operations in housing prices in Beijing and Shanghai are not very obvious.
However, in Guangzhou and Shenzhen, the style is completely different.
In Guangzhou and Shenzhen, there is a type of housing project called the "Internet Celebrity Housing Project" for real estate speculators, and this phenomenon has only emerged in recent years.
Let's delve into the specifics of the situation:
Firstly, in Guangzhou, there are three well-known "Internet Celebrity Housing Projects" where real estate speculators gather: Lanting Shenghui in Dongpu, Tianhe District, Vanke Donghui City in Huangpu Science City, and Vanke Oubei in Panyu Wanbo.
The real estate speculation groups are basically concentrated in the small units of less than 90 square meters in these communities, with low total prices, high room for price speculation per unit, and all are ready-to-move-in properties.
Looking at the representatives of these three popular "Internet Celebrity Housing Projects" in the region, there are several characteristics:1. After the last round of investment frenzy, all three communities experienced a situation where speculators lowered prices and fled in 2023. However, some property owners were able to successfully escape, while others are still stuck in place.
2. The exodus of speculators in Lanting Shenghui and Vanke Donghui City has not yet ended, which is largely related to the sharp increase in the number of listings in the community. Vanke Oubei, on the other hand, stood at the forefront in 2023, and even with an increase in the number of listings, the opportunity to escape by lowering prices is much greater.
3. Lowering prices to sell remains the main theme of the three communities and the main theme of the Guangzhou second-hand housing market. This is not only the choice of investors but also the choice of many property owners who are looking to upgrade.
Then comes Shenzhen. Compared with Guangzhou, the older brother, the speculators' routine of controlling the market in groups and clustering together is definitely a case of the student surpassing the teacher:
Kaisa Qianhai Plaza, with an average price of about 36,000 yuan per square meter when it was launched in 2013, rose to 150,000 yuan per square meter in 2020 with the help of Shenfangli's speculation, and now has fallen back to 100,000-120,000 yuan per square meter. The die-hard fans of Shenfangli who took over at a high price may now have a hard time expressing their difficulties.
Qianhai Times, 190,000 yuan per square meter in 2020, 140,000 yuan per square meter in 2022.
Nord International, 170,000 yuan per square meter in 2021, 110,000 yuan per square meter in 2022.
In areas where speculators gather, housing prices are difficult to normalize. For example, the famous Longyue Residence, the price of which was halved, is not only due to the efforts of speculators but also the weakening of the school district concept.
Longyue Residence was the last batch of affordable housing in Shenzhen in 2013, at 5,000 yuan per square meter, and was converted to red books in 2019. With the benefit of the Shenzhen Foreign Language School Longhua nine-year school district, coupled with the promotion of speculators, the housing price was driven to 120,000 yuan per square meter.
Affected by the "double reduction" and the university district factors, coupled with the withdrawal of speculators, in 2022, Longyue Residence plummeted to 65,000 yuan per square meter, far below the guidance price of 83,600 yuan per square meter.From the price fluctuations, one can sense the madness and greed of the real estate speculators in Shenzhen, right?
This type of real estate speculation group is actually overly dependent on the overall market trend. When the real estate market is on the rise and demand is squeezed, these speculative groups and capital, driven by the temptation to maximize profits, will form a fragile and short-sighted interest alliance. They will drive up housing prices, hype concepts, and even fabricate rumors to create expected bubbles.
The approach is not complicated, and this method has also been very profitable in Guangzhou and Shenzhen in the past. However, in 2024, is there still a chance for this method to turn around?
In fact, there is not much imagination, especially for players and capital that entered the market after 2019, there is even less chance of escape.
This model has a fatal flaw, that is, the product cannot withstand the test of real demand. They are often low total price, small area, or the price has been hyped to be detached from the real purchasing power during the upward stage.
From the perspective of demand, the hard-pressed cannot afford it, and the improvement looks down on it. The market atmosphere of comprehensive downward pressure will not have a knight in shining armor, only vultures waiting to pounce and bottom-fish.
If the overall market and environment do not turn around, the reality of the price performance of these popular plates being cut by a dull knife cannot be changed.Can the leverage pressure, the biggest threat to the real estate speculation group and capital, be alleviated in 2024?
In 2023, with the continuous intensification of real estate market regulation policies, the wave of selling houses has become more and more severe.
In addition to the problems brought about by price reductions, some specific groups of people have been forced to accelerate their exit from the real estate market, including the real estate speculator group, people holding multiple properties, and flexible employees.
When housing in our country is called a profitable investment product, too many people have used leverage to speculate on real estate, with loans ranging from hundreds of thousands to millions, or even tens of millions. When the price of the building soared, real estate speculators could make money no matter how they operated.
But now, the transaction rate of China's real estate market is frequently hitting new lows, and the days of real estate speculators are indeed not easy. Some people find it difficult to get back to the original, and can only admit the loss and sell at a low price to avoid the cost of holding the house to empty the old bottom.
In this process, the biggest risk is actually the financial leverage added during the upward phase in order to seek an increase in profits.
Archimedes once said: Give me a fulcrum, and I can lift the whole earth.
Leverage can help you lift the earth; on the contrary, it can also smash you into hell.
90% of people, the biggest leverage in their life, is the mortgage.For those with the idea of getting rich by speculating in real estate, the greatest risk in life comes from leverage.
Data from the research center of Le You Jia shows that from 2021 to 2023, the average transaction price of second-hand housing in Shenzhen has been continuously adjusted, from the 80,000s, to the 70,000s, and then to the 60,000s.
It is worth mentioning that since 2023, there have been market reports that some Shenzhen homebuyers previously converted their housing mortgage loans to business loans. However, as housing prices have fallen, the bank's assessment of the property value has also been adjusted accordingly.
In response to this, the aforementioned homebuyers are facing the risk of renewing business loans, that is, they need to make up the difference in the adjusted assessment price. If they can't pay it back, they will face the situation of the property being auctioned by law.
This trick is an open secret in Shenzhen: for example, you buy a house for 5 million yuan now, but the bank assesses it at 8 million yuan, and then loans 70% based on 8 million yuan, which is 5.6 million yuan.
That is, a house bought for 5 million yuan can be loaned 5.6 million yuan. It has the advantage of arbitraging funds.
Therefore, there are many real estate speculators in Shenzhen who have multiple layers of leverage, and those who started playing this game earlier have already made a lot of money in the surge of housing prices in Shenzhen in the past few years. This is not news.
Whether it is leverage embedding or illegal business loan extraction, it is actually a bet that Shenzhen's housing prices will continue to rise. Don't mention falling, as long as the housing prices remain stable, the pressure of leverage is not to be taken lightly.
At present, the biggest pressure and risk for the real estate speculation group in Shenzhen is the impact of the overall decline in housing prices.
On the one hand, as the price of the collateral goes down, the bank has the right to demand additional collateral value, which is often several million yuan, can it be taken out casually?On the other hand, the income expectations are not ideal, and the financial environment is harsh, with pitfalls everywhere, which has directly hurt the cash flow that maintains the minimum credit guarantee for many real estate speculation groups.
Of course, let's not talk about whether the housing prices can rebound later, just say how long the current downward pressure on housing prices needs to continue, who can say clearly?
With a little family foundation, choose to tough it out, facing such uncertainty and the situation of increasing pressure, it is also very difficult, right?
This world is like this, everything is about looking forward to something, with hope, you can persist, but now the real estate market is turning around, the market is warming up, and the rebound of housing prices, is it reliable?
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Analysis Conclusion: In 2024, how should we view the fate of real estate speculation groups and funds?
Based on the above analysis and discussion of the play and routine of China's real estate speculation groups and funds, as well as the current trend, the conclusion is actually very clear, that is, in 2024, for these groups and funds, there may not be much imagination for a smooth escape and unloading.
In the past, during the good times, leverage was used well, and it was easy to take you to the clouds.Nowadays, life is not easy, with high leverage that could drop into hell at any moment.
Looking back at history, it is not that the housing prices in China have never fallen, and the phenomena of "supply cut-off housing" and "abandoning housing" also truly exist. In 2008, Shenzhen's housing prices continued to fall, and many people found that the value of the houses they bought in the past was continuously shrinking. The amount of housing loans they owed to the bank even exceeded the market price that the house could be sold for, and these houses had become negative assets. As a result, some homeowners chose to throw the houses to the bank and no longer repay the bank's loans.
For example, in 2013, there were rumors that 15,000 houses in Wenzhou had supply cut-offs. The staff of the Wenzhou Banking Regulatory Bureau responsible for the "supply cut-off" investigation once said that the phenomena of "supply cut-off housing" and "abandoning housing" do exist, but the actual total number is 595. At the end of May and June 2014, there were cases in places such as Hangzhou, Zhejiang, Wuxi, Jiangsu, Ningde, Fujian, and Xinyi, Jiangsu, where owners were sued by banks for overdue personal mortgage loans. In these cases, most homeowners claimed to be "unable to repay the loan."
After experiencing a new round of rapid increases, it is an undeniable fact that housing prices in major cities in mainland China have a heavy bubble. Therefore, the risks faced by homebuyers who have added leverage in this round of the market cannot be underestimated. If it is a homeowner, they may have to continue to bear high mortgage loans and be prepared for a long period of hard times. For speculators, choosing "abandoning housing and cutting off supply" will pay a heavy price.
In short, if you are unwilling to take the initiative to deleverage, you can only welcome passive deleveraging, and someone has to "pay the bill" for high housing prices.
Everything has a cycle, and the way of heaven has reincarnation. Every cycle transformation has the cost of reshuffling debts, and the group that entered the market to speculate on housing at the last round and was trapped at a high position is destined to become the cost of such a process.
However, such a conclusion and reality are a cruel conclusion that is difficult for many groups to bear and accept.
Written at the end:
What insights can the possible analysis of the subsequent direction of the speculative housing group and funds bring?Since the second half of 2023, the real estate market has seen a series of major measures, with everything you could think of gradually being implemented, and some you couldn't even imagine are also starting to come into play.
Firstly, the policy of "recognizing the house but not the loan" has been gradually implemented in first and second-tier cities.
Next, the down payment ratio and loan interest rates for mortgages have been reduced. The down payment for the first home has been adjusted to a minimum of 20%, and for the second home, it's a minimum of 30%. The mortgage interest rates are also at an all-time low, effectively encouraging you to leverage up and buy a house.
Then, the interest rates on existing mortgages have been reduced. It was thought that the reduction of these existing mortgage interest rates would be a bit of a hassle, but the intensity was quite significant—customers didn't need to apply, and banks automatically adjusted them in batches, all according to the lowest standard that customers could achieve.
After that, the lifting of purchase restrictions in the real estate market of second-tier cities came again. Several cities such as Shenyang, Dalian, Nanjing, Suzhou, Jinan, Qingdao, and Wuhan have successively lifted purchase restrictions. As a first-tier city, Guangzhou also lifted restrictions in some areas and adjusted the years of exemption from value-added tax.
At the same time, Guangzhou became the first first-tier city to break through the lower limit of the LPR for mortgage interest rates (4.1%). Shenzhen also announced on September 28 to reduce the mortgage interest rate for the first home to LPR minus 10 basis points (4.1%).
There is no more shocking measure in the real estate market than Harbin organizing real estate companies to promote and sell houses in other places, with the reason being that the Northeast is cool and suitable for summer retreat. This statement is unassailable; Northeasterners can buy houses in Sanya to avoid the cold, and people from the south can also go to the Northeast to escape the heat.
It should be said that in order to save the real estate market, there is nothing that cannot be done, only things that cannot be thought of. A series of policies and attitudes have changed, giving some different ideas and impulses to the groups that were trapped in speculation and those who did not participate.
It is best to stop as soon as possible and cut off these thoughts. This should be the most conscientious and reliable advice and viewpoint on the entire network.Based on the current situation, the real estate market is indeed quite weak, and the marginal effect of policies is also diminishing. There may be some favorable policies introduced in the future, but when the real estate market will stabilize remains a big question mark. Once the market's confidence is shattered, it is truly not an easy task to rebuild it.
Do not use your own hard-earned money to bet against the trend.
Following the trend and being responsive is wisdom, and it also requires courage. However, going against the trend and gambling on feelings is foolish.
The above is a special sorting and analysis discussion on the possible direction and situation of China's real estate speculation group and funds in 2024, and it is shared and exchanged with readers and friends on the headline.
(According to the latest regulations of the relevant state departments, the content and opinions of this article are for reference only and do not constitute any explicit advice on buying property, investing and other actions. The risk of entering the market shall be borne by oneself.)