Excess Inventory Resolved by 2018

iFeng: 高善文：大量中小城市楼市去库存将2018年基本完成

China's small and medium-sized cities real estate inventory reduction will be completed in 2018, this transition marks the basic normalization of economic operation, and will have a significant impact on the large class of asset markets.

...In 2016 due to the impact of stimulus policies and demand overdraft, real estate inventory consumption is undoubtedly very fast, and unsustainable. But if the inventory reduction maintains the pace of 2015, then by the first half of 2018, the third- and fourth-tier level of "unsatisfactory" inventory will drop to near zero.

...A topic worthy of discussion is that many people believe that since 2016 the focus of the city's real estate market is re-bubble. If the price from the point of view, the situation is undoubtedly the case. However, from the start of the new changes to see the problem, these cities so far there is no rapid accumulation of inventory, which is very worthy of vigilance.

Summary In the late 1980s, after the United States in 2005, and China since 2010, a key feature of the real estate bubble was the rapid expansion of real estate investment and the subsequent accumulation of large inventories. In fact, it is precisely because of the rapid accumulation of inventory and difficult to deal with, in the housing bubble burst, only the formation of a serious bank bad debts, excess capacity and price adjustment.

From this point of view, since the beginning of 2016 in some second-tier cities, housing prices rose rapidly at the same time, the rapid expansion of supply and inventory accumulation is not obvious so far, rising house prices mainly reflects a serious imbalance between supply and demand.

With the start of demand regulation, this imbalance is expected to ease in the short term, but the long-term correction of this imbalance will undoubtedly require a more robust response from the supply level, or a fundamental reversal of the trend of population movements.