What Did We Gain from the 2010 Real Estate Regulation?

Let's review the conclusions from that legendary post:

House prices are not determined by the average income reported by the statistics bureau—i.e., ordinary people's income—but by the average income of the elite. (When elite incomes rise, house prices go up; when elites collectively lose their jobs, house prices crash.)

Why does capital flow into real estate and other capital markets while fleeing the real economy? Because the environment for the real economy is poor and unprofitable.

First, tax burdens are too high. Second, there are too many departments, managers, and staff members requiring bribes and favors—more than the taxes themselves, an unbearable weight. Third, the state-owned sector's monopoly across key sectors has turned SOEs into de facto tax-collecting entities; the exorbitant pricing of these monopoly enterprises is another mountain pressing down on the real economy that should be thriving.

The way to make the rent-to-price ratio more reasonable isn't just lowering house prices; there's a more reliable method: sharply raising rents. If real estate transaction volumes decline and it no longer absorbs massive amounts of capital, then the prices of essential goods like agricultural products and housing rents will surge. This is because the flood of excess money must flow somewhere. If it isn't absorbed by real estate, it will be absorbed by price hikes in garlic, mung beans, ginger, and all essential commodities—i.e., inflation.

Urban villages will inevitably disappear. Without eliminating urban villages, where would the GDP come from? Renting will become the mainstream lifestyle for young white-collar workers.

The introduction of public rental housing is a milestone in the process of rent monopolization. Taxes are always passed downstream; the extra revenue collected must ultimately be reflected through the lowest end—the rent market. By remodeling and demolishing existing housing to create rental demand, the state indirectly raises taxes through rent monopolization, phases out private developers, and achieves an integrated monopoly over land, housing, and rentals. The idea that rental income will decline is pure fantasy; the state's entry into the market ensures rents won't fall.

The launch of public rental housing also aims to solve two problems:

1. The basic housing needs of the lowest tier within the system (even the lowest tier belongs to the ruling class—think of the clerks in ancient bureaucratic hierarchies).

2. The need to stably collect money from the non-system masses under its rule.

A fundamental attribute of investment assets is scarcity—a common trait, though the degree varies. It is precisely this scarcity that gives them the ability to absorb excess social wealth, which is why they become targets of speculation.

Will house prices fall? When will they decline? In one sentence: supply and demand. A shrinking population is the only way house prices can truly fall. In the distant future, they definitely will—but the manner of decline will be completely different. They won't drop as some hope, from 30,000 RMB per square meter in 2010 back down to 6,000 RMB per square meter in 2004. Instead, the likely scenario is this: while agricultural prices skyrocket tenfold or even dozens of times over a few years, housing prices remain relatively stagnant. This is the most probable form of "decline."

Saving assets is better than saving cash; cash loses value, assets appreciate

Supply and demand refers to the relationship between money and goods. When the money supply exceeds the quantity of goods available, prices rise. Even if artificially suppressed, such effects are merely short-term—this is an iron law.

 If we disregard inflation, naturally, the less interest you pay, the better—20 years of mortgage interest is less than 30 years. However, because China is a country with high growth and high inflation, the actual annual inflation rate far exceeds officially published figures, and it far outstrips loan interest rates. Therefore, longer loan terms are preferable. As for whether smaller monthly payments are better, that entirely depends on individual financial capacity.

Being a mortgage slave isn't tragic; the real tragedy is being unable to become one. What's truly disastrous is the vast population of urban dwellers who are reduced to poverty. For struggling working-class people, if they lack the means to buy a home and have no opportunity to climb the social ladder, establishing themselves in the city becomes nearly impossible, with no safety net to fall back on.

Today's college graduates are somewhat different: if they can't join the system and lack marketable skills, they're certain to sink to the very bottom of society. Forget buying a house—whether they can even afford food is uncertain.

Beyond housing, expenses across all other areas will skyrocket absurdly—a common pattern in the later stages of a prosperous era. The non-system middle class is constantly treading water; if they fail to keep moving forward, they risk falling into abject poverty.

The government's regulatory objectives have never been to solve the housing problem for the poor. Quite the opposite: financial risks stem from allowing the poor to buy homes. Therefore, raising down-payment requirements for first-time buyers and preventing the poor from purchasing property is an effective means of mitigating financial risk. Simultaneously, pushing rental prices upward ensures that government-provided public rental housing has a viable market—and profit potential.

Stocks differ from real estate in that they don't create wealth; they merely redistribute it. But this redistribution flows from retail investors to market makers, not the reverse. That's why successful stock trading requires thinking like a market maker.

Backup link: https://github.com/shengcaishizhan/kkndme_tianya