How a house became negative equity

Sand table deduction - how a house became a negative asset

　　Recently , there have been many hot house buying scenes across the country, from divorced house buyers crowding the Civil Affairs Bureau, to *ST Ningtong B planning to sell the school district housing to protect the housing, and then to 300 sets in Beijing The housing stock is liquidated in one minute and every second. It seems that the Chinese real estate market has ushered in a "mad cow". The greedy and short-sighted people are performing a bizarre comedy that has never been seen before and never came after. The main factor behind the achievement of this "myth" is that under the weak economy, capital exports continue to narrow, hot money flows into the property market, and leverage is high.
　　Many friends around saw the house prices rising, and couldn't bear it any longer. Years of bearishness and restraint were thrown into the sky. They used the bank's credit leverage to do more backhand and invested in the vigorous homebuying army. Since then, they have embarked on a deep journey. A bottomless journey to the center of the earth.
　　Case 1: A friend lives in a second-tier city in southern China, with a monthly family income of about 30,000 yuan, middle class, and a house. Thinking of my child going to school soon, in order to change to a good school district, I sold a small house at the beginning of this year. With the cash on hand, I collected a down payment of more than 1.5 million, and took out a loan of more than 3 million. Nice big house. At present, the monthly repayment is more than 20,000 yuan. Although the repayment pressure is huge, but seeing the rising house prices, I am still very happy, and the family is looking forward to a bright future.
　　Case 2: A friend in a second-tier city in the north has a monthly household income of only over 10,000 yuan. Seeing that the house price keeps rising, he panicked. He finally collected the down payment and bought a house with an average price of over 15,000 yuan. He took out a loan. After that, the monthly repayment is more than 8,000 yuan, the children go to school, and the elderly are retired. Although the pressure is huge, I finally became a homeowner, and I enjoy it.
　　In the current thinking of many home buyers, the house is the best investment product, and it will continue to rise like the stock before 5100 last year. No matter how staunchly short-sellers and renters were once, they are now unable to withstand the temptation of skyrocketing house prices. Under the hype of the government, banks, media, and developers, "house prices will continue to rise" and "if you don't buy a house now, in the future, I can’t afford to buy” and other concepts are constantly brainwashed, and in the end, I don’t hesitate to spend all my liquidity and become a glorious house slave.
　　There is such an investment philosophy, which I agree with: For investment in fixed assets that are difficult to realize and have low liquidity, you should go against the trend, such as real estate; and for assets with fast realization and strong liquidity, you should follow the trend, such as stocks. At present, China's real estate has been booming for 15 years (except for the two minor adjustments in 2008 and 2014). At this time, regardless of one's life, throwing in, only the worst is more fortunate. Where does the tyranny come from? Leverage, unemployment, and the government's unconventional means of locking in liquidity.

　　1. Amplified leverage.
　　At the meeting of the G20 finance ministers and central bank governors in February this year, Zhou Xiaochuan gave a shot of blood to China's property market: From the perspective of China's situation, the proportion of personal housing loans in the total bank loans is still Relatively low, there are many countries where personal loans, especially housing loans, may account for 40% to 50% of the total loans. In China, only a dozen percent, which is relatively low. Therefore, the banking system also feels that personal housing mortgage loans are still relatively safe products and have opportunities for development.
　　This passage has set the tone for China's real estate leverage, and it has also given courage to banks and real estate companies. While taking the opportunity to significantly deleverage and reduce risks, Chinese people are induced to enter the property market and buy houses with leverage, taking on the debt risk of developers and the risk of bad debts borne by banks. And this leverage cost, many of which exceed the income affordability of home buyers, is tantamount to killing the chicken and taking the egg.
　　The Economic Information Daily on September 26 reported with this title: High leverage has become a risk amplifier for the property market, and residents’ purchase of houses and leverage is approaching the limit. Extremes meet, and once the limit is reached, the trend will reverse. Living within your
　　means , if your monthly income is 20,000, it is rational to repay 7,000; if your monthly income is only 10,000, it is crazy to repay 8,000. Because you did not consider the risk of future unemployment and the risk of falling house prices, you put all your bets on the endless rise in house prices. Whenever this is the time, the risk comes quietly.
　　The 21st Century Business Herald on August 14, 2016 pointed out that RMB loans increased by 463.6 billion yuan in July, and by sector, the household sector loans increased by 457.5 billion yuan. Some netizens gave the following comments: The financial data in July is terrifying! Almost all of the new loans are housing loans, and enterprises have stopped lending. The funniest thing is that the bosses don't dare to take out loans, but their employees are desperately trying to take out loans. Do the employees think that the company's prospects are good, they won't lose their jobs, and they can raise their wages? They are more confident than the bosses...

　　2. Unemployment comes.
　　Although China has many warning words such as "prepare for a rainy day" and "be prepared for danger in times of peace", Chinese people rarely have a real sense of crisis and the ability to think independently. They are pessimistic when they are optimistic, and blindly optimistic when they are pessimistic. They like to follow the trend, like to push back the current situation indefinitely, and imagine that the current life will continue forever, and the days will continue to be beautiful, such as never being unemployed, wages will continue to rise, there will always be enough income to repay the loan, and they will always be able to exchange for foreign exchange. Travel and study abroad. It is in this fantasy that the crisis is creeping closer.
　　After reading my last article, "Japanese companies withdraw from Huawei to set up factories in India and the real estate bubble", you know that under the background of foreign capital groups fleeing, the money earned by doing business for one year is not as good as that of my wife's real estate speculation. The current real estate bubble has forced many companies to close down, and China's manufacturing industry is already in jeopardy in the future.
　　Unemployment has a transmission effect. The service industry relies on the manufacturing industry to exist. The depression starts from the manufacturing industry and gradually spreads to the service industry. In the future, service industries such as finance, design, commerce, catering, and logistics will be the hardest hit areas for unemployment. Most of the employees in these industries are middle class. White-collar workers, gold-collar workers, and middle-class workers have been the main force who took out loans to buy houses in the past two years. Without a job and to pay the mortgage, the only option is to go to the red light district to engage in the fourth industry. This should be the only bright spot in the industry under the economic depression!
　　Today's Phoenix News report: During Japan's economic depression, "there is one call girl for every 50 people?" "The market size of the pornographic service industry is 5 trillion yen, accounting for 1% of the island country's GDP. "After the economic depression, only the porn industry didn't collapse." I don't know if it's purely entertainment reports or some insinuations, but I prefer the latter.

　　3. High taxes freeze second-hand housing transactions.
　　Easy entry and strict exit is ZF’s coup for using real estate to transfer liabilities and lock in liquidity. Everyone buys a house and the over-issued currency goes into the reservoir. As long as the house price continues to rise, the buyers feel that their real estate is increasing in value and will not sell it. Cashing out, the currency will be precipitated, and will not impact the foreign exchange market and prices.
　　Everyone can note that the current hot market is all new houses, while the second-hand houses are much lighter. The reason is that because of high taxes and fees, it is difficult to sell houses. Someone calculated an account. If the last purchase price of a commercial house was 800,000 yuan, the transaction was 1.6 million yuan this time, and the house was 5 years old. After entering the second-hand housing market, how much tax do I need to pay? The total tax expenditure of value-added tax, stamp duty, personal tax, and land value-added tax is 323,000 yuan, and tax expenditure has accounted for more than 50% of the value-added. If the tax rate is doubled, it may be a loss to sell the house.
　　ZF has some ways to deal with people who cash out. Even if you want to cash out, it will not be easy. Taxes and fees are the first major barrier. For example, a house in Beijing, Shanghai, Guangzhou and Shenzhen is 10 million yuan. If you want to sell it, you can first charge a transaction tax of 3 million yuan, or 5 million yuan. It will make you feel painful to sell the house. It depends on whether you dare to sell it. Don't say there won't be such a policy, that's because you know too little about history and don't expect enough of the thick black hand.

　　4. Interruption of the transfer procedure.
　　If one day in the future, just like buying a house, you need to queue up to get the number, and your queue is 2 or 3 years later, what will you do? That is to say, even if someone is willing to buy, you have to wait, you need to get permission from the relevant department, and the relevant department can find any reason, such as the computer is broken, the clerk is on vacation, the department is merged and reorganized, etc., the person who can handle the transaction procedures Wait a few months. Don't say this won't happen, it's already happening.
　　Please see the recent news about the difficulty of selling a house that has been hyped by the media: Recently, due to "intestinal obstruction" in the real estate registration process, the embarrassing situation of "buyers can't get houses and sellers can't get money" has repeatedly occurred in Zhengzhou, the capital of Henan Province: Zhengzhou City, a big city, only issued 42 real estate property certificates in 28 days; because the real estate registration certificate could not be obtained, some people bought second-hand houses for more than 4 months and still could not pay the house. Zhengzhou's "difficulty in real estate registration" has caused panic among buyers of second-hand houses.
　　Seeing this, are you sure that in the turbulent army of selling houses and cashing out in the future, you can get the number, get the fixed asset registration certificate smoothly, and successfully complete your selling and transfer procedures? Everything is unknown.

　　5. Property tax and inheritance tax.
　　When all the land in the local government is sold out, the real estate transaction tax is almost collected, and it is inevitable that the real estate tax will shift from the transaction link to the holding link. Real estate holding tax is levied to generate revenue for the financial sector. A real estate tax of 5% of the assessed value of the house price is levied every year. In line with international standards, it is common to collect hundreds of thousands of real estate tax for a house in a first-tier city. If you feel that 5% is not enough to relieve Fiscal expenditure, then levy 10%, 15%? The house has become tasteless, it is a pity to sell it, and it will be hot.
　　If someone said, I have money, property tax is a drizzle, no care. Well, then one day you're going to have to go, and the estate tax will be levied. Recently, it has been rumored on the Internet that Shenzhen will be the first to introduce an estate tax on a pilot basis in the country.” He also said that the pilot plan stipulates that the applicable tax rate for inheritances of more than 10 million yuan is 50%, and the taxable funds cannot be paid out of the estate, and must be paid in the inheritance tax. All of them will be handed over within three months, otherwise they will be nationalized.
　　Although it is said that the rumors stop with the wise, but for the people of Shenzhou who have seen all kinds of miracles, no matter how exaggerated the rumors are, they will believe it, because our land is so magical. In the past 67 years, I have seen many things.
　　What's more, the reason why rumors can rise and spread widely is because the rumors conform to the psychological expectations of the people and reflect the general concerns and worries of everyone. Who can say for sure, In the future, Shenzhen will not levy inheritance tax according to this plan?
　　If you say you can afford the property tax, can you ensure that you can afford 50% or even higher inheritance tax?

　　6. The inflection point of the sharp drop in housing prices.
　　I don't predict the inflection point of the housing market because I can't guess the bottom line of policy. In any country and region, real estate has experienced prosperity, such as the United States, Japan, South Korea, including Hong Kong in China. There will be ups and downs, this is a law that no one can change, it is just a matter of time. China's housing market uses the bank's leveraged funds to infinitely magnify the risks of home buyers, blowing it into the great bubble of the century, making the United States and Japan feel ashamed.
　　The money multiplier has a limit on the expansion of the currency. The annual interest rate is 10%. Under the extreme conditions, the central bank can only produce a multiplier effect of 10 yuan at most when 1 yuan of base currency is invested. In the same way, the bank's credit leverage is also limited. Yes, there is a boundary. Once leveraged expansion reaches this boundary, asset prices will inevitably peak. Unless you continue to print money without anchors, then everyone will wait for the baptism of the flood. Therefore, from this point of view, the housing price bubble hyped by credit leverage is bound to face the inflection point of the capital limit.
　　Of course, there are other emergencies that will also accelerate the inflection point of housing prices. For example, some time ago, there was a gossip report that because China participated in the sanctions against East Korea, San Pang was unhappy and clamored for a nuclear strike against Beijing. , Regardless of whether it is true or not, if such an event is about to happen, what impact will it have on Beijing's housing prices? Or if the United States and Japan support Vietnam in conflict with us in the Beibu Gulf and the South China Sea, what will be the impact on housing prices in Shenzhen and Guangzhou? Whether such a black swan will take off, who can say for sure?
　　Buying up and not buying down is a common psychology. As long as there is trouble and the expectation of price reduction is formed, the Chinese people's urine must be a swarm of sell-offs, just like the crazy selling of stocks in last year's stock market crash, fleeing, regardless of the cost!

　　7. House slaves under negative assets.
　　Housing prices plummeted, and the real estate became insolvent, which means that the total value of your real estate has been lower than your loan, not only the down payment is in vain, but the assets become negative.
　　Take the situation of my friend at the beginning of the article. If one day, the value of the property he purchased fell below 3 million yuan, or fell to 2 million yuan, the down payment of 1.5 million yuan he paid was a waste of money. He has to repay a high mortgage every month, what will he choose?
　　A lot of people say this won't happen because it's in China. That's how the subprime mortgage crisis in the United States happened back then, and China will only surpass it. The only rational option for this scenario is to cut off the supply.

　　8. Suspension? dream.
　　If the buyer chooses to cut off the mortgage, then the bank will quit.
　　For residential mortgage loans in China, China has neither a personal bankruptcy law nor a provision for its contractual obligations to be limited liability. In this case, the debt liability of individual housing mortgage loans in China is unlimited. In other words, if China's real estate market prices fell sharply, the housing held by residents became "negative equity". In this case, as in the United States, these residents who hold "negative equity" houses can suspend their debts as long as they "cut off the supply" and hand over the houses purchased through mortgage loans to banks.
　　On the contrary, if the resident chooses to "cut off the supply", then not only the bank that made the loan may repossess the house, but also the debt owed by the resident has to continue to be repaid. until all its debts are paid off. Not only did the house purchased by the individual disappear, the personal down payment and up-front contributions were lost, but he also carried a whole body of debt.
　　If the economy gets to this point, the banks that are now making large-scale mortgage lending can't be alone. Small and medium-sized banks can no longer manage. The five major banks are sons and must be saved, even if they print money. Sending money directly is too naked and not good-looking, then buy a house!
　　The bank has become the largest real estate developer. Millions of houses that have been cut off from supply have become the targets of government procurement. The government's large-scale purchases have supplemented the bank's liquidity, and the bank has been saved. The government uses these housing listings as welfare programs, Providing low-rent housing for the unemployed and homeless, avoiding social unrest, not only saving the bank, but also solving the problem of social stability, killing two birds with one stone, killing two birds with one stone, it is really smart!
　　After a cycle, the house that the family has worked hard for all their lives may still be in your hands. It's just that the autumn wind is bleak, and the world has changed. Your assets have been cleared, and the house is no longer your private property, but a charity from ZF to you!
　　There is a price to choose, whether it is licking blood or taking chestnuts from the fire, see if you can afford it! When you enter a casino, you must abide by the rules of the game. I hope you are a person who is willing to gamble and admit defeat. Have your destiny, and seek more blessings!