Urgent need: the principle and application of four-quadrant model of housing market!

The four-quadrant model is a tool to analyze the real estate market. Through the combination of qualitative analysis and quantitative research, this paper studies the changes of real estate market. In essence, the four-quadrant model is a relatively static model. The four-quadrant model is based on the division of two markets, namely the real estate asset market and the real estate use market. The so-called real estate asset market refers to buying and selling real estate for investment, while the real estate use market refers to renting or buying real estate for your own use. 2. Four Quadrants Based on the division of two markets, the model has established four quadrants, namely, Quadrant I and Quadrant IV are real estate use markets, and Quadrant II and Quadrant III are real estate asset markets. 3. There are two intersections between the asset market and the use market: first, the rent level formed by the use market is the key factor to determine the demand for assets; Second, the two markets also have a combination point in development or construction. (2) The basic meaning of the four-quadrant model method 1. The reason why the two markets are divided into two markets is that from the most basic analysis of supply and demand in economics, it can be found that if the real estate market is studied as a whole, there will be fuzzy areas, so it is necessary to subdivide it, and the division into real estate asset market and real estate use market is based on the differences of factors affecting the supply and demand relationship between the two markets. Of course, there is a close relationship between the two markets. 2. Scientific Economic Analysis Through the establishment of a four-quadrant model, we can conduct standardized economic analysis, that is, we can deduce the logical relationship of various factors through mathematical models, and the most important thing is to realize the research on how external factors affect the internal variables of the real estate market. At the same time, the four-quadrant model makes the study of real estate market changes quantitative. II. Principles of China's Macro Policy and Real Estate Industry 1, Phase I: 1998-2002 1998. The reform of urban residents' housing system was comprehensively promoted, and seven system reforms, including housing distribution, supply, market, finance, property management, intermediary, administrative management and regulations, were comprehensively launched and cancelled. The privatization of residents' housing property rights and the marketization of housing purchase channels have been clarified, which has mobilized residents' enthusiasm for buying houses and concentrated the release of residents' housing demand. A better economic environment has created more housing demand. At the same time, the state's policy support for the development of the real estate industry has promoted the rapid development of the real estate industry from both supply and demand. In order to expand domestic demand, China government regards housing as a new consumption hotspot for residents. By 2002, it has cut interest rates eight times in a row, given preferential mortgages, reduced taxes and fees, encouraged the purchase of houses, and stimulated housing consumption. At the same time, as a pillar industry of economic growth, the state has given policy support to the sustainable development of the real estate industry, including relaxing the credit scale control of commercial housing, implementing the house pre-sale system, rectifying and canceling some administrative fees, and promoting the rapid growth of the real estate industry. Four-quadrant model analysis: China's economy has sustained rapid growth in recent years, which has a very significant impact on real estate prices. When the economy grows, China government expands domestic demand and regards real estate as a new consumption hotspot for residents, which stimulates demand growth. The demand curve of the first quadrant of the four-quadrant model of the real estate market shown in figure 1 will move to the upper right, and the rent level and demand of the market will increase or increase at the same time. The increase of the rent level in the real estate market, the decrease of the long-term interest rate, the decrease of the expected investment risk in real estate, preferential mortgage, tax relief and other policy support encourage the purchase of houses and stimulate real estate investment and consumption. These policies reduce investors' demand for investment income, that is, the capitalization rate curve in the second quadrant rotates to the lower left, leading to an increase in asset prices. The rise of real estate prices and the preferential policies given by the state to the sustainable development of the real estate industry, including relaxing the credit scale control of commercial housing, implementing the house pre-sale system, rectifying and canceling some administrative fees, have led to the increase of new development and construction in the third quadrant. Thereby increasing the development cost and market supply of housing. At the same time, a large number of urban demolition and transformation have increased the demand of the real estate market. In the fourth quadrant, the amount of development and construction has been converted into stock. Finally, a new balance is formed between the demand and supply in the use market and between the transfer price and development cost in the asset market. Obviously, the rectangle formed by the equilibrium scheme during economic expansion is outside the equilibrium line of the main market. Whether it is rent, price, new development and construction, or stock, it cannot be lower than the original value in the initial equilibrium state. Therefore, economic growth will make the housing market develop in a diffuse way. As shown in figure 2. Figure 2 Four-quadrant model Figure 2 Stage 2: From 2003 to 2007, from the second half of 2003, the real estate industry experienced the phenomenon of overheated real estate investment and excessive price increase in some areas, and the real estate prosperity exceeded the level of economic development stage, showing the characteristics of being uncoordinated with economic growth. In view of the rising real estate prices, the state has comprehensively applied economic, legal and necessary administrative means to introduce a series of macro-control policies for real estate in a differentiated and step-by-step manner. Regulation in the fields of credit, taxation, interest rate, foreign investment, Xing Tao structure, market information, land transfer and supervision system, and land revenue distribution management. Specifically, there are a series of policies such as "National Eight Articles", "National Six Articles" and "National Fifteen Articles", which sum up to regulating demand and supply. (1) From the perspective of controlling demand, since 2004, China has raised the deposit reserve ratio and the loan interest rate 10 times, and only in 2007 it was raised six times. A series of measures such as increasing the down payment ratio, raising the real estate tax rate, collecting personal income tax on the transfer of second-hand houses, increasing the down payment ratio and loan interest rate of second homes, strictly managing real estate development loans, controlling the demolition scale and so on are taken to curb speculative and non-speculative demand for real estate. Through the analysis of the four-quadrant model, the macro-policy controls the demand for real estate assets by means of interest rates, loans and taxes. When the long-term interest rate rises, taxes increase, the expected risk of real estate investment rises, and the depreciation policy changes, investors' demand for real estate investment income, that is, rent, rises. The improvement of capitalization rate is reflected in the fact that the ray (solid line) in Figure 3 rotates to the upper right to a new position (dotted line), which changes the original equilibrium state. When the expected income rent rises, the increase of capitalization rate will reduce the asset price (as shown in Figure 3), which will lead to the decrease of development and construction in the third quadrant. This situation will eventually lead to a decrease in the stock of real estate and an increase in the rent in the real estate market. As a result, the rectangle in the new equilibrium state moves up relative to the initial equilibrium rectangle, and the whole rectangle shrinks to the origin. When the long-term stock and the amount of new development and construction to maintain this stock scale are relatively low, the asset price will be lower and the rent will be higher. If the rent is relatively low, the stock can maintain the same scale, which cannot be balanced with lower asset prices and lower new development and construction. In the long run, through the increase of rent expectation and capitalization rate, the price of real estate assets will be reduced and the amount of new development and construction will be reduced, thus stabilizing the real estate market. In the short term, policies can effectively reduce speculative demand and non-speculative demand. However, in reality, China's current housing market is complex, with great regional differences and different policies, so the adjustment of the real estate market is relatively slow. But in the long run, the adjustment of capitalization rate is still effective to curb the excessive growth of housing prices. Fig. 3 Four-quadrant model diagram (2) Control supply Control supply, including housing supply structure, tax, credit, land, etc. Land supply is implemented in accordance with "Specification for Transfer of State-owned Land Use Right by Bidding, Auction and Listing" and "Specification for Transfer of State-owned Land Use Right Agreement" formulated by the Bureau of Land and Resources, which standardizes the land market and increases the land cost. Strict management of real estate development loans increases the difficulty of financing and tax adjustment for developers, and increases the cost of real estate development. From the four-quadrant model, controlling land supply, controlling credit scale, increasing taxes and restricting apartment structure increase the financing difficulty of developers, and at the same time greatly increase the development cost, thus inhibiting the development and supply of real estate. The increase of real estate cost is reflected in the fact that the ray (solid line) in Figure 4 moves to a new position (dotted line) and changes the original equilibrium state. The decrease of development and construction will lead to the decrease of property stock and the increase of rent. At the same time, the scale of demolition has been controlled, the stock has decreased less, and the rent will not increase much. As can be seen from the figure, the rise in rent drives the rise in real estate prices. Therefore, the whole rectangle in the new equilibrium state is translated to the upper left. In the long run, this reflects the long-term control goal of promoting the stable and sustained growth of China's real estate industry. However, from the short-term supply point of view, due to the time lag of the real estate industry, the supply will not decrease in the short term, but the investment demand and speculative demand will decrease. According to the theory of supply and demand (as shown in Figure 4), if the supply remains unchanged and the demand decreases within a certain period of time, the real estate price will inevitably decrease, which also achieves the goal of controlling the housing price by the government. But in reality, the real estate price has not decreased, on the contrary, the house price has risen faster, mainly because although the loan cost of developers has increased, the market is a seller's market, and real estate companies mainly pass the cost on to buyers. The short-term effect may not be obvious, which also depends on the systematicness of macro-policies, and whether these controls can effectively transmit the demand and supply levels, and finally control the real estate price. Figure 4 Four-quadrant Model Figure 3 Stage 3: The third quarter of 2008-The real estate industry experienced the "golden period" in the next 10 year, but it began to change at the end of 2007: the price increase dropped and the market turnover shrank obviously. At the same time, the international financial crisis and economic downturn have affected the domestic economic development, and the real estate industry is inevitably seriously affected. On June 22, 2008 10, the central government issued seven measures to rescue the market: reducing the real estate tax rate, exempting the transaction stamp duty, temporarily exempting the land value-added tax, lowering the mortgage interest rate, reducing the down payment ratio, lowering the provident fund loan interest rate, and allowing local governments to implement self-help projects. Through the four-quadrant model, during the economic downturn, demand decreases. If the supply of real estate remains unchanged, if the demand for real estate equals the usable real estate, the rent will be reduced accordingly. The original equilibrium state changes, the demand curve moves to the lower left, and the speculative and non-speculative demand of real estate decreases, which leads to the decline of real estate prices in the second quadrant, which in turn leads to the decrease of new development and construction in the third quadrant, and finally leads to the decrease of real estate stock in the fourth quadrant. When the equilibrium state is reached, the four-quadrant model shrinks to the original point as a whole, which is just the opposite of economic expansion. As shown in fig. 5. Fig. 5 Four-quadrant mode diagram At this time, the national macro-control policy is from control to security, with the focus on supporting residents to solve housing problems. Macro-policy is contrary to the period of rising house prices. Reducing the real estate tax rate, exempting the transaction stamp duty, reducing the mortgage interest rate, reducing the down payment ratio and reducing the provident fund loan interest rate will help increase the real estate demand. Allow local governments to implement self-help projects, temporarily waive preferential development fees such as land value-added tax, promote the increase of development volume and supply, and stabilize real estate investment. The whole change process is opposite to that in Figure 2. Three. Conclusion The four-quadrant model can track and analyze the various impacts of macro-economy on the real estate market, and is very effective in explaining the new equilibrium caused by external environmental changes. A clear understanding of the principles of the national economy and the real estate industry is conducive to China's long-term macro-policy and regulation of the real estate market. At the same time, it is necessary to foresee the problems existing in the real estate market in advance, make an accurate judgment on the changes in the overall situation of the real estate market operation, and make a correct expectation and evaluation on its future trend, so as to take early control measures, maximize the sustained and good operation of the real estate industry and the real estate market, effectively prevent the ups and downs of the real estate market, and maintain its health and stability. But at the same time, the four-quadrant model also has defects. This model can only show the equilibrium state of the market at a certain moment, but can't reflect the dynamic process of the whole market from imbalance to equilibrium. Therefore, it is necessary to establish a housing market information system that can reflect the short-term dynamics of the housing market, and use a four-quadrant model to describe the long-term equilibrium of the real estate market and analyze the short-term dynamic changes of the real estate market.