Real Estate Finance|International Experience and Inspiration of Residential Financing System

  Countries around the world have established different residential finance models and implemented different financial policies, regulations and measures according to their own conditions. Although their formation is closely related to their economic and political systems, social and cultural traditions, consumption habits and economic development history, in general, the evolution of residential finance in various countries has obvious stages and regularities, which have strong reference significance for China’s real estate finance industry.

  Institutional guarantee for the development of China’s residential market

  1, with the development of the residential market in various countries, the evolution of residential finance in various countries have obvious stages.

In the process of solving housing problems, all countries have basically gone through a development process from solving housing difficulties to increasing the area of housing, and then to improving the quality of housing to improving the overall standard of living. In terms of housing finance policies, they have also gone through three stages of evolution. In the first stage, the government participated directly in housing development, construction and operation, and most residents rented public housing.

The second stage is the government’s shift from direct housing provision to participation in the residential finance market, forming a residential finance system dominated by state-owned financial institutions, with the aim of improving housing construction financing and consumption payment capacity; the third stage is the government’s indirect participation in the residential finance market, focusing on macro regulation and control to ensure the stability of the financial market.

  2. The housing finance policy of improving housing construction and consumption payment capacity is the basic policy of the second stage.

The second stage of development in developed countries generally lasted for more than 20 years, during which the government generally held an active financial support policy for the housing industry.

For example, the U.S. had a financial policy aimed at improving the financing capacity of developers. from the 1960s to the early 1970s, the U.S. began to implement a comprehensive urban renewal program, along with a large-scale demolition campaign nationwide. Many controversies arose due to the large demolition and construction costs and the insufficient number of housing units to be rehoused.

In 1975, the government enacted and implemented the U.S. Residential Mortgage Ordinance, and in 1977, the U.S. Urban Community Redevelopment Investment Regulation to encourage financial institutions to actively lend money; at the same time, a specialized agency, the Residential Redevelopment Investment Corporation, was established to increase investment. In Japan, through the Fiscal Investment and Financing Program, financial institutions absorb and raise funds to provide credit facilities to official financial institutions and direct investment to public or state-supported housing development institutions. The Japanese government has also opened up a variety of channels to solve the housing problem of residents by adopting a number of policies that focus on financing the construction of housing by various housing institutions and groups, the management of rent, and the provision of housing subsidies.
  China’s housing industry is in the early stage of the second phase and needs a decades-long financial support policy. After more than 20 years of reform and opening up and the rapid development of urban residential construction, the per capita living area in China has been improved faster, and urban residents in general have bid farewell to the era of severe housing shortage, and entered the stage of incremental and quality development from the quantitative development stage. 2003, China’s per capita GDP reached US$1090, and the per capita residential floor area of urban residents was only 23.7 square meters (converted into usable area), and the per capita residential floor area was only 17.8 square meters in 2004. In 2003, China’s per capita GDP reached US$1,090, and the average residential floor space of urban residents was only 23.7 square meters (converted into usable area of 17.8 square meters, and 18.4 square meters in 2004), with an Engel coefficient of 37.7, which is only at the early stage of the second phase.

As a large developing transit country, this stage will far exceed that of a small geographically populated country, and China’s housing finance policy to improve housing construction and consumption affordability should also last for decades, requiring prevention of the tendency to leapfrog development stages or disregard the mainstream of development at this stage.

  China should draw on international experience to clarify its financing policies that support residential production and consumption in both directions. The government has put forward a people-oriented governing platform, made building a moderately prosperous society a political goal in China, and cultivated the real estate industry as a pillar industry of the national economy, and the real estate industry also has the intrinsic motivation for rapid development, so a long-term and stable financial support policy is an institutional guarantee for achieving political goals, improving people’s living standards and cultivating a pillar industry, and building a financial support system focused on improving the ability to pay for housing construction and consumption It is of far-reaching significance to build a financial support system focusing on improving the housing construction and consumption payment capacity.

  The development direction of China’s housing finance system

  1, the characteristics of the residential finance system in developed countries

  Mature housing finance system generally has an independent government non-profit housing financial institution to coordinate the whole housing finance business (for example, Japan’s Housing Finance Corporation, Singapore’s Central Provident Fund Board, etc.). It provides funds and other facilities to housing operators and financial institutions operating housing credit, and coordinates specialized residential financial institutions (such as mutual housing savings institutions or mortgage banks), while other banks and non-bank financial institutions participate in financing and providing guarantees, thus forming an operational mechanism with the participation of all parties and mutual division of labor.
Developed countries and countries in transition generally establish a multifaceted housing financing system combining commercial and welfare, and most of them have professional housing financing institutions. While giving full play to the market mechanism, market economy countries have not neglected the construction of the welfare financial system by the government. Developed countries have both commercial financial institutions and welfare financial institutions to support them.

Professional financial institutions are established in the commercial financial system, and other financial institutions actively cooperate. The government mainly provides active support for direct financing, credit supplementation and market liquidity in the welfare financial system. From international experience, most countries have specialized housing savings institutions, such as building savings financial institutions in Germany, a special bank for residential finance in Japan, and building societies in the UK. Research shows that developing countries promoting residential finance systems are more likely to succeed by establishing professional institutions. Specialized institutions are better able to provide home purchase loans than general institutions.

  A financing system with the participation and division of labor among many institutions in developed countries is both an important means to promote the construction and consumption of housing and a necessary measure to prevent risks. Developed countries have now formed a situation in which a variety of residential financial institutions participate together, using various financial instruments and raising funds through multiple channels, widely using the residential professional savings and loan system, the government’s direct financing system, the government’s credit supplement and mortgage banking system, and real estate securities financing to promote residential construction and consumption, while also widely spreading the risk 

  2、China should strengthen the exploration and pilot of residential financing system

  The government should participate in the residential finance market, explore the establishment of an independent residential financial institution to coordinate the entire residential finance business, focus on interest rate guidance, deposit insurance and credit supplementation, coordinate the interest relationship and operation rules among various financing entities, and effectively regulate the market and achieve social welfare.

  Establish a multi-channel support system and cultivate diversified financing tools. China’s residential financial support institutions are very single, currently residential construction and consumption are only supported by commercial banks and housing provident funds, and there is a lack of specialized residential financing institutions, corresponding support bodies and support policies in credit supplementation, market flows and direct financing. Cultivating diversified financing institutions is a necessary means to promote residential consumption and construction and diversify risks.

  Professional residential financial institutions should be established as soon as possible, while further leveraging the role and effectiveness of housing funds. At this stage, the pilot and promotion of savings banks can be continued, and professional residential financial institutions with Chinese characteristics can be established as soon as possible to provide a continuous source of funds for China’s residential goals and industrial development. At the same time, the role and effectiveness of housing provident funds should be further brought into play, and quickly complemented in terms of credit supplementation and market circulation.