The industry value chain is undergoing reconstruction | Building a new real estate model (10)

Chinese real estate is at a turning point where the old and new models are being replaced.

**　　　The old model can no longer be sustained, and a consensus has formed both within and outside the industry.** However, this consensus does not come from an understanding of the new model—in fact, the industry’s understanding of the new model is quite vague; instead, it comes from a series of soul-searching questions—why did the industry see systemic defaults? Why, in the troughs and crises of 2008, 2011, 2014, and 2018, did the industry fail to form a corrective mechanism? Why did the industry’s financing structure consist almost entirely of debt, thereby allowing risk to spread into the financial system?

To answer the question of why the old model can no longer continue, you cannot rely only on criticizing the “three highs” model (high leverage, high turnover, and high gearing); you also cannot rely only on reflecting on a self-reinforcing cycle based on land as collateral, finance as leverage, and rising home prices as the expectation.

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