Many in China spend their life savings on real estate, and therefore this can be a rather emotional issue to many people. Concerning housing price, I have four opinions:

First, China's urbanization rate is now reaching its limit, so it is quite right for the country to engage in the "new normal." If China's urbanization rate reaches about 60%, things will get chaotic; in fact, signs would be visible if it is more than 50%.

Second, will the housing price increase, or will it decline in the future? My answer is that there will be time for it to increase, and there will be time for it to get low. The reason is that there is a surplus of capital and the market performance is like tidal waves that rise and subside. This is what I call "tidal market phenomenon"; when the tide surges and the price rises wildly; if the tide recedes there will be immediate fall or stagnation.

Third, will it collapse? My answer is that the real estate market will not collapse soon but this is quite likely to happen in the future. It does not collapse soon because it is a macro industry; there are too many people and resources involved, where the collapse will only happen in the last crucial moment. When that happens, there will be a complete collapse, and it will not just involve real estate market.

However, as the reform is facing challenges, I am quite pessimistic. In the end, this industry, or other industry will still collapse. To put it bluntly, the struggle between reform and anti-reform has always existed, and the prospects for reform are still not optimistic.

Fourth, is there a way to find a way out? My answer is that unless China seeks an alternative path, if the old way of rising, regulating, then followed by rising and re-regulating, things simply will not work. The current practice is to consume resource and delay the time; once production factors and resource conditions such as external storage, environment, and manpower are all exhausted, things will come to the end. The only way is to find another space, but this is another story.

How should we analyze the real estate market? A common way is to see how many houses are currently available and how many sets are needed; the supply and demand are reduced, and those additional ones naturally will be in "de-capacity" and "destocking". How is the house price determined? The so-called "comparative method" is nothing more than looking at the age of the house, the type, the decoration, the position and the location, the supporting facilities, the community environment and so on, but in this case, the price is likely to rise instead of fall.

History is everywhere, and history is reminding everyone that the so-called real estate preservation and appreciation is a myth. This is the reality in the past and present. Real estate itself will not preserve the investment value; it is the economic environment, economic trends, and the environment that can really preserve the investment value. Real estate itself is a macro industry; this means that it cannot be measured by input and output like commodities such as television sets. It cannot be measured by supply and demand, or even by price. What we have today might be worthless tomorrow.

Most Chinese, including renowned economic gurus, do not have a sufficient level of rational thinking to invest in the market according to market logic. Saying something is profitable without development logic is simply bluffing; even the most powerful government is also subject to the logic of development.

Final analysis conclusion:

It is a myth that real estate can preserve and appreciate the value. What can really preserve the invesment value is the economic environment, the economic trend, and the big environment. The most powerful government is also subject to the logic of development. How then, can investors change what the government cannot?