Insufficient balance

  "Second uncle, you entered the Hainan property market in 1991, right? At that time, the land price in Hainan should have been very cheap, around tens of thousands to hundreds of thousands per mu. Now, the land price in Hainan is several million, and it's hard to get a deal for less than that, isn't that right?"

  Tang Tianhao's face was filled with surprise, and seeing his big brother also looking at him, he nodded slightly.

  "Xiao Yu, how did you know all this? Outsiders don't know much about this. When I first entered the Hainan real estate market in '91, the land price was only 160,000 yuan per mu. At that time, it wasn't certain if the market would be good, and I didn't dare to buy too much. Who would have thought that afterwards, the land price skyrocketed? By last year's end, the land price had already risen to 6 million yuan per mu. Now it's only April, and the land price has already approached 7 million yuan per mu. I'm now regretful to death. If I had been bold enough to buy more land at that time, maybe your second uncle would be the third billionaire in Dongling by now. Now, buying land from the Hainan government or getting it through administrative allocation is becoming increasingly difficult. It's not something that people like us without connections can get involved in. This time when I came back, I was also planning to transfer some funds to Hainan and buy another piece of land, holding onto it for slow appreciation."

  When Tang Tianhao said this, Tang Yu suddenly realized that the debt his second uncle owed to the bank was probably borrowed from Dongling around this time and then completely invested in the bubble in Hainan.

  "Second uncle, don't ask me how I know this, just listen to what I have to say. In 1991, the housing price in Hainan was less than 1500 yuan per square meter, and now it has exceeded 7000 yuan per square meter, right?"

  "This is actually correct, when I first entered the Hainan property market in 1991, the commodity house was about 1400 per square meter, now it's around 7500 per square meter. But the housing prices there change every day, who knows, maybe tomorrow it will rise to 7600. People from Hainan are rich."

  "Second uncle said that Hainan's property market changes price every day, this is the point. This kind of rapid growth does not conform to market rules at all. The house prices in Hainan are definitely not driven up by natural market demand, but are being manipulated by you developers and speculators. Second uncle, tell me, your developed properties haven't even been built yet and have already changed hands several times? Are the houses you sell to ordinary people or speculators? I reckon you know best yourself. And another thing, the buildings you sell were probably not originally developed by yourself either?"

  "Xiao Yu, you seem to know a lot about Hainan. The property market there is currently booming, with most buildings selling out within days of being put on the market, and prices changing every few days. I also invested in some land development back in 1991, and now many of the buildings that are being sold were actually taken over from others."

  "My dad studied economics, let him tell you, with this rapid growth in housing prices and large amounts of speculative capital, is there something fishy going on?"

  Tang Tianhong slightly furrowed his brow, although he found it a bit strange that his son knew so much, but what his son said still made him think a lot.

  "I hadn't heard you mention anything about Hainan before, but if it's really like what Xiaoyu said, then it's likely that there's a large amount of speculative capital driving up housing prices. Otherwise, it wouldn't be possible for housing prices to rise by more than five times in just two years - this kind of explosive growth is abnormal and doesn't follow market rules. However, some economists are now actively promoting the idea of using real estate to boost local economic development, and this viewpoint still has a lot of traction in academic circles. Hainan's rapid development in recent years, with large amounts of speculative capital flowing in, is also normal - but ultimately it's the ordinary people who will suffer. Your second uncle and those unscrupulous businessmen won't care about any of that."

  He was ridiculed by his elder brother as a black-hearted businessman, and his second uncle did not argue, which businessman is not black-hearted.

  "Haha, we real estate developers naturally know that there is a lot of speculative capital in the market for housing speculation. But never mind whether they speculate or not, in the end we developers always make money, as long as someone else foots the bill."

  "Second Uncle, you said someone else will foot the bill. Are you referring to the people of Hainan paying for it? But Second Uncle, have you considered what would happen if the people of Hainan refuse to pay for your expenses?"

  Tang Yu said that they were exploiting the people of Hainan for money, and Tang Tianhao simply opened up and said.

  "This can't be blamed on us, the key is that Hainan has developed too quickly in recent years. If we don't make money from them, who will? In recent years, Hainan's economy and population have grown rapidly, especially after it became an independent province from Guangdong in 1988. By 1992, economic growth had reached as high as 83%. For something like real estate, someone will eventually foot the bill. This is money that can't be made for nothing."

  Tang Yu was sharp, "Second uncle, you said Hainan's economic growth is as high as 83%, that's a sign of overheating. Moreover, I'm afraid you won't care about this, but more than 40% of the 83% growth comes from real estate and related industries, isn't that a surprising figure? Using real estate to drive local economic development is not wrong, but this driving needs to have a limit. If half of the local economic growth is contributed by real estate, it's extremely abnormal. And if the economy is overheating, it can't be guaranteed that the country won't implement macro-control policies, like Hainan's hot real estate market, the country will eventually introduce policies to control it and bring down the temperature. The aftermath of last year's macro-control hasn't dissipated yet."

  "You little brat, where did you learn all this? These professional terms are so standardized, aren't you just trying to fool your uncle? Does the central government control or not, is it up to you kids to decide?" Tang Tianhao was somewhat skeptical of Tang Yu's words.

  "What Xiaoyu said is not unreasonable. If the Hainan real estate market is indeed overheating, it's possible that the state may take unilateral control measures. After all, the country cannot just watch as a local economy gets out of control. Of course, this would depend on whether the property bubble has grown large enough and what percentage of speculative buying there is. Even if the central government wants to intervene, there will be significant resistance. It's only possible, not certain. Currently, there are no signs that the central government plans to intervene, and mainstream economists don't think China's economy is overheating."

  Seeing that his father agreed with part of it, but not entirely, Tang Yu continued to speak. As long as they listened to part of it, the goal was achieved. For this real estate bubble that had cost his second uncle a fortune, Tang Yu could almost recall every detail.

  "Dad, you say that, I reckon you don't know much about speculation in Hainan's property market, and your understanding of Hainan's real estate area is not enough. Who says the central government doesn't have any signs of regulation? Let Second Uncle tell you about the specific situation in Hainan. You two, one with theory and one who knows the specifics, put together can figure it out, no need to say I'm talking nonsense."

  Seeing his big brother's serious face, Tang Tianhao also stopped teasing Tang Yu.

  "There are indeed many speculative purchases in Hainan. In my own development projects, 80% of the houses were not sold to genuine residents, but rather to speculators who then resold them without handing over the properties directly to the buyers. To be honest, I've done this a few times myself and made a pretty penny from it. This time, I had a big deal that required some capital, so I thought of coming back to Dongling City to raise funds. As for other developers, they're all more or less the same - many buildings are sold multiple times even before construction is completed. As for the total area developed in Hainan's real estate market, I'm not entirely sure, but a rough estimate would be over 10,000 hectares. The actual data might be higher, but those figures are confidential within the provincial government and I don't have access to them."

  "Let's calculate based on a development area of 12,000 hectares then. Although Hainan is a province, its total population is not large, with just over 60 million people. With an average residential area of 20 square meters per person, this data only includes buildings under construction and does not include completed or existing ones. Adding those in, the average residential area per capita in Hainan should be at least over 40 square meters, right?"

  Tang Tianhong's eyebrows furrowed, "Hainan's per capita living space has reached over 40 square meters? How is this possible? I remember seeing a piece of data in the party newspaper not long ago that said Beijing's per capita living space was less than 7 square meters. Even if Hainan develops quickly, it can't compare to Beijing. If this is true, then Hainan's property market has severe bubbles, far more severe than imagined."

  Tang Tianhao's forehead was also slightly sweaty. He had only seen the continuous boom in the property market before, and as for what Tang Yu said, he hadn't thought about it before, so naturally, he didn't calculate it carefully either. It wasn't just him who hadn't calculated it, no one who speculated in real estate in Hainan had calculated this account, they only saw the rapidly rising house prices and the high profits that came with it.

  The area of real estate development and the area of land approved by the government, the Hainan government has always kept it in hand without making it public, but the property market has been booming all along, so no one thought about these things. Now Tang Yu suddenly points to the key point, Tang Tianhao's sweat naturally comes down with a whoosh.

  As a real estate developer, he naturally knows what it means for the per capita housing area of a region to exceed 40 square meters. It's simply doomsday for developers and banks.

  Real estate, no matter how it is hyped, ultimately has to be sold to the masses. However, with the average living space per person reaching over 40 square meters, it means that a large number of buildings will eventually be left idle and unsold.

  Wiping away the sweat on his forehead, "Xiao Yu, is Haikou Province's population really six million? You must have remembered it wrong. A province can't possibly have such a small population."

  Tang Tianhong continued, "It won't be wrong, specifically around 6.5 million. I work on the government side and am more sensitive to numerical things. The data that was just released by the state before the new year was around 6.5 million, it won't be wrong. Hainan only became independent from Guangdong Province in '88, there were originally fewer people, but they've increased over the past two years."

  Tang Yu remembered more clearly, the real data was 6.558 million people. For this matter that almost killed his second uncle, he had a deep memory, and every number was very clear.

  After Big Brother confirmed the population figures, Tang Tianhao's forehead was covered in even more sweat, but Tang Yu didn't care about him. "I don't know if Dad and Second Uncle have seen the news from the beginning of the year when Vice Premier Zhu inspected Hainan and Beihai. I remember that Zhu Yanshan, the vice premier, said a sentence at that time, which roughly means that Hainan can't compare to Shanghai, where he used to work, and that urban construction should be done in moderation. This sentence is already very clear, isn't it? It's directly pointing at the real estate market of Hainan and Beihai! Isn't this the attitude of the central government towards the abnormally hot real estate market in Hainan and Beihai? The central government does have an attitude, but many people don't realize it or don't want to realize it. When the central government really lets the Hainan real estate market crash, that will be the doomsday for you developers!"

  Here is the translation:

  It seems that both Tang Tianhong and Tang Tianhao are taking it seriously, although they don't know how Tang Yu, who has been in Dongling all along, seems to be more familiar with the situation in Hainan than Tang Tianhao. However, undoubtedly, his words are very reasonable, directly pointing to the core of the problem, and layer by layer analysis. Tang Tianhong, a former economics master's student, connected Tang Yu's words from beginning to end, and it's not hard to find that there is indeed a bubble in Hainan's property market, which is a serious bubble, and he can also understand what his son wants to express.

  "Xiao Yu mentioned that Vice Premier Zhu Yanshan inspected Hainan and Beihai, I knew about it, but the specific words didn't leave an impression on me. Vaguely remembered that in the end, he seemed to be not very satisfied with the result of the inspection. Looking back at the party newspaper, should be able to find it."

  "Second uncle, what you are playing in Hainan now is actually a game of passing the drum and flower, but what you are passing is land, not flowers. This flower will eventually rot in the hands of the last player and cannot be passed on. That day is not far away, just look at Vice Premier Zhu's recent speeches. The property bubble has reached such an extent that the average living space per person is several times that of Beijing. This bubble is so fragile that it can be burst with a single poke. As long as the country slightly tightens its monetary policy and controls the total amount of credit, it will be like taking away the fuel from under your cauldron, leaving you developers with no room for resistance."

  Tang Tianhao felt more and more uncomfortable as he listened, with sweat on his forehead increasing. Unexpectedly, the young son of his brother's family, who was known for only studying, could see so many things. He didn't know where he got the data from. He looked at Tang Yu again, then turned to look at his big brother Tang Tianying.

  "Big brother, look!"