The Federal Reserve's interest rate cut in September has essentially become a high-probability event. Once the US dollar enters a rate-cutting cycle, it means that the multi-year Sino-American financial war is finally coming to an end.

During the Sino-American financial war, the sectors in our country that were hit the hardest were the real estate market, the stock market, and the foreign exchange market. Now, the Sino-American financial war may truly be coming to an end.

As a result, many people have started to fantasize that a large amount of international capital will flow out of the United States and then into our country, causing our real estate and stock markets to rise again.

So, after the Federal Reserve's interest rate cut and the end of the Sino-American financial war, will our real estate and stock markets rise? What kind of impact will there be?

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Hello everyone, I am Dahai Qingdao, a real estate practitioner for more than ten years. In my spare time, I like to post videos related to the Qingdao real estate market or real estate in general, and I hope you will enjoy them.

Before the pandemic ended, many people said that once the pandemic was over, everything would get better, so everyone was looking forward to the end of the pandemic.

Later, after a three-year-long pandemic, various places were finally unsealed, and everyone was supposed to get better, right? No, not only did things not get better, but they actually got worse.

It is only now that people have realized that over the past few years, the biggest impact on our work, employment, income, and consumption was not the pandemic, but the Sino-American financial war.

It was because the bald eagle wanted to use the US dollar's interest rate hike cycle to burst our real estate bubble, our stock market, and our foreign exchange market, which led to the decline in housing prices, the stock market downturn, and the impact on employment income and consumption.

Therefore, everyone is now hoping that the Federal Reserve will quickly cut interest rates and that the Sino-American financial war will end quickly, so that everything will get better.Now the Federal Reserve may indeed be considering a rate cut, and the financial battle between China and the U.S. might truly be coming to an end. At this juncture, many are saying, "Just wait for the Fed to cut rates, and everything will be fine." They believe that once the Fed lowers interest rates, capital will flow back, housing prices will rise, the stock market will soar, and everything will turn around for the better.

However, will our housing prices really rise, and will the stock market truly surge after the Fed cuts rates? I hope everyone doesn't get their hopes up too high. I'm not trying to dampen spirits, but rather urging everyone to view the Fed's rate cut objectively, calmly, and rationally.

The higher the expectations, the greater the potential for disappointment. Without expectations, there is no disappointment. If expectations are set too high, it's not a good thing. If they are too lofty and not met, a significant sense of letdown can ensue.

Firstly, if the Fed cuts rates, it would undoubtedly be a positive development for our real estate market, stock market, and economy. There's no doubt about that, as it would indeed lead to capital inflows, thereby boosting the value of assets in RMB.

But would the U.S. really stand idly by and watch as international capital flows into our country, contributing to the development of a competitor?

Secondly, due to the impact of the China-U.S. financial conflict, our stock market is indeed at a low point right now. However, one crucial point should not be forgotten: the stock market is a place for companies to raise funds, not a place where everyone can make money. Therefore, it's essential to maintain a rational and objective perspective.

As for housing prices, a rate cut by the Fed is definitely good news for our real estate development. With the absence of the black swan event that is the China-U.S. financial conflict, we no longer have to worry about capital outflows.

But remember one thing: we have already released a significant amount of liquidity. While the U.S. dollar was increasing interest rates, we have been continuously cutting rates. Therefore, the future rise or fall of housing prices in our country will not have a very direct relationship with the Fed's rate cut.

Our country's real estate market has been developing for over twenty years, and as of now, the urbanization rate in our country is around 65%. Although there is still a considerable gap compared to the urbanization rates of developed countries, which are over 80%, the most basic housing needs of our country's residents have been met. In the short term, it may only be the core locations in first- and second-tier cities where properties still have the potential for appreciation and preservation. Most other areas are unlikely to see such growth.Although some people are still propagating that as long as the Federal Reserve enters a rate-cutting cycle, our housing prices will start a new round of increases, you must not believe it, because these people are either seeking attention or trying to deceive those who haven't bought a house into quickly taking out loans to purchase property.

Do not be deceived; unless you have an urgent need or are looking to improve your living conditions, do not invest in real estate in the short term, as the primary mission of financializing real estate has come to an end.

Although real estate is still a pillar industry in our country's economy, it cannot remain a pillar industry forever. Once our nation achieves industrialization and wants to become stronger and progress further, it will ultimately have to rely on high-tech industries. This is because technology is the key to a strong nation, and this is the reason for our industrial upgrading.

Over the past few decades, our country has used real estate as a pillar industry, which was a necessary step and an inevitable path for a nation transitioning from an agricultural society to an industrial one. Industrialization requires a significant amount of capital and sufficient initial accumulation. An agricultural country does not have that much money, so where does this money come from?

The initial accumulation of capital for those old European capitalist countries relied on looting and plundering the wealth of other nations in their colonies. For example, Japan was able to achieve industrialization through war reparations.

When it came time for our country to transition from an agricultural society to industrialization, looting was obviously not a realistic option, so we had to engage in real estate for a period to accumulate capital. After achieving industrialization, we then replaced real estate with high-tech industries as the pillar of our national economy.

Simply relying on land sales would not work either, as it would not generate much revenue, and bare land would not attract buyers. Therefore, we built houses on the land, turning them into financial products. This approach not only met people's basic living needs and improved their living conditions but also allowed them to use their future income for the next two to three decades to purchase homes.

This way, the initial capital accumulation needed for the early stages of industrial development was achieved. However, raising such a large amount of funds in a short period is not necessarily a good thing, as some countries, after obtaining the funds, quickly used them to achieve industrialization and then upgraded their industries, continuously growing and strengthening.

On the other hand, some countries may find it too easy to develop their economy through real estate, leading to an inflated sense of vanity and a loss of their original intentions. Instead of using the funds to focus on industrial development, they might have spent it on welfare or squandered it, resulting in a false prosperity. When the real estate industry could no longer sustain itself, the economy would also falter.The real estate industry, while capable of rapidly stimulating employment and driving the rapid development of related industrial chains, is actually akin to a stimulant or a credit card in terms of economic development. Its short-term impact on economic growth is indeed significant. However, be wary of becoming addicted, as the real estate economy is essentially a debt-driven economy. It relies on rapidly expanding debt scales and overdrawing income for the next two to three decades to fuel economic development, creating what is essentially a false prosperity, as this money will eventually have to be repaid.

When the total debt that the general public can bear reaches its upper limit, it signifies the end of the real estate-driven economy. At this juncture, if industrialization has already taken off, as long as the transition period from the real estate economy as a pillar industry to high-tech industries is successfully navigated, the economy can continue to develop rapidly.

On the other hand, if the profits from real estate have not been invested in industrial development, the end of the real estate economy will also mark the beginning of a recession.

The main reasons for the recent decline in housing prices in our country are twofold:

Firstly, our country anticipated the Sino-American financial war in advance. In response to the impending conflict, proactive measures were taken to deleverage, reduce debt, lower financial risks, and strengthen defensive capabilities to prevent a financial collapse, leading to active regulatory actions on real estate.

The Federal Reserve's initiation of an interest rate hike cycle in March 2022, which coincided with the start of the financial war, allows us to corroborate our judgment. In 2021, measures such as the "three red lines" for developers and even more significant policies to suppress the real estate market were implemented.

However, after the Sino-American financial war began in March 2022, there was a 180-degree shift in the country's attitude towards real estate, with policies such as lifting purchase restrictions, credit limits, and sales restrictions, and various other strong support measures for the real estate market.

This is sufficient evidence that the adjustment cycle in real estate is a proactive regulatory response to the Sino-American financial war.

Secondly, the debt ratio of the general public is indeed very high, with many families potentially needing to exhaust their savings and pre-empt future income for two to three decades just to afford a house.Adding to the fact that we have achieved industrialization and become the world's largest industrial manufacturing power, the focus of economic development has now shifted to industrial upgrading. There is no longer a need to rely on real estate to raise funds required for industrialization.

Of course, in addition to this, after several decades of rapid development, the real estate sector has met people's most basic housing needs. There has been a localized surplus of houses, with a phenomenon of oversupply, all of which indicate that Chinese real estate has fulfilled its greatest historical mission.

However, do not misunderstand my meaning. I am merely stating that the economic pillar status of real estate can be replaced by high-tech industries. This does not mean that real estate is no longer viable or that housing prices can only decrease.

Our country's urbanization rate is only around 65%, which still has a significant development space compared to developed countries. Furthermore, with the constant progress of technology and the replacement of old with new, the demand for improved housing will always exist, especially in first and second-tier economically developed cities that have a strong attraction for people. The potential for future housing price increases is definitely there.

For instance, in developed countries that have been developing for over a century, real estate remains very important. In major cities like New York, Tokyo, and Seoul, housing prices are still on the rise. Therefore, when it comes to the issue of buying a house and housing prices, it is essential to analyze specific issues in detail.

Our viewpoint is that in the short term, even if the Federal Reserve enters a rate-cutting cycle and the Sino-American financial war ends, a nationwide general increase in housing prices like in the past will definitely not occur.

However, the possibility of housing price rebounds in core areas of first and second-tier cities, as well as in certain regions and specific locations, is quite high. Moreover, as long as the economy continues to develop without issues, the long-term trend for core locations in these core cities will definitely be upward.