In the past two years, China's real estate market has seen new changes: from fleeing first-tier cities early on because land kings drove up land prices, to returning to first-tier cities in droves due to high risks in third- and fourth-tier cities and the frequent emergence of ghost towns. It can be said that many development enterprises have made a comeback.

　　The destocking pressure in third- and fourth-tier cities is relatively greater. On the one hand, after a large number of developers raced to enclose land, supply increased substantially; on the other hand, opportunities in third- and fourth-tier cities are relatively scarce, with a lack of population concentration and employment opportunities. Last year, a report by a relevant institution assessed that the top 50 on the risk list were almost all occupied by third- and fourth-tier cities. Jiuquan ranked first, Hulunbuir second, and Ordos, which has attracted much attention, ranked sixth, with a land digestion cycle of 9.71 years, a supply-demand ratio as high as 3.88, and a market seriously oversupplied. By region, the top 50 risk cities were mainly concentrated in North China, Northwest China, and Southwest China, with most concentrated in inland cities.

　　Wenzhou, the home base of property speculators, has seen housing prices fall for 23 consecutive months. Some newly built commercial housing has fallen by 30 to 40 percent from its peak. Based on this, on August 6, Wenzhou became the first among the country's 46 cities with purchase restrictions to loosen its local version of the "purchase restriction order," with the aim of continuing the increasingly severe trend in the real estate market. It can be said that the property markets in Wenzhou and Ordos are on the verge of collapse. For these two cities, this is not good news, but for other cities it is good news, because it means the national regulatory policy is loosening. The exit of Wenzhou's purchase restriction policy broke the monolithic regulatory steps, although since the beginning of this year many cities have in fact not been truly willing to implement these policies. The grim scene of Wenzhou's property market has provided ample reason for other cities to run naked on policy.

　　In July just past, like the surging June, neither homebuyers nor developers were prepared. In July this year, housing prices in first-tier cities such as Beijing, Guangzhou, Shenzhen, and Shanghai rose astonishingly, with year-on-year increases of 18.3%, 17.4%, 17%, and 16.5%, respectively. The astonishing increases in first-tier cities show that the so-called regulatory targets set at the beginning of the year will definitely not be met. Another implication is that, because many favorable policies and special advantages are mainly concentrated in first-tier and second-tier cities, and regulatory policies have in fact been almost entirely abandoned, the opportunities in first-tier and second-tier cities running naked far outweigh their risks, even though housing prices remain persistently high.

　　Since last year, the trend of developers returning to first-tier cities has gradually become evident. Third- and fourth-tier cities have less rigid demand and therefore less investment space. First-tier cities, because of their super-strong long-term ability to generate rigid demand, have booming property sales, and developers' motivation to return to first-tier cities to grab profits has increased significantly. As a result, battles for land kings in first-tier and second-tier cities keep unfolding. Rather than saying that some real estate enterprises are still deeply cultivating and remaining in small and medium-sized cities, it is more accurate to say that they have been forced by large real estate enterprises into third- and fourth-tier cities. In recent years, the concentration and monopoly of China's real estate market have continued to strengthen, leaving a large number of small and medium-sized real estate enterprises with no way to acquire land, so they have to open up new horizons in cities with greater risks that large real estate enterprises are unwilling to enter. Once the market is opened up, large real estate enterprises closely follow and step up pressure with their capital advantages, which leads to excessively rapid housing price increases in third- and fourth-tier cities.

　　Media reports say that many developers have already put forward the slogan of returning to first- and second-tier cities, and some have even crossed out "committed to real estate development in China's third- and fourth-tier cities" from their business scope.

　　However, developers returning to first-tier cities need to meet a threshold, and not all real estate enterprises can return smoothly. Take May as an example: in the land markets of major first- and second-tier cities across the country, more than 10 land king transactions with high premiums were completed, with total transaction value exceeding 15 billion yuan. The increasingly high land kings and land premium rates not only reflect a better market but also reflect the differentiation of real estate enterprise capabilities. Real estate enterprises returning to first-tier cities are enclosing land almost regardless of cost.

　　The characteristic of "insufficient supply in first-tier cities and excessive supply in third- and fourth-tier cities" may be a typical feature of China's real estate market for some time to come. As the household registration system gradually retreats, economic means have been deployed through housing prices and land prices to curb the excessive concentration of population and resources in first-tier cities. The problem is that this not only prevents excessive population entry into large cities but also prevents talent from entering. Ever-rising land prices will inevitably drive up housing prices and rents, and the crowding-out effect of large cities will hollow out their core competitiveness.

　　In short, there are two most important reasons for real estate enterprises to return to large cities on a large scale: one is ample credit, and the other is regulatory policies running naked, plus strong rigid demand and speculative demand inherent in the market. The battle for land kings has significantly increased the degree of monopoly among real estate enterprises. For China, the negative effects of this far outweigh the positive effects, and these changes require great attention from management.