China’s real estate crisis is alive despite multiple initiatives to support the industry.
China is considering lifting some of the remaining restrictions on buying a home after previous failed measures to spark a moribund housing market.
Regulators are working on a plan that allows megacities like Shanghai and Beijing to relax limitations for non-local buyers who lack a so-called Hukou residency permit for that area. Many smaller cities have already eliminated this barrier.
The government might also end distinctions between first and second-home buyers, opening the door for second-home buyers to pay smaller down payments and affordable mortgage rates.
Policymakers are under relentless pressure to break the housing slump dragging in its fourth year, breaking the second-biggest economy and forcing millions of people out of work. USB Group AG and Bank of America Corp. anticipate that China will fall short of meeting its annual growth target of 5% this year.
Authorities are also considering new measures to support the weak stock market. China’s CSI 300 Index performed the worst in the world with a 7% down.
The proposals might change and need senior leaders’ approval, but China’s housing ministry did not respond to a comment. As of midday on Friday, a Bloomberg Intelligence gauge of Chinese developer stocks had increased by 2.5%, continuing its upward trend. Even after Chinese banks maintained their benchmark lending rates for house loans earlier on Friday, dashing hopes of additional monetary stimulus after the Fed rate cut.
According to Raymond Cheng, head of China property research at CGS International Securities Hong Kong, loosening is helpful but not meaningful since it only benefits the top-tier cities. He also adds that China should implement policies like urging local governments to purchase unsold units from developers to improve the demanding current environment of the real estate industry.
China’s real estate crisis is alive despite multiple initiatives to support the industry. As easing efforts subsided and buyers waited patiently for lower rates, August saw a further decline in housing prices and sales.
China has extended greater freedom to local governments to investigate measures for market stabilization. In June, the State Council instructed officials to continue developing new policies to support the consumption of the current housing stock. It raised hopes for more financing after Beijing published a series of regulations, like a reduction in the down payment requirement.
Additionally, the government is pushing for lower borrowing costs. Authorities are allowing homeowners to refinance up to $5.4 trillion in mortgages for millions of families, with rate reductions from select banks coming into effect.
Unless they have paid income tax and made social security contributions for many years, local authorities in megacities have not lifted the prohibition on anyone lacking Hukou from purchasing property. The primary tool utilized to keep prices under control has been the policy.
Policymakers have utilized hukou, an efficient passport-like permission that allows access to housing, healthcare, and educational facilities in cities, to control population movements. Improving housing eligibility for foreigners in affluent areas slows demand from less desirable locations and aggravates current economic disparities.
The IT powerhouse Shenzhen and the capital Beijing maintained that ban when rolling assistance in May and June. The financial center in Shanghai reduced the time homeowners without Hukou had to pay individual taxes from five years to three years in May.
The largest cities in China have likewise long tried to manage their population. After the coronavirus outbreak and the city-wide lockdowns in Shanghai in late 2022, the State Council again emphasized the need to slim down ultra-big cities.
As for the Beijing municipal government, it intends to eliminate the distinction between budget and luxury residences when the proper moment comes, according to a government document that Beijing Daily published on Friday.