In China, where the real estate market recession has been prolonged, recent policies to ease real estate regulations are pouring in. With the traditional peak season approaching in September and October, local governments are taking out cards to revitalize the real estate market. As the accumulation of housing inventory, particularly in suburban areas, is pointed out as a fundamental issue, it is anticipated that additional real estate stimulus measures from the central government will be announced after September.
According to China Business News on the 27th, new housing transactions have markedly decreased since the second quarter in the Chinese real estate market, which has been in a recession for over five years. Even in first-tier cities like Beijing and Shanghai, the burden of housing inventory in suburban areas is increasing, especially widening the gap between the inner and outer areas.
The first signal for easing real estate regulations was fired by Beijing. Beijing, which has the strictest real estate market regulations in China, relaxed the restrictions on the number of housing purchases earlier this month. For commercial dwellings outside the fifth ring, households with a Beijing household registration and non-Beijing household registration households that have paid social insurance or personal income tax for more than two years are not subject to purchase limits. This applies equally to both single-person households and family units.
The housing public fund system has also been significantly revised. The housing public fund is a long-term savings plan jointly funded by corporations and workers for the purchase of dwellings. If a person has no property in Beijing and only one record of completed repayment on a public fund loan nationwide, they can change their status from 'two-homeowner' to 'one-homeowner' to receive loan benefits. The loan limit for two-homeowners has also increased, and initial payments can now be made using public funds. This is regarded as the most robust easing measure Beijing has introduced in recent years.
According to Tianfeng Securities, this measure focuses on the fifth ring suburban areas where demand and supply are concentrated. In fact, based on data from January to July of this year, more than 80% of new housing sales in Beijing and over 50% of second-hand housing transactions occurred outside the fifth ring. Tianfeng Securities forecasted that "policies targeting demand areas will promote the entry of pent-up demand into the market."
According to China Business News, the Beijing city government announced measures to ease real estate regulations on September 30 last year, resulting in a roughly 60% increase in overall housing transaction volume in the fourth quarter of last year compared to the previous year. Positive signals are also being detected from this policy. After its announcement on the 8th of this month, new housing transactions from the 9th to the 22nd decreased by 23% compared to the same period last year but increased by 41% compared to the previous month. Second-hand housing transactions also did not show significant differences compared to the previous year but were recorded with an 11% increase compared to the previous month.
In response, Shanghai began implementing similar measures on the 26th of this month, loosening restrictions on housing purchases for households in suburban areas. In particular, the public fund loan limit for first-time home purchases for families with multiple children was raised from 1.92 million yuan (about 374.53 million won) to 2.16 million yuan (about 421.35 million won). Public funds can be used to pay deposits and will not affect the loan limit after use. Overall, Shanghai has introduced broader and more relaxed measures compared to Beijing, including the removal of discrimination in mortgage interest rates between first and second dwellings and adjustments to property tax systems.
This is also seen as a measure to address the housing inventory in suburban areas. According to Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, currently, 70% of the total housing inventory in Shanghai consists of new dwellings outside the outer ring road. In the case of second-hand dwellings, about 40% of the total inventory is located in suburban areas. He predicted that "the easing of regulations in Shanghai will be a favorable policy for multiple homeowners or generations considering post-retirement living."
Following Beijing and Shanghai, cities such as Tianjin, Xi'an, and Suzhou have also begun to roll out various measures such as easing public funds, redeveloping old urban areas, and providing subsidies for housing purchases. Experts note that while the foundation for stabilizing the real estate market is being established, complete recovery will require more time. Chief researcher Li stated, "Current policies may have short-term effects, but there is still an abundance of listings, leading to strong consumer sentiment targeting lower-priced properties. Therefore, in order to stabilize market prices, improvements in macroeconomic fundamentals must support the efforts."
Amid this, the Chinese government is expected to unveil new real estate policies soon. According to Choi Seolhwa, a researcher at Meritz Securities, "Premier Li Qiang directed at the State Council meeting on the 18th to devise measures to prevent further declines in the real estate market in the second half of the year and ensure stable recovery," adding that "the market anticipates additional real estate stimulus measures to be announced in September and October." He further noted that "the most necessary stimulus in China is the purchase of housing inventory by policy authorities."