China takes advantage of targeted policies to boost the real estate market

China has actively begun to implement targeted measures such as easing restrictions on purchases or sales, adjusting housing provident fund policies, lowering mortgage interest rates to better meet the needs of the housing market, and promoting the development of the real estate market.

Due to factors such as COVID-19, the expected decline in personal income and the risk of default for some property developers, the real estate market in China has experienced contractions this year.

In the first four months of the year, commercial home sales fell 20.9 percent in floor area and 29.5 percent in value.

Emphasizing the principle that “housing is for living and not for speculation,” a major meeting of China’s top decision-makers last month called for efforts to improve real estate policies, an important pillar of the economy.

With a volume of 10 trillion yuan (about 1.48 trillion US dollars), China’s real estate industry includes dozens of sub-sectors across the supply chain. Official data showed that the value-added output of the industry represented 6.8% of the country’s GDP in 2021.

At the State Council executive meeting on Monday, the state once again stressed that city-specific policies would be adopted to meet people’s basic housing needs and their desire to improve housing conditions.

As of May 25, 20 Chinese cities have eased restrictions on home sales, data from the China Index Academy showed.

“Easing sales restrictions could increase the supply of housing in the short term, improve liquidity in the second-hand housing market, and increase demand for better housing conditions,” said Guan Rongxue, an analyst at Zhuge House Hunter, a website. property platform.

Some cities have begun to allow families with more than one child to buy an additional home in light of the current restrictions or exemption from restrictions, as part of efforts to alleviate the housing shortage for them and inject vitality into the real estate market.

For cities, especially those of the third and fourth tier, where there are no home purchase restrictions, adjusting housing provident fund policies is an effective way to support demand.

At least 70 Chinese cities have issued nearly 100 housing provident fund adjustment policies so far this year, focusing on boosting the quota and lowering the down payment ratio for provident fund loans, according to the China Index Academy.

Chen Wenjing, director of research at the academy, believes that more cities will improve related policies to enhance the guarantee function of the housing provident fund.

The country’s financial authorities have recently sent clear signals to support the growth of mortgage credit.

A circular issued by the People’s Bank of China and the China Banking and Insurance Regulatory Commission on May 15 allowed commercial banks to lower their minimum home loan interest rates by 20 basis points for first home buyers, based on the term of the standard loan base rate (LPR).

On May 20, China announced that it would cut its more than five-year LPR, on which many lenders rely on mortgage rates, by 15 basis points to 4.45 percent, which would also help the property market maintain stable development and stimulate aggregate demand.

Noting that a healthy real estate market plays a positive role in stabilizing economic growth, Xu Xiaoly, chief analyst at Chinese real estate brokerage platform Beike, said measures should be taken to promote the virtuous cycle of the sector.

He said real estate policies, however, should not be used as a short-term economic stimulus.

Feng Jun, president of the China Real Estate Association, said the country should strive to maintain the continuity and stability of its regulatory actions, while enhancing policy rigor and coordination, in an effort to solidify housing prices and market expectations.

(Cover image courtesy of CFP)