In an effort to stimulate growth in China’s real estate sector, two major cities, Hangzhou and Xi’an, have lifted all remaining restrictions on home-buying. Hangzhou, home to tech giant Alibaba and EV maker Geely, has been gradually relaxing restrictions since early 2022, with a recent announcement that they will no longer check social security records or household registration status of potential buyers. Similarly, Xi’an, a city with a population of 13 million, made a similar move to remove all barriers to home purchases. Other cities, such as Chengdu and Changsha, have also taken steps to make the process of buying property easier, signaling a trend towards revitalizing the struggling real estate sector in China.
The Chinese government’s crackdown on excessive borrowing by developers in 2020 has led to a crisis in the property market, with the collapse of Evergrande and other major developers facing insolvency. Millions of apartments have been left unfinished, creating a major drag on the economy and sparking protests by homebuyers. Despite stimulus measures such as mortgage rate cuts and relaxed home purchase curbs, demand in the property sector has remained weak. The Politburo, China’s top decision-making body, has pledged to explore new measures to tackle the housing crisis, including implementing “city-specific” policies to reduce housing inventory.
Despite efforts to revive the property sector, a recent UBS survey found that Chinese people’s intention to purchase a home remains tepid. Only 23% of respondents plan to buy a house in the next two years, while 47% have no plans to buy a home at all, an all-time high. Respondents cited income growth and policy measures, such as rate cuts and government subsidies, as key factors in boosting confidence. Analysts expect the government may orchestrate a bailout of the sector by allowing local authorities to purchase empty properties for social housing purposes, following a more supportive tone set by the April Politburo meeting prioritizing reducing existing home inventory.
The property market crisis in China has become a significant challenge for the economy, with the government implementing measures to revive the sector and boost consumer confidence. The lifting of home purchase curbs in major cities like Hangzhou and Xi’an is a direct response to the declining demand in the real estate sector. By removing barriers to home-buying, local governments are hoping to stimulate activity in the market and spur growth in the economy. However, the tepid response from consumers in the UBS survey suggests that more significant interventions may be needed to address the underlying issues in the property market and restore confidence among potential buyers.
As the Chinese government continues to grapple with the challenges facing the property sector, it remains to be seen whether the current measures will be enough to stabilize the market. The focus on reducing housing inventory and implementing city-specific policies reflects a recognition of the need for targeted interventions to address the crisis in the real estate sector. Moving forward, job promotion and income growth will be key factors in boosting consumer confidence and driving demand for housing. The government’s willingness to consider further measures, such as allowing local authorities to purchase empty properties for social housing purposes, indicates a proactive approach to addressing the challenges facing the property market in China.