China fine-tunes regulatory policy to boost sound property market development

BEIJING -- China's central and local authorities are fine-tuning housing policies to seek a balance between defusing risks and spurring demand, amid efforts to boost the steady and sound development of the property market.

While reiterating the principle that "housing is for living in, not for speculation," a key meeting held last week by the Political Bureau of the Communist Party of China Central Committee called for efforts to improve real estate policies based on local realities.

Giving a shot in the arm to both the demand and supply sides, it urged support for meeting the demand from both first-time home buyers and home upgraders and optimizing regulation over the prepayment for commercial housing.

China's property industry, with a size of 10 trillion yuan ($1.5 trillion) and involving scores of subsectors across the supply chain, has been a key underpinning for the economy. Official data showed that the industry's value-added output accounted for 6.8 percent of the country's gross domestic product in 2021.

However, influenced by the resurgences of COVID-19 epidemic, debt default risks of certain property developers and expected fall in personal income, the real estate market has seen contractions in key performance indicators.

In the first three months of this year, the new housing construction area in the country shrunk 17.5 percent year-on-year. Commercial housing sales dropped 13.8 percent in terms of floor area and 22.7 percent in terms of value.

Market analysts noted that the mounting risks on developers induced banks or other financial institutions to tighten up financing, while high mortgage interest rates, among other factors, put extra burdens on potential consumers. Such factors have caused sales to shrink.

Under this backdrop, the key meeting, sent positive signals to China's real estate market, prioritizing stability in the sector, according to Liu Lin, a researcher with the Chinese Academy of Macroeconomic Research.

It allowed local authorities, while fending off risks, to unveil more targeted and flexible policies, optimize regulatory measures for land leasing, and ramp up the supply of government-subsidized housing to bolster the market, Liu said.

Toward this end, multiple government departments have announced adjustments to regulatory measures as fresh impetus into the industry.

A case in point is a recent symposium on financial policies held by China's central bank and top banking regulator. It underscored the importance to tailor region-specific policies on housing credit to cater to diverse demands across the country.

On the financial front, the symposium called on financial institutions to manage real-estate finance prudently, avoid halting or delaying loan issuance to property developers, and ensure the appropriate handling of financial risks.

The fine-tuning task is even more detailed on the local level, with some 120 cities nationwide putting in place various policy adjustments in the first four months of this year, showed data from Centaline Property, a real estate agency.

These included relaxing restrictions on purchasing or selling properties, reducing down payments, allocating subsidies, and providing developers with financial support.

With the increased availability of housing and streamlined procedures for mortgage approval, the consumer demand for housing will be unleashed in some cities, said Fu Linghui, an official with the National Bureau of Statistics. Fu expected the decline in housing sales to narrow.

Given that 63.9 percent of its population are urban residents, China maintains a rapid pace of urbanization. The number of urban employees rises by over 11 million every year, bringing robust demand for housing.

Feng Jun, head of the China Real Estate Association, said that whereas differentiated policy-making is encouraged, all local governments must cling to the principle of "housing is for living in, not for speculation," and must not take to real estate policy as a short-term economic stimulus.

The country should strive to maintain the continuity and stability of its regulatory measures, with policy precision and coordination strengthened, in a bid to anchor housing prices and market expectations, Feng added.