Editor's note: Zou Linhua is a researcher at the National Academy of Economic Strategy, Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN.

Recently, the Chinese real estate market has witnessed the implementation of a series of policies. Although further improvement and optimization are needed, overall, these policies signal the direction of a healthy and sustainable development of the sector. Thanks to these policies and an improving external economic environment, the supply-demand relationship in the Chinese real estate market is expected to change gradually, paving the way for market improvement.

Firstly, both the cost and difficulty of financing home purchases have been significantly reduced. A circular, recently released by the Ministry of Housing and Urban-Rural Development and two other government bodies, relaxed the criteria for first-time home buyers. According to the policy, family members of a household should be treated as first-time home buyers when applying for a mortgage loan from a bank if they do not yet own a house, regardless of whether they have a previous housing loan record or not. Shanghai, Beijing, Guangzhou and Shenzhen were among the first-tier cities to enforce the new policy. A number of other cities have announced the adoption of the policy at a later date.

On August 31, the People's Bank of China and the National Administration of Financial Regulation issued a joint statement that said borrowers of existing mortgages for first-home purchases are allowed to lower their interest rates by applying for a rate change in the contract or swap to a new repayment plan. This aims to reduce the pressure of selling and alleviate short-term downward pressure. According to another statement, a uniform policy on the minimum down payment ratio for commercial housing mortgages of individuals, for both first-home and second-home purchases, will also be implemented. The minimum down payment requirement will be adjusted to be no lower than 20 percent for first-time home purchases and 30 percent for second-time home purchases.

Secondly, restrictions on home purchases are being eased or lifted, marking the first step toward normalization in the market. During the period of continuous rise in housing prices, major cities implemented demand-restricting policies such as restrictions on purchases, mortgages, prices and sales. With housing prices now on the decline, it is time to relax or remove these restrictive policies. An increasing number of cities have been relaxing restrictions on sales and purchases. Among these cities, 11 of them – including Nanjing, Zhengzhou, Shenyang, Dalian, Dongguan, Foshan, Jinan, Qingdao, and Hefei – have completely lifted purchase restrictions. Suzhou and Changsha optimized purchase restrictions for specific regions and demographics, while Tianjin adjusted the restricted area to the city's six districts. Generally, relaxation measures are gradually becoming more extensive, expanding from second-tier to first-tier cities. On September 20, Guangzhou became the first first-tier city to partially lift purchase restrictions by canceling restrictions in the districts of Panyu, Huangpu, Huadu, and the northern part of Baiyun.

Observing the effects of the policies shows there has been an increase in transaction volumes in second-tier cities like Nanjing and Hefei after they lifted purchase restrictions. Take Nanjing as an example: after the complete lifting of restrictions on September 8, transaction volumes on the weekend after the introduction of the policy showed a 26.5-percent increase compared with the weekend before. According to data from the Beijing Municipal Commission of Housing and Urban-Rural Development, from September 1 to September 27, there was a 45 percent month-on-month increase and an 11 percent year-on-year increase in the number of second-hand homes sold. The growth in transaction volume in Beijing was significant compared to August.

In conclusion, the Chinese real estate market is improving. The relaxation of restrictive policies and the reduction in the cost of financing, present new opportunities for the market. However, it should also be recognized that the improvement of the real estate market takes time and requires the support of policies and a good external environment. Although the current policies and market sales have shown positive changes, confidence in the real estate market has not fully recovered. Further policy support is still necessary to sustain the healthy development of the sector as a whole.