China continues to promote stable, healthy real estate growth

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.

In recent years, the downturn in the real estate market, intensified industry risks, and concentrated debt risks among real estate enterprises have impacted macroeconomic growth and financial system stability. In this context, authorities from the central to local levels need to adapt to the significant changes in the supply and demand relationship of the real estate market, timely adjust and optimize real estate policies, and promote the stable, healthy, and sustainable development of the real estate industry.

Central policy adjustment and optimization efforts are increasing, and local governments are actively promoting policy loosening

After the Political Bureau of the CPC Central Committee proposed an important judgment to adapt to the new situation of the significant changes in the supply and demand relationship of China's real estate market on July 24, the Central Financial Work Conference on October 30 made further clarifications with calls to promote a virtuous cycle between finance and real estate, improve the regulatory system and fund supervision of real estate enterprises, improve macro prudential management of real estate finance, and meet equally the reasonable financing needs of real estate enterprises of different ownership. 

The work conference also advocated to implement policies tailored to each city, better support the demand for rigid and improved housing, accelerate the construction of the "three major projects" such as affordable housing, and build a new model for real estate development. This reflected the central government's insistence on the strategic determination of "housing is for living, not for speculation", to ensure the housing needs of the people, to build a stable and sustainable new model of real estate, to correct or optimize the restrictive policies introduced when the market was overheated, and to combine the implementation direction of affordable housing with the acquisition of unfinished houses and guaranteed delivery of buildings.

Local governments are actively implementing the spirit of the central government, loosening policies and accelerating progress. Various provinces and cities have loosened their housing policies multiple times, with restrictive administrative measures withdrawn one after another. In terms of purchase restrictions, first-tier cities have implemented the policy of "recognizing the house but not the loan" for first homes. Multiple second-tier cities, such as Nanjing, Hefei, Jinan, and Qingdao, have completely lifted purchase restrictions. Other second-tier cities have loosened purchase restrictions by optimizing the number of purchasable housing units, optimizing the scope of purchase restrictions, and relaxing purchase conditions. 

In terms of credit, differentiated housing credit policies and the policy of "recognizing the house but not the loan" for first homes have been actively implemented. Most urban commercial loans have implemented a down payment ratio of 20 percent for the first home and 30 percent for the second home, and adjusted the lower limit of the second home mortgage rate down to the loan prime rate plus 20 basis points.

The market continued to cool down in December, policy effect needs to be further released

In terms of market performance, the recent policy measures generally need to be further expanded. However, in some cities, such as Beijing and Shanghai, the real estate policies have had a certain positive effect and the performance is relatively stable.

According to data from the National Bureau of Statistics, in December 2023, among the 70 large and medium-sized cities, the prices of commercial residential properties in various cities across tiers decreased month on month, with both increases and decreases year on year. Overall, the data reflects a continued cooling trend in the current market, with further downward pressure on housing prices. Especially in second-tier cities, the phenomenon of "exchanging price for quantity" is evident. Coupled with the acceleration of inventory turnover by real estate companies at the end of the year, housing prices further declined.

Despite the overall downward trend, there are still cities showing a steady upward trend. In terms of new housing, the policy implementation effect in Beijing and Shanghai is relatively obvious. Under the strong positive signal released by the new policy on December 14, the market quickly heated up, confidence was boosted, and the trend was substantive. In addition, Chengdu and Xi'an also maintained relatively high year-on-year growth rates. In terms of second-hand housing, Beijing, Chengdu, and Changsha demonstrated strong resilience, and the average monthly prices for the whole year still showed an upward trend year on year.

It should be pointed out that there are significant differences in transaction volumes and prices among different cities. The next step is to continue to emphasize the implementation of policies tailored to the cities with precision, improve supporting policies and operational rules, and further unleash policy effects.