Amid ongoing challenges in China’s property sector, Zhouchen Mao, Head of Research and Advisory at Asia House, highlights key developments in regional policies designed to boost this section of the economy and examines the national implications.
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Guangzhou officials have eased property restrictions, marking the first significant move to strengthen market sentiment and stabilise sales in one of China’s Tier-1 cities. However, it remains uncertain whether other Tier-1 cities will follow suit.
China’s property sector: Guangzhou implements policy support
Guangzhou has become the first Tier-1 city in China to ease restrictions on home purchases, announcing that first-time homebuyers could “enjoy preferential loans”. This is an indication that officials will broaden the definition of first-time homebuyers – a key restriction in major cities – to allow more access to lower minimum downpayments and interest rates. The city will reduce the minimum downpayment for first-time buyers to 30 per cent.
The announcement comes a month after the State Council stated that local municipal governments should roll out measures that meet their own needs to bolster the ailing property sector. The Politburo meeting in July also signalled willingness to provide policy support. The decision made in Guangzhou, therefore, marks a significant political step in closely aligning with the central government’s push to ease property policy.
More importantly, Guangzhou’s decision marks a meaningful policy shift that will have positive ramifications on the property sector. Firstly, the announcement signals that the central government will tolerate some speculation to stabilise the property market. Secondly, the move could incentivise local officials in other cities and regions to go beyond the current incremental approach and undertake bolder measures. Thirdly, and relatedly, the implementation of policy support in Guangzhou could translate to a temporary boost in demand that will help stabilise property sales.
While several Tier-2 cities such as Zhengzhou, Hefei, and Nanjing have already announced policy packages including tax cuts and subsidies to support home buyers, market attention has primarily focused on the Tier-1 cities of Beijing, Shanghai, Shenzhen, and Guangzhou as policies there are the most restrictive, and any relaxation will have a major impact on sentiment.
It is uncertain whether other Tier-1 cities will join Guangzhou in loosening policy to stimulate property sales. Beijing thus far has only granted more access to cheaper mortgage loans, and given the capital’s effort to ease density and congestion through satellite cities, it may choose not to go further. In Shanghai, officials are set to keep policies unchanged amid concerns that further loosening could lead to capital influx and push up house prices. The financial centre will instead lower taxes. In the tech hub Shenzhen, local authorities have previously pledged to improve housing demand but have yet to unveil any concrete measures.
In the near-term, while a substantial revival of the property sector is unlikely, especially as China faces structural challenges in its economic slowdown, high youth unemployment, and weak domestic consumption and personal income, Guangzhou’s decision is a first step in policy implementation to improve sentiment and stabilise the national market.
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