China Unveils New Policy to Boost Property Sector
China announced a new policy package on Friday to stabilize its struggling property sector. The new system will prioritize the sale of completed homes. The guidelines, issued by the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources, and the National Financial Regulatory Administration (NFRA), direct local governments to focus on completed-home sales. This aims to reduce delivery risks for buyers.
These reforms respond to a market downturn that began in 2021. A government campaign to reduce debt led to a crisis among property developers. Many projects were left unfinished, causing social unrest as homebuyers protested and threatened to stop mortgage payments on incomplete properties. The new guidelines require homes to be sold only after they are completed. This change alters the long-standing presale model that had fueled the sector's growth.
According to state news agency Xinhua, the policy aims to "fundamentally prevent delivery risks and protect the legitimate rights and interests of homebuyers." The measures are expected to support financing for property developers. They may also encourage mergers and restructurings among listed companies. Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, noted that the policies announced are "stronger than what the market expected."
The guidelines also state that projects must be topped out before they qualify for presales. There are exceptions for those that had already obtained construction permits before the new measures. This shift is seen as necessary to restore confidence in the property market. The market has been plagued by defaults and falling home prices.
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The reforms could lead to increased stability in the Chinese property market. This may benefit sectors related to real estate and construction. Investors might see changes in the performance of property stocks and related financial instruments as the market adjusts to the new sales model. Watch for further developments in property financing and any additional measures from the government to support the sector.
Based on reporting by: scmp.com, businesstimes.com.sg