Homebuyers in mainland China’s major cities are showing little enthusiasm for new policy relaxations, with many anticipating further price declines amid an uncertain outlook for the real estate sector. Analysts and potential buyers warn that weak market sentiment may undermine the effectiveness of stimulus measures aimed at reviving a stagnant property market.
Qiu Lixiao, a property agent with Pacific Rehouse in Shanghai, noted that the consensus among potential buyers is that prices will continue to slide in the coming months if homeowners are eager to sell. “Any measure to encourage purchases of new and pre-owned flats may turn out to be a damp squib,” he said. His agency has received few inquiries since Beijing’s recent move to lift home-purchase restrictions in the city’s outlying areas, which had raised expectations that authorities in Shanghai would follow suit.
On August 8, Beijing announced that both local and non-local residents could now buy new and second-hand homes outside the Fifth Ring Road, a major highway encircling the suburbs. This decision was seen as a surprise and drastic step by the local government to support the real estate sector. However, non-locals still cannot purchase a flat in the capital unless they have paid social insurance and individual income tax in the city for a certain period.
Over the past decade, major cities like Shanghai and Beijing have implemented various measures to curb home purchases in an effort to rein in what was once a rapidly growing property market. Lindsay Zhang, a finance professional based in Beijing, believes the recent policy change is not enough to inspire confidence in the market. “I don’t think the relaxed rules are very meaningful because there is not much room for value appreciation for most homes,” she said. “Only properties in the very core locations can retain their value, or at least are more immune to a citywide price decline.”
Zhang suggested that further relaxation of the rule allowing buyers from other parts of the mainland to own a home in Beijing would provide a real boost to the local market. The deregulation in Beijing reflects the authorities’ determination to support an ailing home market that has experienced a continuous decline in prices over time.
In addition to lifting purchase restrictions, the central and local governments have introduced other stimulus policies, such as cuts to mortgage rates and lower down payments, to stimulate home transactions. According to the National Bureau of Statistics (NBS), new home prices in 70 major mainland cities declined 3.4 per cent year on year and 0.2 per cent from a month earlier in the latest report. Prices have been falling since April 2022.
In the lived-in home market, prices have been declining for more than two years, according to NBS data. In July, prices dropped 5.9 per cent year on year after falling 6.1 per cent the previous month. Wan Qin, a Shanghai resident, has shelved plans to buy a home due to the current buyer’s market. “I would rather use the interest income to rent a home than hunt for a flat now,” she said. “I expect at least another 10 per cent discount, or maybe 20 per cent, from homeowners.”
Wan, who runs a laundry business, had planned to buy a flat earlier this year but stepped back amid falling prices. “The downward trend is clear and I have to be patient,” she added. “Government incentives may trigger a short-term rebound, but a turnaround will not take place for the next five to 10 years.”
China’s property sector and related industries, such as home appliances and construction materials, account for about a quarter of China’s economic output. The country’s property market, following three decades of rapid growth, began retreating in late 2020 when Beijing implemented austerity measures to control excessive leverage among developers and prevent a financial shock to the economy.
An estimate by Barclays at the end of 2024 showed that the mainland’s property crisis cost Chinese households US$18 trillion in wealth, surpassing the losses suffered by Americans during the subprime lending crisis in 2008 and 2009.
