Housing eyes stability, growth on policy support

As of March 8, as many as 52 Chinese cities have announced a range of home market measures. And their numbers are growing. All of them are intent on achieving a singular goal: to stabilize the local-level property market.

This has prompted the hitherto cynical industry experts to express optimism that China's housing market will find stability this year, more so because even the central government has vowed to support the market to better meet the reasonable needs of homebuyers.

Amid all this, consensus on the principle "houses are for living in, not for speculation" has been reinforced. "We will continue to meet people's housing needs," said Premier Li Keqiang in the Government Work Report delivered at the opening meeting of the fifth session of the 13th National People's Congress on March 5.

This year's Government Work Report has emphasized that China will keep land costs, housing prices and market expectations stable, and adopt city-specific measures to facilitate positive circulation and sound development of the real estate sector.

Stable performance without any undue fluctuations－that has been set as a key goal for China's housing market. The task for local governments is to ensure that demand remains firm, with emphasis on rational requirements that can help improve living conditions, said Chen Wenjing, market research director of the China Index Academy's index division.

In fact, in a bid to encourage demand and achieve market stabilization, local governments are aligning themselves with the central government's guidelines to unveil respective measures.

These include lowering the down payment ratio, offering home purchase subsidies and loosening the grip on provident fund loans, said economist Ren Zeping, an online influencer who is the former chief economist of debt-laden property giant Evergrande.

The four first-tier Chinese cities－Beijing, Shanghai, Guangzhou and Shenzhen－maintained almost all existing regulations, except for lowering their home mortgage interest rates in February, following the central bank's cut to the market-based benchmark lending rate.

In contrast, on March 1, Zhengzhou, Henan province, announced a package of measures to stabilize its home market that, along with local enterprises, has been under a lot of pressure due to the COVID-19 pandemic as well as floods last year.

Zhengzhou's measures include supporting rational living demand, improving home supply, raising support for mortgage financing, increasing subsidized homes and optimizing the home market environment.

Anticipation of such measures appeared to have had a positive impact on homebuyers such as Guo Yuan, 47, who runs her own sports goods business in Shanghai's Pudong New Area but has been longing to buy a home in Zhuhai, Guangdong province.

A single mother, Guo said Zhuhai is a potential ideal destination for those who care for quality living as it boasts a bright economic outlook, year-round balmy weather and outstanding urban environment.

So, Guo went ahead and bought a two-bedroom flat in a newly built estate, hoping her 11-year-old son can complete his education and grow up to eventually work in the city.

Like Guo, Shanghai-based Li Le, 30, an HR professional working with a foreign-funded company, and her husband recently bought a two-bedroom flat with an eye on their daughter's future.

The only difference was the couple had to sell off their larger three-bedroom home in order to be able to afford the smaller flat. Both properties are located in Shanghai's Minhang district. Their new home offers their only daughter a chance to get admission into a fairly good primary school nearby and eventually enroll in a reputable junior middle school.

"For people who can buy a home for living, this year offers a really good timing as the prices have stabilized," said Li.

Agreed Xie Chen, head of research with CBRE China. "The modest lift of restrictions on the real estate sector showed that local governments are taking specialized policies in accordance with their own conditions, and these adjustments are made under the principle that 'houses are for living in, not for speculation'."

Yao Yao, head of research for JLL China, said he expects the measures to have different impacts on each city.

In first-tier and major second-tier cities with strong economic fundamentals, policy adjustments will spur more transactions, given these cities' large populations and resilient housing demand. But the new measures may not be as effective in less populated lower-tier cities without sufficient supporting industries, said Yao.

Similar policies to improve demand and restore market confidence are expected to be announced by more Chinese cities at an accelerated pace in the coming months. In the meantime, prospective homebuyers will likely see home loans become more accessible.

While effecting different measures to suit each city, commercial banks are encouraged to meet new city-dwellers' reasonable demand for home mortgages and to make it more convenient for them to apply for mortgages and repay debts, said a notice jointly released on March 4 by the People's Bank of China, the nation's central bank, and the China Banking and Insurance Regulatory Commission.

The decision would help solve new city-dwellers' living problems with credit support and unlock the rational home-buying demand of up to 300 million new city-dwellers, Chen said.

The fine-tuned regulations also reflect the effectiveness of the sector's deleveraging, Xie said.

According to CBRE, representative housing enterprises' sales revenue in the first two months of this year slowed about 30 percent or more year-on-year, while the money they spent on land acquisition more than halved.

Differentiated measures in cities would help stabilize home prices, land prices and market expectations and ensure a soft landing of the industry, experts said.

"We believe the property market will gradually stabilize in the second half of this year," said Xie.

To ensure long-term smooth functioning of the property market, China is looking to allow people to live in a place in tune with the property's affordability, be it a self-owned property, rented apartment or government-subsidized rental housing.

As the Government Work Report said, China will explore new models of housing development and encourage both rental housing and home purchases. The country will move faster to develop the long-term rental market and promote the construction of government-subsidized housing.

This aspect of the report, Chen said, shows the central government attaches considerable importance to leased homes, particularly subsidized rental housing.

"It's trendy for the home market to embrace both rentals and purchases. Living in a rented home offers an option for the younger generation and new city-dwellers in large cities where home prices are usually high," said Yao of JLL China.

In order to effectively ensure new city-dwellers' basic living needs, cities should work hard in terms of the development and standardization of their rental housing market, said Yao. He also suggested conventional property developers should seize rental housing development opportunities to ensure their business transitions to stability amid a challenging environment.

Xu Xiaole, chief analyst with the Beike Research Institute, which is part of KE Holdings Inc, a Chinese platform for housing transactions and services, said he foresees substantial opportunities emerging during the development of the subsidized rental housing market, long-term rental housing, and the renovation of old urban residential flats.

According to the Beike Research Institute, China's expected new supply of more than 2 million units of subsidized rental housing this year will entail a total investment of 280 billion yuan ($44 billion).

During the 14th Five-Year Plan period (2021-25), urban renovated home projects will benefit 35 million households, and the renovation scale is projected to reach 700 million square meters by 2030 with a total investment of about 600 billion yuan.