The Chinese government, along with various departments, recently released several real estate-related policies, which are viewed by the public as a new measure to rescue the property market. However, while bank stocks surged, real estate stocks plummeted, and the new regulations have sparked concerns among developers about funding turnover.
On August 28th, the Chinese government introduced a new round of real estate policies, aiming to reform the pre-sale system of commercial housing that has been in place for over 30 years, and promoting on-site housing sales. Simultaneously, several real estate financing management measures were introduced, extending the term of housing loans and adjusting the financing rules for real estate enterprises, covering areas such as development loans, personal housing loans, commercial real estate loans, urban renewal, and real estate trusts.
The policy effects were divergent in the capital markets. On September 1st, the A-share banking sector opened high and maintained its strength until the close, continuing the previous trading day’s uptrend. Market viewpoints interpret that the new policy will re-establish the real estate credit relationship, reduce the risk of bank real estate assets, and stabilize the basic mortgage business.
Financial联社 (Fenglian Society) interviewed several industry insiders. The head of a commercial bank in South China stated that the new regulations had significant impact, unlike the previous three red lines which were restrictive policies. This time, the mode of real estate financing has changed, and it is expected that the demand and proportion of development loans will decrease. Additionally, the situation of early repayment in first-tier cities is expected to decline, and the scale of mortgages will begin to rise.
At the same time, the A-share real estate sector sharply declined on September 1st, for the second consecutive trading day. Industry analysts believe that the new regulations restrict developers from using pre-sale funds for project financing, causing concerns in the market about the extended period for real estate developers to recoup their funds. Developers have been accustomed to selling properties before completion and using funds from buyer’s down payments and mortgage loans for construction costs and daily operations. If mortgage financing can only be obtained after completion, the inflow of funds will be delayed, posing further financial pressure on developers with faster asset turnover.
The worries have also spread to the Hong Kong stock market. On September 1st, China Resources Land, a significant market indicator, closed at HK$28.98, down by 3.59% (after a 7.7% decline in the previous trading day); the stock prices of China Jinmao, Greentown China, China Overseas Development, and China Merchants Property also fell for two consecutive trading days.
The head of financing at a large private real estate company in Changsha told Financial联社 that the new policy will have a differentiated impact on different types of real estate enterprises. Currently, most of the large private real estate enterprises in China have exited the market, with the main players now being state-owned enterprises, local government-owned enterprises, and a few regional private enterprises.
CITIC Securities believes that the core benefits of the new real estate policy are directed towards “the financial strength, project quality, and operational capability of real estate enterprises.” Subsequent capital market funds will accelerate towards state-owned and government-owned real estate enterprises with the ability to sell on-site and operate dividend assets (such as REITs).
Real estate analysts interviewed by Reuters stated that these policies may favor large real estate developers with good liquidity conditions because these companies face less pressure on project fund recovery and are better equipped to handle longer sales and repayment cycles. Conversely, this means increased operational pressure on small and medium-sized real estate developers, who may be forced to exit the market or seek alternative business models.
Public reports indicate that the Chinese real estate bubble has essentially burst, with several major developers such as Evergrande defaulting, and house prices falling in most parts of the country. Comprehensive data shows that the demand for various industries in China, such as construction materials, directly or indirectly depends on real estate, and over 70% of Chinese household wealth is concentrated in real estate. Whether the Chinese real estate crisis will escalate into a systemic financial crisis is a matter of widespread concern.
Currently, the real estate market continues to slump. According to the Chinese National Bureau of Statistics data, in the first half of 2026, real estate investment fell by 18% year-on-year, new housing starts decreased by over 23%, and new home sales dropped by nearly 14%.