Recently, Chengdu city in China announced the comprehensive cancellation of housing purchase restrictions on April 29th. Following the announcement, nearly a hundred property owners have decreased their prices in an attempt to sell their properties. However, many potential buyers are holding onto their money due to concerns about further price declines in Chengdu’s housing market. Some industry insiders believe that the cancellation of the purchase restriction policy in Chengdu will have limited stimulation effect on the real estate market.
In an official notice issued by the Chengdu Municipal Housing and Urban-Rural Development Bureau on April 28th, it was stated that starting from April 29th, there would no longer be qualification reviews for housing transactions in the entire city. The public lottery system for selecting units in commodity housing projects would be abolished, and sales would be conducted independently by real estate companies.
Chengdu had implemented purchase restrictions since October 2016, progressively tightening the policy to become one of the most detailed and complex among major cities in mainland China. In March 2021, the restriction policy in Chengdu reached its most stringent level with the inclusion of foreclosed properties.
This latest notice indicates the formal end of the 7.5-year implementation of housing purchase restrictions and the 6.5-year allocation system for new homes in Chengdu.
Within 24 hours of the notice, data from Zhuge Findings showed that a total of 98 existing homes in Chengdu had lowered their prices, with the largest reduction reaching 650,000 Chinese Yuan.
Prior to this, Chengdu authorities had adjusted the purchase restriction policy four times and lowered down payment ratios and mortgage rates.
The continuous relaxation of real estate regulations in Chengdu aims to stimulate a rebound in the housing market, driven by the ongoing decline in the city’s real estate sector, which has had a significant impact on the local economy.
Since July 2023, both new and existing home prices in Chengdu have been on a downward trend, and as of 2024, transaction volumes have notably declined.
Data from the National Bureau of Statistics of China indicates that the index of existing home prices in Chengdu has been decreasing consecutively for 9 months from July last year, with a year-on-year decline in January for existing home prices. Similarly, the index for new commodity housing in Chengdu remained stable in January but then entered a declining phase.
Regarding transaction volumes, the Chengdu Municipal Housing and Urban-Rural Development Bureau reported that from January to March this year, the transaction volume for newly-built homes dropped by over 33% compared to the same period last year, while existing home transactions decreased by more than 21%.
During the same period, the sales area of commodity housing in Chengdu decreased by 30.7%. Real estate development investment fell by 12.9%, and the newly started area of commodity housing dropped by 29.1%.
Data from Zhuge Research Center showed that in March 2024, Chengdu recorded 8,924 transactions for new commodity housing and 18,771 for existing homes, marking a decline of 41.9% and 33.4% respectively compared to the same period last year.
Despite the continuous relaxation of real estate regulations in Chengdu, the market response remains subdued.
According to a survey by “Epoch Financial” on April 30th, both sellers and buyers are worried about further price drops. Buyers believe that the complete removal of purchase restrictions signifies the need for more buyers to stem the downward trend in prices, which in turn makes them cautious about entering the market.
Lin Yiming, who has been monitoring market changes while planning to buy a house, expressed that considering “price drops should be the future trend,” he has chosen to adopt a wait-and-see approach.
“Wait and see” has become the prevailing sentiment in the current market. Several real estate intermediaries informed “Epoch Financial” that there had been no substantial response from buyers to the new policy yet, with only an increase in inquiries. One intermediary mentioned that “it’s difficult to assess the impact of the policy now,” as although more individuals are qualified to purchase, many are worried about a decline in income due to various factors.
Senior analyst Guan Rongxue from Zhuge Data Research Center believed that based on the experiences of other cities like Nanjing, Hefei, and Suzhou, which had completely lifted purchase restrictions, the local housing markets did not fully rebound. He mentioned that “the current deep adjustment cycle in the housing market is relatively long, and the actual effects of the (Chengdu) policy still require further observation.”
Financial blogger “Uncle Bao” posted on social platform X, stating, “Chengdu has completely lifted all purchase restrictions, but unfortunately, the situation cannot wait. The lifting came too late and now serves little purpose.”
Many netizens have shared their opinions on this matter.
“Chengdu’s Tan Co.” believed that the issue lies in low public income, resulting in inability to afford housing. He stated, “If the monthly salary in second- and third-tier cities can match the housing prices per square meter, you would see more buyers.”
“W Rising” expressed that confidence in real estate has been shattered, indicating that merely reducing prices can only generate a small temporary increase, and a swift turnaround is unlikely. Subversive policies are needed to reverse the situation after expectations and confidence have been damaged.
Some netizens contended that the frenzy in the Chinese real estate market is now history and irrecoverable. “Golden Years” commented, “The madness of the property market has become history, draining our wallets.”