Mainland real estate enterprises have found themselves in a debt crisis, and destocking has become the top priority for the Chinese Communist Party (CCP) authorities. The recent full-scale lifting of home purchase restrictions in hot cities like Hangzhou and Xi’an has drawn a lot of criticism from netizens. Analysts believe that the decline in the real estate industry has led to local governments struggling to survive, and some relevant departments may have difficulties handling the situation. Chinese economists have publicly voiced their pessimism about loosening real estate policies.
On May 9th, Hangzhou and Xi’an officially lifted all home purchase restrictions, sparking intense interest in the market. This move comes after the comprehensive removal of home purchase restrictions in these two hot second-tier cities following the CCP Central Political Bureau meeting on April 30th. The recent series of accelerated loosening of real estate policies in hot cities reflects the CCP’s determination to “digest existing properties”, which translates into destocking being the immediate concern.
The news of the complete removal of home purchase restrictions in Hangzhou and Xi’an continues to trend on social media platforms, with the comment sections exploding with criticism and mockery from netizens.
Some sarcastic comments from netizens include: “Others think I don’t buy a house because of restrictions, but they don’t know that I simply don’t have the money.” “With the restrictions lifted, many people won’t have excuses anymore. It will be hard to dodge questions from family and friends in the future.”
A netizen from Guangzhou commented: “What does lifting restrictions mean? I think it’s to provide more options for us common folks. Those who have money can buy three houses for themselves and another three to rent out, meeting the so-called ‘low-income families renting out idle houses to earn higher income’.”
Many netizens have expressed that the successive implementations of the lifting of home purchase restrictions across various regions indicate that houses are indeed not selling well, and they are trying to pass on the burden to ordinary people.
One netizen asked why despite 99% of second-tier cities already lifting restrictions on home purchases and prices, it still doesn’t work.
Another netizen replied that because no one is buying houses anymore, knowing that buying a house would lead to losses, it’s challenging to find buyers. Lifting price restrictions is an attempt to find new buyers, but it’s proving to be difficult.
According to the China Index Research Institute’s report on the sales performance of Chinese real estate enterprises in January and February 2024, the total sales of the top 100 real estate companies dropped by 51.6% compared to the same period last year.
In February, the sales of the top 100 real estate companies decreased by 29.3% compared to January. There were 14 companies with sales over 10 billion yuan, 12 fewer than the same period last year, and 8 companies with sales over 5 billion yuan, 18 fewer than the previous year.
Mainland scholars believe that there is an excessive inventory of houses, and if destocking does not happen soon, many real estate developers will go bankrupt. Moreover, many local governments are facing financial deficits, and if real estate cannot be liquidated, they won’t have the funds to sell land, leading to an economic deadlock.
A prominent host known as “Hang Brother,” certified by the public, stated that the mainland real estate market has been in a sluggish state since the epidemic. Many real estate developers are sitting on a mountain of unsold houses, making it impossible to move inventory. Therefore, many real estate developers are at risk of breaking their financial chains. If higher authorities don’t intervene soon, the underlying risks with these real estate developers will surface. Destocking not only aims to revitalize the market but also relieve the local financial burdens.
He explained, “Some local governments are solely depending on land sales for survival. If real estate developers acquire land, build houses but can’t sell them, how will the government sell land in the future? It’s a vicious circle. In this scenario, only when real estate developers can sell houses, will the government have funds flowing, enabling land sales again. Therefore, the introduction of the new policy likely indicates that certain relevant departments are struggling to manage the situation.”
Why are ordinary people expressing discontent? “Hang Brother” pointed out that it’s not because people are wealthy but because the houses themselves are not selling. After the epidemic, many people are practically broke, with no source of income. Expecting people to dig into their pockets to buy houses in such circumstances seems inconsiderate of their livelihoods.
“Hang Brother” further highlighted that house prices have no correlation with local average wages. In some areas, prices have soared to tens of thousands per square meter, while people earn only between three to six thousand yuan monthly. Given this reality, even if housing policies are relaxed, ordinary people are unlikely to embrace them.
Following the complete removal of home purchase restrictions in Hangzhou and Xi’an, among mainland key cities, only Beijing, Shanghai, Guangzhou, Shenzhen, Sanya, Haikou, Tianjin, and Zhuhai have not lifted all purchase restrictions. However, most cities have partially relaxed their real estate markets.
On May 10th, Chinese economist and Vice President of the China Association of Private Economic Studies, as well as Chief Economist of Zhongyuan Bank, Ren Zeping, in his article “Can lifting restrictions save the real estate market?”, stated that recent efforts to relax purchase restrictions in first and second-tier cities have been notable. Beijing eased restrictions beyond the fifth ring road, Shenzhen relaxed non-core areas, and Chengdu completely lifted restrictions. Some took a step forward, while others were tentative. Hangzhou and Xi’an also fully lifted restrictions, showcasing the current state of the real estate market.
The article points out the effectiveness of these relaxed purchase restrictions. Looking at cities like Xiamen, Suzhou, and Guangzhou, which had previously relaxed restrictions, the market remained weak even after a short-term boost. The evidence suggests that there shouldn’t be excessive expectations for lifted restrictions.
Ren Zeping believes that the core factors currently constraining the real estate market might be residents’ purchasing power and market expectations. The immediate need is to restore residents’ consumption capabilities and confidence.