Shanghai, a first-tier city in China, announced on August 26th to relax its housing purchase restrictions, following Beijing’s footsteps. This marks the first real estate optimization policy introduced in Shanghai this year. However, experts widely believe that this new policy will have minimal impact on the general public, with its core purpose potentially aimed at stimulating the purchasing power of the remaining affluent group to “rescue” the ever-increasing housing inventory outside the city’s outer ring road.
According to a notice jointly issued by the Shanghai Municipal Housing and Urban-Rural Development Commission, the Municipal Housing Management Bureau, and four other departments on August 25th, Shanghai will no longer limit the number of houses that eligible families and single adults can purchase outside the outer ring road. This policy will take effect on August 26th.
The notice specifies that resident families meeting the housing purchase conditions, including Shanghai residents and non-Shanghai residents who have paid social insurance or individual income tax in Shanghai continuously for one year or more, can purchase houses outside the outer ring road (including new commodity houses and second-hand houses) without restrictions on the number of units.
The purchase policy within the inner ring road remains unchanged, with Shanghai resident families limited to purchasing two units and non-Shanghai resident families who have paid social insurance or individual income tax in Shanghai continuously for three years or more limited to purchasing one unit.
The notice also mentions that single adults can follow the housing purchase policy for resident families.
In addition, Shanghai has increased the individual housing provident fund loan amount. For those purchasing newly built green buildings rated two stars or above, the maximum housing provident fund loan amount (including supplementary housing fund) has been increased by 15%. The maximum loan amount for the first set has been raised from 1.6 million yuan to 1.84 million yuan, and the additional deduction ratio for families with multiple children can be cumulative.
Residents can also withdraw their own and their spouse’s housing provident fund to pay for the down payment of newly purchased pre-sale commercial housing, without affecting their housing provident fund loan amount calculation.
Concerning individual mortgage interest rates, commercial individual housing loan interest rates will no longer differentiate between the first and second homes, aiming to reduce the burden of housing interest payments on residents.
To encourage and attract talents to live in Shanghai, the city officials have exempted property tax temporarily for non-Shanghai families who meet the criteria and purchase their first home. For the second and subsequent homes, each individual can deduct a tax-free area of 60 square meters (645 square feet) per person. Starting from January 1, 2025, eligible buyers can enjoy this policy.
This marks the third time this year that Shanghai has introduced an optimized real estate policy, following similar moves in May and September last year, aimed at stimulating the real estate market.
Shanghai’s new policy has quickly sparked discussions among netizens. Industry insiders and netizens alike question: Is the new policy merely a “no-feeling” operation for the general public?
The comments of “Xiao Wei,” a real estate agency blogger with 79,000 followers, have gained wide recognition, defining the core logic of this new policy as “encouraging the current wealthy to exchange properties.”
Many netizens are more concerned about whether the relaxation of the outer ring road housing purchase limit in Shanghai will lead to a surge in housing prices. In response to this question, “Xiao Wei” asked back: Has the government opened up policies for having a third or fourth child and provided childcare subsidies resulted in more births? Why not? The answer to this question is no different from the impact of Shanghai’s relaxation of the outer ring road housing purchase limit.
“Xiao Wei” predicted that within a week of the implementation of the new policy on August 26th, there will be a surge in listings of second-hand houses outside the outer ring road. She said that since the housing purchase threshold in Shanghai has not been relaxed, among those who are qualified to buy a house, how many will go and buy another house outside the outer ring road because of this new policy? Only a very small number of people with surplus funds, who already own two or three houses within the inner ring road, may buy another villa for leisure and vacation outside the outer ring road.
She said, who would believe that buying property outside the outer ring road has investment value for ordinary people? The underlying logic of the new policy is to lift restrictions for the wealthy and tap into the potential of the affluent, which has no impact on ordinary people because most of them lack money, not houses.
“The authorities are encouraging the remaining purchasing power in the current real estate market to ‘rescue’ the new houses outside the outer ring road. Because in the current Shanghai real estate market, especially outside the outer ring road, the biggest challenge lies in the increasing number of houses being built and the decreasing number of new buyers entering the market. Ordinary essential buyers can no longer afford it; the middle class, even if not yet impoverished, how many are still willing to buy houses? The current environment is not good, the middle class is worried about sliding down the social ladder and dare not buy. The only ones who can still afford to buy are a very small number of affluent people.”
This also explains why Shanghai and Beijing (which relaxed the outer fifth ring limit on August 9) coincidentally focused on relaxing the restriction on “number of units” rather than lowering the “home purchase qualification” threshold. In this real estate “defense war,” the target is no longer the general public but a few at the top of the pyramid.
In May last year, Shanghai reduced the social security or individual tax payment period required for non-Shanghai residents to purchase homes from five consecutive years to three or more years. Non-Shanghai single individuals were also allowed to purchase second-hand housing outside the outer ring road. In September last year, Shanghai further reduced the social security payment period required for non-Shanghai residents to purchase homes from three years to one year and lowered the down payment rate for the first home from 20% to 15%.