Recently, Beijing’s real estate market has once again announced a major relaxation policy, allowing eligible resident families to purchase an unlimited number of residential properties outside the Fifth Ring Road. Additionally, there have been optimizations and adjustments made to the public housing fund policy. However, the general sentiment among mainland Chinese is not optimistic about this new measure to rescue the market. Many believe that the more intervention by the government in the market, the more it signifies instability. Foreign financial institutions also believe that the stimulus measures have limitations.
The official announcement from Beijing titled “Notice of Further Optimization and Adjustment of the City’s Real Estate Policies by the Beijing Municipal Housing and Urban-Rural Construction Commission and Beijing Housing Provident Fund Management Center” was released recently and has been effective since August 9th.
According to the notice, eligible resident families in Beijing (including those with local household registration and non-local households that have paid social insurance or personal income tax for the relevant period) can now purchase residential properties outside the Fifth Ring Road (including new and second-hand residential properties) without any limit on the number of units.
In addition to the relaxation of the property purchase restrictions, Beijing’s new real estate policy has expanded the criteria for public housing fund loans for first-time homebuyers. As long as the individual does not own any property, even if they have used and repaid a public housing fund loan previously, they can apply for a loan as a first-time homebuyer. This adjustment allows for a reduction of 10% to 15% in the down payment ratio for those using combined loans to purchase property.
In response to Beijing’s repeated market rescue policies, many netizens view this as an encouragement by the authorities for buyers to purchase multiple properties. However, the prevailing sentiment in the market is that property investment is no longer a reliable means of making profits. The segment of buyers looking to purchase is primarily driven by basic housing needs. The increasing frequency of market intervention by the government suggests a lack of stability in the local real estate market.
According to data from a research institute, from January to July this year, over 80% of the sales of new residential properties in Beijing were located outside the Fifth Ring Road, with the proportion exceeding half in the case of second-hand residential properties.
Financial blogger “Egg Yolk” commented that lifting the limit on the number of properties buyers can purchase outside the Fifth Ring Road in Beijing is a policy with little effectiveness. The majority of new properties in Beijing are located outside this area, indicating that properties here are difficult to sell. The prevailing belief in the market is that property investments are no longer as profitable as before, further driving demand only for essential housing needs.
On August 11th, a report from CCTV showed Mr. Zhang viewing properties at a real estate project. Prior to the policy adjustment, he could only apply for a public housing fund loan up to 800,000 yuan. After the adjustment, he can now apply for a maximum of 1.2 million yuan.
“Egg Yolk” believes that by encouraging families with multiple children to take on high leverage to purchase properties, they may end up burdened with substantial loans, leading to financial risks for these buyers.
Following the introduction of the new policy, how have real estate agents and residents in Beijing responded? A video of a middle-aged woman from Beijing commenting on the policy has gone viral online. When asked if people are satisfied with the policy, she remarked that those who understand the situation are dissatisfied, while those who do not see it as a positive development.
Some netizens noted the increased awareness among individuals like the woman acknowledging that government encouragement often requires critical thinking in the opposite direction.
Multiple real estate agents from outside the Fifth Ring Road in Beijing told “The Times Weekly” that both sellers and buyers in the Beijing housing market are cautious. Buyers carefully consider factors such as housing prices, environmental amenities, resulting in longer transaction periods compared to before, indicating a strong inclination towards observing the market rather than making hasty decisions. With falling prices, people are hesitant to enter the market, pondering if prices will drop further next month making it more beneficial to wait.
A real estate agent from the Daxing District outside the South Fifth Ring Road in Beijing stated that clients are waiting for further price drops, even those with specific housing needs are postponing purchases. Current buyers have stringent requirements regarding property specifications such as the presence of an elevator and a desirable community environment. The market has evolved into a buyer’s market, with changing practices in handling transaction costs shared between buyers and sellers, illustrating the cautious approach in the current market environment.
Manager Wu from Haidian District outside the Fifth Ring Road in Beijing mentioned that the residential properties he oversees are generally priced around 10 million yuan. The average transaction period this year has been longer, with buyers predominantly looking to upgrade rather than make new purchases, indicating a more precautious approach in the market.
A prospective buyer mentioned that the successful sale of their existing property is crucial before making a new purchase. With their property continuously dropping in value, it becomes challenging to sell. However, selling at a significantly reduced price will require additional funds when buying a new property, creating financial constraints.
Industry experts caution against attempting to predict the bottoming out of the property market and advise against attempting to time the market or catch falling prices like a falling knife.
Reports from various financial media outlets in mainland China, including an analysis report by JPMorgan on Beijing’s real estate market, suggest that the latest policy adjustment, although significant, may not be sufficient to sustain a market recovery. They emphasize that without a change in buyer expectations and overall market confidence, the impact of this policy alone may be limited in boosting the real estate sector.
These insights caution against relying solely on local government policy relaxations to stimulate market activities, highlighting the necessity for substantial fiscal stimulus measures or innovative financing solutions for a more substantial market recovery.