Facing a huge inventory of vacant houses, the top leadership of the Chinese Communist Party has called for the real estate sector to reduce inventory. In May, the authorities announced a plan to support local state-owned enterprises in acquiring inventory houses, but the latest revelations from mainland media show that the progress on the ground has been slow, with many facing various challenges.
On April 30, the meeting of the Central Political Bureau of the Chinese Communist Party proposed to “coordinate research on digesting existing housing stock.”
Official media reports stated that the acquisition of existing commercial housing for use as affordable housing has become one of the important measures to coordinate the digestion of existing housing stock, optimize increment housing, and promote the construction of a new model for real estate development.
After the State Council Policy Briefing on May 17 released relevant policy signals, local actions for “acquiring unsold houses” continued, and models such as “purchase in place of construction” for affordable housing were introduced one after another.
On July 19, an article titled “Few State-Owned Enterprises Willing to Acquire! Many Cities Facing Challenges in Acquiring Existing Housing Stock” was published by the “China Real Estate News,” indicating that different cities have shown varying progress and difficulties in the process of the acquisition plan. Some cities have not disclosed specific implementation plans, while others are facing numerous challenges.
On June 17, the Housing and Urban-Rural Development Bureau of Huizhou City, Guangdong Province, issued a notice stating that professional state-owned enterprises designated by the government are proposed as the acquirers, intending to acquire completed and unsold commercial housing below 120 square meters within the central area of 7 counties (districts) in Huizhou for use as affordable housing at a reasonable price (with the reset price of affordable housing in the same location as the reference limit). The collection period is from June 17 to July 17.
After a month, the deadline for the collection of completed and unsold commercial housing for use as affordable housing in Huizhou City, Guangdong Province is approaching.
An official from the Housing Guarantee Department of Huizhou City mentioned that it is expected that a specific state-owned enterprise responsible for the acquisition will be determined by next week or the end of this month, but there are still some issues with incomplete supporting policies at present.
On June 20, the Ministry of Housing and Urban-Rural Development held a “Video Conference on Acquiring Completed Existing Commercial Housing for Use as Affordable Housing,” explicitly stating the promotion of the acquisition of completed existing commercial housing for use as affordable housing in cities above the county level. Yangxin County in Huangshi City, Hubei Province, became the first county to respond to this policy, attracting widespread market attention.
On June 22, Yangxin County, Huangshi City, Hubei Province, issued 20 measures to promote the development of the real estate market. Among them, in promoting the “old-for-new” housing program, the county supports state-owned enterprises in acquiring second-hand residential housing for families with the need to “sell the old and buy the new,” with a 100% subsidy based on the paid contract tax. The acquired second-hand residential housing can be sold externally or used for rental housing, requisitioned resettlement housing, talent housing, affordable housing, etc.
However, a relevant staff member of the Housing Guarantee Company in Yangxin County, Huangshi City, Hubei Province, told mainland media that “Yangxin County is currently in the stage of policy document issuance and has not yet introduced specific implementation details. We are waiting for further specifics to be released before determining which state-owned enterprise is responsible for the acquisition.”
On July 10, the Housing and Urban-Rural Development Bureau of Chuzhou City, Anhui Province, issued several measures for further optimizing and adjusting real estate policies, including seven policies related to home purchase subsidies. Among them, they encourage state-owned enterprises and other platforms to acquire second-hand residential housing from families with a demand for “selling the old and buying the new.”
A staff member of the Chuzhou City Real Estate Industry Association stated that the model of state-owned enterprises and other platforms acquiring second-hand residential housing currently faces significant challenges in Chuzhou City due to the scattered nature of second-hand housing resources and various uncertainties, making it difficult for state-owned enterprises and other platforms to reuse acquired second-hand residential housing, thus affecting their enthusiasm to participate in acquisitions.
Li Yujia, Chief Researcher of the Housing Policy Research Center of the Guangdong Provincial Institute of Urban and Rural Planning, previously stated, “There are many difficulties in the operation of state-owned enterprises acquiring second-hand housing for use as affordable housing.”
He believes that second-hand housing resources are scattered, making centralized management difficult, and affordable housing requires the concentration or sharing of public facilities, which is hard to fulfill among second-hand housing resources unless it is some homes, residential properties, or commercial properties held by companies, which are usually more concentrated. This requires more negotiation with companies for acquisition, rather than with individual owners. Acquiring properties from individual owners involves a large amount of work and various issues, making it challenging to implement in practice.
Currently, the Chinese real estate market is facing an oversupply situation, with weakening demand and increasing pressure from housing inventory. Chinese blogger “Wēi dòng shāng bào” recently stated that due to the inability to sell a large number of houses, the most direct consequence is the growing inventory of real estate. The most direct impact on local governments is the significant reduction in land transfer income.
Chinese media has reported that land transfer income is an important source of revenue for local governments. In recent years, affected by the weak real estate market, land sales revenue continued to decline last year, to some extent affecting the financial capacity of local governments.
Data from the Ministry of Finance of the Chinese Communist Party shows that in 2022 and 2023, China’s land transfer income decreased by 23.3% and 13.2% year-on-year, respectively. In 2024, the decline continued to accelerate. In April of this year, China’s land transfer income decreased by 21% year-on-year.
“Wēi dòng shāng bào” stated that the cliff-like decline in land transfer income for three consecutive years has plunged many local governments that heavily rely on land finances into a huge financial quagmire. Due to the enormous size of the real estate sector in the Chinese economy and the difficulty in digesting high inventory levels, it has brought about a cascading series of impacts.