Experts: CCP releases new housing policy, aiming to attract citizens to participate in land finance

China rolled out a series of stimulating measures to boost the real estate market ahead of the “Golden Week” holiday. Following Guangzhou, Shanghai, and Shenzhen’s announcements to cancel or relax property purchase restrictions, Beijing also introduced eight new real estate policies. Experts say the so-called new policies are just lowering the threshold to entice people to take over land finance, with no real benefits offered by the government, making it more of a temporary boost rather than a lasting solution.

The People’s Bank of China and the China Banking and Insurance Regulatory Commission jointly announced four financial policies to support the real estate sector on the evening of September 29. These policies include guiding banks to lower interest rates on existing housing loans, unifying the minimum down payment ratio for housing loans to 15%, extending the deadline for some real estate financial policy documents, and optimizing policies for refinancing affordable housing.

“Existing housing loans” refer to the portion of individual housing loans disbursed before the announcement of the new policies that has not been fully repaid yet. Recently, new housing loan interest rates in China have been decreasing, sparking a trend of early loan repayments.

The four major state-owned banks – Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, and China Construction Bank – announced on the late night of September 29 that they would implement batch adjustments to interest rates on existing housing loans before October 31.

On the evening of September 30, Beijing released the “Eight New Policies” for real estate, effective from October 1, 2024.

Among them, the purchase restriction for buying commodity housing within the Fifth Ring Road in Beijing has been adjusted to a minimum of 3 years, while outside the Fifth Ring Road, it is set at 2 years or more. The minimum down payment for first-time homebuyers for commercial individual housing loans has been lowered to 15%; for purchasing a second commodity housing, the minimum down payment ratio for commercial individual housing loans is adjusted to no less than 20%. For resident families purchasing housing in Tongzhou District, they shall follow the unified policy of the entire city. Beijing households with two or more children can have their housing provident fund loan amount increased by 400,000 yuan; single Beijing residents living with their minor children shall follow the housing purchase restriction policy for Beijing residents. Additionally, standards for ordinary and non-ordinary housing are set to be canceled, and more.

Economic scholar David Huang, currently in the United States, told Epoch Times that Beijing’s “Eight New Policies” are simply lowering the entry barriers for purchasing houses without reducing the actual payment amount or making significant interest rate adjustments, which are only around 0.5%. Despite increased tax burdens, such as deed taxes and property transfer taxes, the government has not relinquished any real benefits, sticking to its principles without offering tangible advantages.

According to statistics from CRIC, as of September 29, Beijing had signed contracts for 12,331 existing homes in the same month, with an estimated total around 13,000 units for the whole month, approaching a low point in the past seven months.

Huang believes that the new policies are expected to bring some relief to the Beijing property market as the city, unlike others, has competitive advantages in terms of employment, education, and healthcare resources, attracting outsiders to purchase houses. However, these effects are estimated to dissipate within half a year to a year, providing only temporary relief without substantial impact as anticipated.

Prior to Beijing, Guangzhou, Shenzhen, and Shanghai had successively announced new market support policies on September 29. Guangzhou completely lifted purchase restrictions city-wide, becoming the first tier-one city to fully withdraw such policies. Shenzhen relaxed restrictions in some areas, adjusting down payment ratios, effective from October 1. Shanghai also modified its purchase restrictions, housing credit policies, and property tax policies.

Huang believes that while other cities’ new policies are similar to Beijing’s, Beijing had more extensive restrictions in place, making the removal a significant move. He contends that the Chinese government tends to prioritize political considerations over public welfare, merely lowering the barriers to accommodate more buyers, hoping people will contribute their lifelong labor and purchasing power to bolster land finance, yet the burdens on individuals have not fundamentally decreased.

Moreover, Huang points out that the government’s market rescue measures lack fundamental changes to the economy’s structural problems and can only provide a short-term boost, postponing the resolution of underlying issues to a later date.

Several Chinese media outlets reported the overwhelming popularity in the real estate market on September 30.

The Southern Metropolis Daily reported that Guangzhou abolished all purchase restrictions, putting an end to the policy introduced in October 2010. On the first day of lifting the restrictions, some upcoming projects witnessed skyrocketing popularity, with some properties registering double-digit sales figures in a single day and a twofold increase in daily visitors at certain sites. Many projects in Shenzhen also experienced a surge in foot traffic at on-site sales offices, with real estate agents working tirelessly to manage the influx of prospective buyers.

Some industry experts in China have echoed official propaganda, expressing confidence in the future market trends.

Taiwanese financial expert Huang Shicong told Epoch Times that these tier-one cities have introduced new policies as part of a comprehensive plan to stimulate the economy, akin to a move aimed at China’s 75th anniversary of state founding. However, the sustainability of China’s real estate market remains uncertain, hinging on whether these policies can truly drive actual consumer spending and market transactions in the long run.

Financial influencer “Cold Eye on Finance” pointed out to Epoch Times that Beijing, Shanghai, Shenzhen, and Guangzhou have relaxed their purchase restrictions to entice people to support the struggling land finance.

“With China having embarked on a macro-level monetary expansion to prop up stocks and the real estate market through printing money, local governments are introducing matching policies to deceive the Chinese people into speculating on stocks and buying houses, following this pattern. With the stock market soaring madly, many are now emptying their savings to chase the market higher, and the real estate market is no exception. The measures in the four tier-one cities are designed to prompt people to withdraw their deposits and buy houses, propping up developers and bolstering land finance.”

He opines that continuing down this path, the Chinese stock and real estate markets are bound to face severe challenges ahead. A possible stock market crash or accelerated decline in the property market should not come as a surprise in the future.