Against the backdrop of the continuing downturn in the real estate market in mainland China, the cities of Hangzhou and Xi’an, which have persisted in not loosening property market restrictions, recently announced the complete lifting of housing purchase restrictions, sparking wide attention. The past two decades have seen rapid expansion in the real estate industry, a pillar of the Chinese economy. The top echelons of the Communist Party of China (CPC) had previously called for “housing for living, not for speculation,” and had implemented stringent real estate control measures. With the complete removal of purchase restrictions in two popular cities, does this mean that the principle of “housing for living, not for speculation” has been abandoned? Analysts believe that there has been a fundamental shift in the CPC’s judgment on the property market.
During the last five years of the mainland China property market downturn, the removal of purchase restrictions became the main action of various local governments. However, Hangzhou and Xi’an had consistently refused to lift these restrictions. On May 9th, both cities announced the complete removal of housing purchase restrictions. Multiple mainland media outlets indicate that this marks the end of more than a decade of implementing purchase restrictions.
A prominent figure in the real estate field from Zhejiang, known as “Old Hangzhou Talks Real Estate,” stated that after eight years, Hangzhou has finally completely eliminated purchase restrictions. Xi’an also lifted housing purchase restrictions on the same day, signifying a nationwide departure from the incremental opening-up of the property market. The future direction of Hangzhou’s property prices, whether they will rise or fall, will be determined by ordinary people voting with their wallets.
Official Chinese data shows that over the past 20 years, real estate has been a pillar industry in China, accounting for 7.34% of GDP, indirectly driving related industries at 9.9%, totaling about 17% of GDP. Local governments have been aggressively selling land to support finances during this period; residents have seen asset appreciation amid rising property prices, while major real estate enterprises have rapidly expanded.
The “housing purchase restrictions” in China began in 2010 when Beijing issued the first housing purchase restriction policy, allowing families in Beijing to purchase only one new commercial property. Subsequently, more than 49 prefecture-level cities implemented housing purchase restrictions. At its peak, there were over 100 cities simultaneously enforcing housing purchase restrictions.
At the Central Economic Work Conference of the CPC in December 2016, CPC leader Xi Jinping first proposed the idea that “houses are for living in, not for speculation,” known as “housing for living, not for speculation.”
In early 2017, with prices in cities such as Beijing, Guangzhou, Shanghai, Nanjing, Hangzhou, and Xiamen increasing by over 15%, Minister of Housing and Urban-Rural Development Chen Zhenggao reiterated the “housing for living, not for speculation” stance on February 23rd of that year. In March, more than 40 cities and counties nationwide began implementing the “most severe” real estate control policies ever.
In recent years, data released by the National Bureau of Statistics of China on property prices in 70 large and medium-sized cities reveals that the real estate market has been deeply adjusting, and some cities are facing significant downward pressure in the property market. Despite this, both the CPC leadership and local governments continue to uphold the principle of “housing for living, not for speculation.”
By December 6, 2022, at the Central Economic Work Conference of the CPC, the complete phrase “housing for living, not for speculation” was no longer mentioned. This year, during the annual sessions of the CPC and Chinese People’s Political Consultative Conference, Premier Li Keqiang did not mention “housing for living, not for speculation” in the government work report, instead emphasizing risk prevention and control as the core of real estate policies.
Now, with the removal of purchase restrictions in Xi’an and Hangzhou, it signals a shift wherein speculators are no longer subject to any limitations and can buy as many properties as they please. So, has the concept of “housing for living, not for speculation” become outdated?
An opinion piece from Hong Kong’s financial outlet, the Hong Kong Economic Times, states that behind this significant move lies a fundamental change in the CPC leadership’s judgment on the property market. The first policy signal being transmitted is that the final nationwide lifting of restrictions has begun.
The article suggests that the supply-demand dynamics in the Chinese real estate market have reversed. The current market no longer has patience for the hesitant and superficial lifting of purchase restrictions. The real estate market is at a delicate juncture where only unexpectedly bold policies can trigger market responses. The remaining major cities with purchase restrictions will sooner or later follow suit in completely lifting them.
Financial influencer “Money Talks” analyzed that the government’s current aim is to stabilize economic development and change the low liquidity state of the society’s funds. The lifting of property purchase restrictions aims to attract funds into the real estate market. China’s manufacturing industry is hopeful to receive substantial investments.
As of now, data from the China Index Research Institute shows that only six areas in mainland China still have housing purchase restrictions in place, including Beijing, Shanghai, Guangzhou, Shenzhen, Hainan Province, and Tianjin, which still maintain partially relaxed restrictions.
“Old Hangzhou Talks Real Estate” predicts that the next city to lift purchase restrictions may be Tianjin or Guangzhou, possibly to be announced in the coming days.
Though Guangzhou, Beijing, and Tianjin have not yet lifted restrictions, following the policy orientation for the property market set during a CPC Politburo meeting in April, on April 30, both Beijing and Tianjin announced new stimulus policies for the property market, allowing resident families who already own properties up to the restricted amount to purchase a new property outside the Fifth Ring Road (suburban areas). Tianjin’s new policy also facilitates purchases by Beijing and Hebei residents on par with local residents.
In January this year, Guangzhou significantly relaxed its purchase restriction policy.
Observers now look to Shanghai for insights into the next policy direction.
On May 9, China Central Television reported that as of now, 35 cities in China have relaxed purchase restrictions, with 24 cities completely lifting them. Additionally, over 160 cities have introduced policies such as relaxing housing provident fund loans, property purchase subsidies, eliminating the lower limit on mortgage rates for first-time homebuyers, and providing financing support under the “white-list” project. The trend seems to be moving towards easing purchase restrictions.
However, the report emphasizes that purchase restrictions will not completely disappear, as cities with over-supply or insufficient innovation capabilities may choose to entirely lift restrictions, while key cities, involving hukou policies, will continue with adjustments and dynamic changes.
Last August, Jiaxing in Zhejiang Province issued 21 new real estate policies, removing limitations on the number of properties residents can purchase and allowing unrestricted transfers of all commercial housing.
Subsequently, many major cities followed suit. The policy of purchase restrictions has been recognized as outdated, but the current real estate market has yet to see improvement.
Before Beijing’s announcement of new policies to stimulate the property market, there was a trend of selling off properties, with many second-hand properties experiencing significant price drops, some up to millions of yuan, yet attracting few buyers. Even after the introduction of new policies in Beijing, there hasn’t been a significant increase in the number of people visiting properties for sale. Sales data from a real estate brokerage in Beijing showed that during the May Day holiday period, there was no notable increase in property visits compared to pre-pandemic levels.
Data from “Buying a Home” showed that by the end of March, Hangzhou had 158,700 residential listings, with major institutions selling around 210,000 units. Of these, over 35,000 units were reduced in price, while only 1,341 units saw price increases. The number of price-reduced units was over 26 times greater than the number of price-increased units. Moreover, data from the Zhuge Find House platform showed that currently, in the list of second-hand properties in Hangzhou, nearly 95% of the properties have reduced prices.
A self-introduction by the self-media figure “Big Fly Talks Real Estate” stated that they focus on real estate knowledge and provide in-depth analysis of real estate issues.
On the evening of May 9, in a video program titled “No More Pretense, Speculation Capital of Real Estate, Complete Lifting of Purchase Restrictions,” they expressed that it is clear that there is a lack of confidence in the real estate market. Regarding the current relaxation of real estate policies, it is vital to understand that it merely signals a direction, and whether it has any effect depends on whether people are willing to spend real money on buying properties. It ultimately boils down to whether the real estate market’s sales data show signs of improvement and an increase in long-term loans for residents. If not, increasing the relaxation of restrictions could potentially have a more severe negative impact on the market, as good news pushed too far can turn into bad news.
They stated, “Not afraid of loosening real estate policies, but afraid that after loosening, there will be no positive effects.” After the lifting of purchase restrictions in second-tier cities, there was negligible market response. The continuous relaxation of real estate policies has resulted in potential buyers becoming numb to the policy changes. Every relaxation of real estate policies represents an opportunity to leave the market.