Since 2024, at least 11 cities in China have cancelled their real estate price restriction policies, with some industry insiders believing that this move may lead to a steep drop in property prices in certain areas.
In China, property developers are not allowed to independently set prices for their projects. Prices must go through official filing procedures, and even if developers want to offer discounts, they need official approval specifying the extent of the price reduction, known as price restriction policies. However, with the continuous slump and severe downturn in property sales, these price restrictions are gradually being lifted.
According to a report by Chinese media outlet “Jiemian News” on August 11, since 2024, cities including Shenyang, Ningde, Yangjiang, Dali, Zhuhai, Wuhu, Huainan, and others have either cancelled or relaxed their property purchase restrictions.
Recently, the Wanhe Guanggu project in Wuhan has decreased its price by nearly ten thousand yuan per square meter, from an initial filing price of around 23,000 yuan/sqm to 12,500 yuan/sqm. Similarly, the Poliwan project in Huangge, Guangzhou, which was priced at over 20,000 yuan/sqm in 2022, has now dropped to 13,300 yuan/sqm.
Zhao Dawei, Chief Analyst at Zhongyuan Real Estate, analyzed to “Jiemian News,” that the cancellation of price restrictions increases the likelihood of a further market decline. Even without price restrictions in the current market, developers are unlikely to sell at high prices because properties simply won’t move. Canceling these restrictions could potentially lead to a sharp decline in property prices in certain regions, triggering an overall irrational market adjustment.
Li Yujia, Chief Researcher at the Housing Policy Research Center of Guangdong Province’s Urban and Rural Planning Institute, mentioned in an article that the strong demand for lower-priced properties indicates buyers’ expectations of price drops, leading to even lower price expectations, which can affect market sentiment and transactions.
Ding Zuyu, CEO of E-House China Enterprise Holdings, stated in his analysis of the real estate market that restrictive policies introduced during hotter market conditions are no longer suitable. The supply-demand dynamics in China’s property market have undergone significant changes, and cities that have yet to lift restrictions will gradually follow suit. Even core first-tier cities like Beijing and Shanghai have some room for relaxation.
Industry insiders speaking to “Beijing News” suggested that more cities may follow in canceling their property price restrictions.
Post the cancellation of property price restrictions, market reactions have varied. Improvements were seen in Chengdu after the restrictions were lifted, while Hefei experienced a slight decline in transaction volume after the restrictions were removed. However, by this year, the new property market in Hefei has significantly cooled down.
Currently, despite continuous efforts by the Chinese authorities to stimulate the property market, the trend of declining property prices persists. Data from the China Real Estate Association released on July 31 showed that from January to July 2024, the total sales of the top 100 real estate companies amounted to 2,390.94 billion yuan, a 40.1% decrease year-on-year. Among them, 51 billion-yuan enterprises decreased by 34 compared to the same period last year. In July alone, the sales of the top 100 real estate companies decreased by 19.4% year-on-year and by 35.2% month-on-month.
Taiwanese economist Wu Jialong expressed to Dajiyuan that there is a severe oversupply of the entire real estate sector in China, accumulated for over a decade. He stated, “It is said that China now has enough houses for 1.4 billion people. How can the real estate sector be saved under such circumstances?”
Regarding the price drops in the property market, a Tencent user lamented, “The housing prices are truly unsustainable, the nosedive has begun, properties priced below the land value will be everywhere, buying a house a day later means more discounts!”
Another netizen, “ZHOU,” commented, “The existing houses in China are being lived in by three to four billion people. Houses are meant for living, but they have been artificially inflated by major real estate developers and speculators. Now, with excessive new housing stock, reduced transactions in secondary markets, significant price reductions are necessary.”
User “Qingshan Lushui 2030” disclosed, “I travel frequently, and many small cities have large areas of vacant houses. Some cities are still under construction while experiencing a declining population. Those with poor locations will become nothing but garbage in the future.”
User “Qie Qie” offered a cautionary advice, “Do not buy off-plan houses at discounted prices, or you may end up with unfinished properties.”