On July 31, Zhengzhou lifted the restrictions on the sale prices of newly built commercial housing, allowing development companies to set prices independently. This policy adjustment marks the comprehensive removal of restrictive real estate policies in Zhengzhou. Some industry insiders believe that this move by Zhengzhou may lead to further expectations of a decline in new housing prices, which in turn could also impact the prices of existing homes.
The Housing Security and Real Estate Management Bureau of the Communist Party of China (CPC) Zhengzhou Municipal Committee issued a notice on the 31st, stating that, after research by the municipal government, the housing security department will no longer provide guidance on the sale prices of newly built commercial housing. Development companies can now sell properties at prices of their choosing and complete the procedures for pre-sale permits for commercial housing.
Regarding the cancellation of housing sale price restrictions in Zhengzhou, Li Yujia, Chief Researcher of the Housing Policy Research Center of the Urban Planning Institute of Guangdong Province, believes that empowering developers with the ability to adjust prices freely and eliminating redundant processes of secondary application conditions benefits developers in sales, helps relieve financial strain, and most importantly, by canceling price limits on commercial housing, it means free pricing and fluctuations, with buyers and sellers taking responsibility, preventing previous owners from troubling developers due to price drops later on.
In terms of the impact of Zhengzhou’s recent cancellation of restrictions on the sale prices of newly built commercial housing, Li Yujia expressed that this move may intensify market expectations of a decline in housing prices. When there are price controls in place, the market assumes that the government will maintain prices at controlled levels and not allow significant price drops. However, with the removal of price limits, this expectation disappears, potentially leading to continued expectations of a decline in new housing prices, which could also affect the prices of existing homes.
Throughout this year, to stimulate the real estate market, Zhengzhou authorities have implemented various policies, including new subsidy policies for first-time homebuyers, support for housing upgrades, advancement of commercial-to-residential property conversions, reduction in down payment ratios and mortgage interest rates, and an increase in provident fund loan amounts, but the results have been unsatisfactory.
Regarding the subsequent impact of this event, industry insiders have told the Xinjing News that more cities may follow suit with similar policies in the future.
According to data from the China Index Research Institute, cities like Shenyang, Lanzhou, Zhengzhou, and Ningde have stopped implementing guidance on the sale prices of newly built commercial housing this year, effectively lifting sales price restrictions.
Despite continued efforts by the CPC authorities to boost the real estate market, they have not reversed the ongoing downward trend. Data from the China Index Research Institute published on July 31, in the “2024 Top 100 Real Estate Enterprises Sales Performance Ranking from January to July”, shows that the total sales of the top 100 real estate companies amounted to 2,390.94 billion yuan from January to July this year, a 40.1% decrease compared to the same period last year. Among the one hundred billion-yuan real estate companies, 51 saw a decrease of 34 companies from the previous year during the same period. 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 told Dajiyuan that there is a severe oversupply issue in the entirety of China’s real estate sector, accumulated over more than a decade. “It is said that there are enough houses for 1.4 billion people now. How can the real estate sector be saved at this point? It’s impossible.”
He believes, “If you have built too many houses, those abandoned projects can only be torn down, there’s no other way. The excess must be demolished, digested, those that need to go bankrupt should, those that need to be demolished should. So, all the solutions either delay the issue or don’t really solve the fundamental problem. The oversupply problem can only be resolved by removing the excess capacity. The sooner this is done, the better. Starting afresh after tearing down would be better than persisting with the current situation.”