Time for policy boost to restore realty health

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By WANG YING in Shanghai (China Daily) 08:46, July 24, 2023

Experts urge cautious approach to avoid sudden overheating, abrupt downturn

An employee (left) from a real estate sales department introduces a residential project to a potential homebuyer in Taiyuan, Shanxi province, on May 12. WEI LIANG/CHINA NEWS SERVICE

With the rise in China's new home prices slowing and investment in property contracting, industry experts have issued calls for stronger supportive measures to restore real estate to healthy development.

As one of the nation's pillar industries, real estate accounts for about 7 percent of the nation's GDP and about 60 percent of urban households' assets, according to the Office of Central Committee for Financial and Economic Affairs.

The industry's performance is closely associated with the nation's overall economic recovery. With that as the backdrop, two views have formed of late. Some people have underlined immediate bailout measures; while others worry that extravagant policies might cause the housing market to overheat in some cities.

Lou Jiwei, former finance minister, said he believes supportive measures are urgently needed. He suggested restrictions on home purchases and home loans should be scrapped, and caps on housing prices lifted, ensuring a soft landing for the country's property market.

Lou also called for plans to levy property tax in due course, with a clear threshold of tax exemption based on the property area owned by a household.

China's property market saw new home prices in major Chinese cities either stay flat or decline in June, while pre-owned home prices fell month-on-month, according to the latest data from the National Bureau of Statistics.

NBS data also showed China's investment in property development fell nearly 8 percent year-on-year to 5.86 trillion yuan ($816.5 billion) in the first half of this year. The residential segment accounted for 4.44 trillion yuan of it, down more than 7 percent year-on-year.

"As various measures took effect, nationwide home transaction volume started to stabilize with firstand second-tier cities taking the lead in recovery," said Sheng Xiuxiu, research director for the residential sector at JLL China, a real estate consultancy.

However, with major indicators of the housing market, including residential investment and new construction, still in a downtrend, property developers should be wary of revitalizing stock assets and cautious about opening new projects, Sheng said.

A slew of measures were launched in the first half. In early January, the People's Bank of China, the country's central bank, and the former China Banking and Insurance Regulatory Commission, then the industry regulator, jointly announced that cities where new home prices dropped both month-on-month and year-on-year for three months, can decide if they would like to retain, reduce or remove lower limits for interest rates on first-home loans in phases.

A real estate project is under construction near the Bund area in Shanghai on June 4. WANG GANG/FOR CHINA DAILY

In June, the PBOC made the first adjustment in 10 months to loan prime rates by cutting the over-five-year loan prime rate, on which many lenders base their mortgage rates.

"These measures mainly focus on lowering the cost of buying homes as well as improving the balance sheet of quality property developers, as part of efforts to defuse financial risks of the real estate sector and assist the property market to form a virtuous cycle," said Chen Wenjing, director of research with the China Index Academy.

"At the local government level, policies related to property had been adjusted in over 130 Chinese cities as of June 25. These policies included easing home mortgage measures, lowering down payment, and reducing home purchase restrictions. The policy adjustments are playing a bigger role in supporting the home market," said Chen Xiao, senior analyst with the Zhuge Real Estate Data Research Center.

Although industry experts agree that policies need more fine-tuning to back the property market recovery, many of them urge striking a fine balance to stop the sector from either getting overheated or taking a drastic downturn.

"Any policy related to the regulation of real estate needs to be implemented under the premise' housing is for living in, not for speculation'," said Shaun Brodie, head of research content for China with Cushman &Wakefield, an industry consultancy.

"Additionally, it is necessary to take into account the specific situation of each city and then carefully make customized policy tweaks to ensure sustainable growth within the housing market of a particular city in question," Brodie said.