Property

Chinese Housing Policies in Adjustment



The head of the Ministry of Housing and Urban-Rural Development invited four of the largest real estate developers of the country, Wanda, Poly, Sunac and Evergrande, for a meeting on 18th July to discuss the developers’ view on the housing market and on any future policy adjustments, according to sources close to the Ministry. Analysts see the sudden meeting as a sign that the current policies have reached a bottleneck and that the central government is planning on a change of market policies or regulations. Meeting will be held with the PBOC and other banks on the issue in the future.

In fact, current policies seem to be at a crossroads. With the promotion of destocking, supply shortages are starting to be a problem in tier-one and some of the popular tier-two cities and, meanwhile, over-supply is still a protuberant problem in tier-three and tier-four cities. The division in the property market has become more prominent than ever. The structural problem in the supply is also an issue, with too much supply for industrial properties and offices but a shortage in pure-residential developments with an affordable price-tag. Land sales in some of the popular cities are reaching new high-prices almost every day, significantly lengthening developer’s inventory cycle and moving the housing market towards a luxury dominated era. Should market trends change, burdens might become unbearable for developers that have invested great money in purchasing plots.

The spokesperson of the National Development and Reform Commission has also said earlier on a press conference that the Commission will be putting more effort into applying different policies in different cities. Although destocking continues to be the main strategy, close attention will be paid to the tight inventory levels of tier-one and tier-two cities, and residential supply will be carefully increased in order to slow down price surge, while more effort will be put on to the reduction of inventory level in tier-three and tier-four cities according to the cities’ situations. He also mentioned plans on developing a healthy leasing market for residential properties by encouraging both supply and demand for leased homes, improving the public rental housing system and so on, so as to develop a buy-rent balance in the residential market.

With the uncertainties of surging home and land prices in some cities and stagnant sales in the others, the central government is expected to introduce a series of policy adjustments, for example, changing its credit policies, meaning that the property market may enter a period of adjustment in the near future.