The People's Bank of China (PBC), the country's central bank, and the National Financial Regulatory Administration on May 17 announced that the minimum down payments for commercial housing mortgages applied for by individuals will be lowered to 15 percent for first-home purchases and 25 percent for second-home purchases.

"We're witnessing the lowest down payments in history," Gan Dou, a social media content creator who hones in on Beijing's property market, told Beijing Review. 

Gan recalled 2016, the year he began focusing on China's property industry. Facing rising housing prices, the Beijing municipal government attempted to cool down the red-hot real estate market by tightening regulations and implementing a new policy on September 30 of that year. This policy increased the down payment for first-time homebuyers from 30 percent to 35 percent, while second-home purchasers were required to put down at least 50 percent on any new residential property. Previously, mortgages on second homes were treated the same as first mortgages, provided the first loan had been paid off.

Huge demand led not only to rapidly rising housing prices but also to regulatory measures across many cities such as property-purchasing limitations. Later that same year, China introduced the principle that "housing is for living in, not for speculation," to stabilize the market.

Today, the property sector's landscape sports a wholly different look.

Prior to the PBC measures, major Chinese cities had already adjusted their real estate policies, with measures such as eased purchase restrictions and the trade-ins of commercial housing, to further release the housing demand and promote the healthy development of the real estate market.

Chengdu, capital of southwest China's Sichuan Province, lifted the restrictions for home buyers from late April, stimulating the local housing market over the May Day holiday (May 1-5). Hangzhou, capital of east China's Zhejiang Province, and Xi'an, capital of northwest China's Shaanxi Province, on May 9 announced the full removal of earlier restrictions related to home purchases. Prospective buyers no longer need to meet pre-existing conditions, such as the local hukou (household registration), local social security and the number of apartments each buyer is allowed to purchase.

On May 17, the central bank also announced its establishment of a 300-billion-yuan ($42.25-billion) relending facility for government-subsidized affordable housing projects. The PBC's measures are considered "historic steps for the property market." Stock prices of developers on A-share markets, which refer to the stock markets in the Chinese mainland where shares of Chinese companies are traded, subsequently surged.

The latest rounds of policy measures, centering on lowering mortgage rates, loosening home purchase restrictions and encouraging local governments to acquire unsold homes and convert them into affordable housing, will support both the supply and demand sides in the real estate sector, Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, told China Daily newspaper.

These measures will promote the delivery of pre-sold homes and curb the ongoing trend of substantial year-on-year declines in the number of completed commercial properties since the start of the year. Additionally, they will reduce inventory pressure, ease the financial strain on developers and help better manage default risks, Wang said.

Affordable, accessible 

"The real estate market involves people's immediate interests as well as the country's overall economic and social development," Chinese Vice Premier He Lifeng said at a May 17 morning teleconference focused on ensuring the delivery of housing projects.

Ensuring the delivery of housing projects and pushing forward the de-stocking of commercial housing are the two main efforts to address risks concerning unfinished commercial housing projects, according to He.

The vice premier also called for efforts to categorize and promote the disposal of under-construction commercial housing projects that have been sold but are hard to deliver. He urged continued initiatives to fend off and defuse debt risks concerning property developers.

Local state-owned enterprises are encouraged to use the PBC funds for relending to buy unsold completed commercial housing at appropriate prices, Tao Ling, Deputy Governor of the PBC, told a press conference on the afternoon of May 17. These homes will then be used as either sale-oriented or rental-oriented affordable housing, developed and managed according to market dynamics such as supply and demand, pricing mechanisms, and competitive practices—while adhering to regulatory and legal frameworks.

This approach ensures housing remains affordable and accessible to targeted groups while maintaining economic viability and efficiency in the housing market.

Affordable housing usually includes public rental housing, affordable rental apartments and homes with shared ownership. According to a circular released by the General Office of the State Council, the country's chief administrative authority, in July 2021, affordable rental homes should mainly target migrant workers, college graduates, and young people.

Most of these homes should be no more than 70 square meters, with their rents lower than those of existing units of similar quality and within the same area.

China's approach to addressing the property market is a systematic one that extends beyond the commercial housing market. Adhering to the principle introduced in 2016—that housing is for living in, not for speculation—the country has implemented various policies to better meet the housing needs of its people.

Traditionally, Chinese consumers prefer buying to renting a home. However, limited land resources and skyrocketing housing prices have made it almost impossible for most newcomers to large and medium-sized cities to own property. To relieve the housing stress, the Central Government has been encouraging the development of the rental housing market since 2016.

Governments at all levels have introduced supporting measures, including tax breaks and financial assistance for rental companies, as well as increasing the land supply for building rental housing.

Ni Hong, Minister of Housing and Urban-Rural Development, stated at the ministry's annual work conference last December that the construction of affordable housing and public infrastructure, both for regular and emergency use, as well as the renovation of urban shantytowns, will receive extra attention.

Another major focus will be addressing the housing needs of new urban residents, young people and migrant workers, Ni said.

A confidence boost 

Statistics from the Beijing Municipal Housing and Urban-Rural Development Commission show that in the first quarter of this year, 33,056 pre-owned homes and 7,092 new homes were sold in the city. In comparison, 45,815 pre-owned homes and 11,765 new homes were sold in Beijing during the same period of last year. In April, then, 13,354 pre-owned homes were sold in the capital city, marking a 4-percent year-on-year decrease and a 6-percent month-on-month decline, according to Gan. 

"The data tell us that Beijing's property market was gloomy in recent months," the content creator said. But the policies introduced and implemented on May 17 are already having a stimulating effect, he added.

The first weekend following the PBC's announcement, Beijing's pre-owned housing transactions exceeded 2,000 units, which was a good performance, Gan said. The number of visitors to the sales offices of new housing projects began to increase and the market did not witness a price increase.

In a separate statement on its official website, the PBC said that the base level of commercial mortgage rates for first and second homes will be canceled nationwide. Central bank branches can determine the lower limits of commercial mortgage rates per local conditions, and financial institutions must set the basic lending rates based on individual business conditions and borrower risks, the central bank said.

According to the PBC, the country will also cut the loan rates of the individual housing provident fund, a long-term housing savings plan made up of compulsory monthly deposits by both employers and employees, by 0.25 percentage points from May 18.

Zhang Dawei, chief analyst at real estate agency Centaline Property, told Xinhua News Agency that lowering mortgage interest rates and down payment requirements will improve residents' willingness to buy homes.

"Still, the long-term effect of these measures is unknown. I think the main point is how to boost consumer confidence," Gan said, adding, "And specifically how to enhance consumers' expectations for future income."

Defusing risks 

For a long time, the real estate sector was China's main economic driver. This was due to its extensive upstream and downstream industrial chain, including a range of real estate-related sectors and services such as construction and the home appliance industry in the post-real estate cycle. Plus, this extensive industrial chain provided a large number of jobs.

The country has always valued its real estate market. The measures released on May 17 were seen as a top-down design, led by the State Council, with participation from multiple ministries, local governments and financial institutions. This reflects the importance attached to real estate risk management.

The focus on the real estate market has already been mentioned in many conferences and documents in the months leading up to the decisive May announcement. For example, the Central Economic Work Conference, an annual meeting of top Chinese officials to set the economic priorities and policies for the coming year, held in Beijing from December 11 to 23, 2023, stated that "on preventing and defusing risks, it is necessary to coordinate measures to mitigate risks related to the real estate sector, local government debt, and small and medium-sized financial institutions, rigorously crack down on illegal financial activities, and resolutely prevent systemic risks."

The Government Work Report for 2024, released in early March, stated, "We will continue to ensure greater security through high-quality development and promote high-quality development with a greater degree of security. We will defuse risks in real estate, local government debt, and small and medium financial institutions by addressing both symptoms and root causes. By doing so, we will safeguard overall economic and financial stability."

The report further read that real estate policies will be refined to meet the "justified financing demands of real estate enterprises under various forms of ownership on an equal basis, to promote the steady and healthy development of the real estate market."

A meeting of the Political Bureau of the Communist Party of China Central Committee on April 30, then, stressed the continuous prevention and defusing of risks in key areas. 

It emphasized the need to create new policies aimed at reducing housing inventory and enhancing the quality of new homes, as well as urged for the establishment of a new model for the real estate sector to promote high-quality development.  

(Print Edition Title: REDEFINING REAL ESTATE) 

Copyedited by Elsbeth van Paridon 

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