Cheng Zhen gave birth to her second child last year and her firstborn is expected to attend primary school in a couple of years. To improve the growing family's living conditions, the 31-year-old mom has developed a stronger desire to purchase an apartment in Beijing.

Due to a job transfer, Cheng and her husband moved to Beijing in 2018 from neighboring Tianjin Municipality where they tied the knot and obtained a mortgage to buy their first home. Since moving to the Chinese capital, the couple has been renting.

"We've been thinking about selling our Tianjin apartment and buying a new one in Beijing, but this way we will become second-time buyers, meaning we will need to make a higher down payment and pay a higher interest rate on our loan," Cheng told Beijing Review.

To curb speculative buying amid an overheated property market, some of China's biggest metropolises have adopted measures to increase market entry barriers since 2010. In these cities, a borrower who already owns a house in their name or has a mortgage record will be considered a second-time buyer when applying for a new loan.

Taking Beijing as an example, when purchasing a new two-bedroom unit in Changping District in the city's northwest, worth 5.2 million yuan ($725,557), the down payment will set a second-time buyer back 2 million yuan ($279,060) more than a first-time buyer. Under these circumstances, Cheng and her husband, despite being able to sell their first home and pay off their first loan, are considered second-time buyers—because they already have a mortgage record.

Rational housing demands like Cheng's are yet to be fully met. In that light, on July 31, the National Development and Reform Commission (NDRC), China's top economic planner, unveiled 20 policy incentives to boost consumption amid efforts to sustain economic recovery and promote high-quality development. Housing consumption is one of the highlights.

A better house

The announcement came after the Political Bureau of the Communist Party of China Central Committee held a meeting on July 24 to make arrangements for the country's major economic undertakings in the second half of the year.

The meeting concluded that to adapt to the changes in the relationship between supply and demand in the real estate market, it's imperative to adjust and improve related policies in timely manner and use targeted policy tools in different cities.

"Under the premise that 'houses are for living in, not for speculation,' with speculation involving buying property with the hopes of reselling it at a higher price in the near future, the demand side of China's real estate market has undergone a new change—as the people's basic demand, or access to adequate housing, and upgraded demand for housing are on the rise, whereas investment- and speculation-oriented demands for housing are on the decline," Kuang Weida, Director of the Center for Urban and Real Estate Research under the National Academy of Development and Strategy at Renmin University of China, told the newspaper China Economic Times.

Meanwhile, according to an article published by Chen Wenjing, Market Research Director of the China Index Academy (CIA), since 2022, when China's population started shrinking for the first time since 1961 and people's per-capita living space notably grew as one household owned nearly 1.1 apartment units on average, the people's basic demand for housing has been greatly satisfied.

"Subsequently, the people's demand for housing has shifted from 'have one or none' to 'good or not'," Chen wrote, adding, "Demand for a larger house now soars."

Overall, the country's real estate sector has shifted from a seller's market to a buyer's market, and corresponding regulatory policies have changed from cooling off an overheated market to warming up an overcooled market.

Following the meeting, the Ministry of Housing and Urban-Rural Development on July 27 pledged to take concrete actions for policy improvement, including reducing the down payment ratios and loan interest rates for first-time homebuyers, as well as easing restrictions for their access to new loans.

The latter in particular has commanded the public's attention. If implemented in Beijing, this would mean Cheng could simply sell her first house for the bank to consider her a first-time buyer and subsequently enjoy a smaller down payment and lower loan interest rates.

"The move, if implemented, will greatly unleash housing consumption potential [like Cheng's]," Cao Jingjing, General Manager of the CIA's Index Department, told daily newspaper Shanghai Securities News. "But featuring strong demand, some megacities like Beijing and Shanghai may be more cautious when it comes to implementing the new measures and will customize the policies for districts under their jurisdiction according to their different situations."

Local housing authorities in Beijing, Shanghai, as well as Guangzhou and Shenzhen in Guangdong Province have already announced they will put the latest property policies in place to better meet people's basic and upgraded housing demands, as well as to promote the stable and healthy development of their real estate markets. Detailed measures are yet to be unveiled at the time of writing.

Among its incentives, the NDRC also proposed to expand the supply of government-subsidized rental housing to address the demands for people with limited financial resources, including new urban dwellers from the rural areas and young citizens. In addition, it emphasized the renovation of old residential areas and rural housing.

The positive tone of the recent policy statements bodes well for the stable development of the real estate market, China International Capital Corp. Ltd., an investment banking service provider, stated in a recent report, adding that pro-growth policies related to the real estate market are highly likely to come soon.

A better home

Once you have the house, it's time to create a home. Many young Chinese today are willing to pay for a better home even if the house isn't theirs.

Gina Gao works in public relations, but in her spare time loves to indulge in interior design. She has rented several apartments and after giving all their rooms a complete makeover, now rents them out on Airbnb. "I'm considering setting up an account on Xiaohongshu [Little Red Book, a popular Chinese lifestyle and e-commerce app] because I realized more and more people were sharing pictures of their home décor there and some influencers with a large following had been able to generate income by including ads for home appliance brands and decoration service providers," Gao told Beijing Review.

Cheng divulged that if she fails to buy a new apartment in Beijing, she will rent a larger one and wholly redecorate it given "being an interior designer was a childhood dream of mine."

According to the China Building Decoration Association, over 72.8 percent of consumers have more than 100,000 yuan ($13,924) in budget reserved for home decoration. The consumption of home appliances, especially green and smart ones, is expected to become a growth driver to expand domestic demand courtesy of supporting measures.

The NDRC's latest notice proposed to push for the consumption of home decoration and smart and green home appliances, rolling out incentives for trade-ins and the recycling of used home appliances. On July 18, the Ministry of Commerce, together with 12 other departments, issued detailed measures to implement the policies.

The aging population and accelerated urbanization, together with recent measures to boost the real estate market, all combined will bring new opportunities for home appliance and decoration consumption, industry insiders said.

(Print Edition: Home Sweet Home)

Copyedited by Elsbeth van Paridon

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