Regulations in property sector to focus on long-term mechanisms for stable market development

The domestic real estate market had seen unprecedented adjustments and changes in 2023, and experts said they expect 2024 to be a year of recovery, propelled by supportive policies and increased investor confidence as the overall property market explores a new development model.

Shaun Brodie, head of research on the China market at global real estate services firm Cushman & Wakefield, said the residential market "in first-tier cities is expected to take the lead in market stabilization and recovery in 2024, which will be gradually seen in second- and third-tier cities."

Meanwhile, government regulation of the residential market will focus on long-term mechanisms, aiming to avoid excessive volatility and maintain stable overall market development, Brodie said.

Property consultant JLL China said "timely" policy adjustments will consolidate the recovery momentum of the sector.

"Policymakers have clearly noted that a significant change has taken place in the real estate market's supply-demand relationship, and in order to adapt to the new situation, policy adjustments and optimizations should be made in a timely manner," said Bruce Pang, chief economist for JLL China.

The measures should come after thorough study and judgment of major trends and structural changes in the real estate market, as well as the urbanization pattern, while efforts should be made to eliminate negative effects — such as high debt and high leveraging — that have accompanied the previous property development model.

Hui Jianqiang, head of research at Beijing Zhongfang-Yanxie Technology Service Ltd, said a meeting of the Political Bureau of the Communist Party of China Central Committee held on July 24, 2023, had sent out a clear signal, and a raft of measures soon followed.

The meeting, which analyzed the economic situation and made arrangements for economic work in the second half of the year, called for concrete efforts in preventing and defusing risks in key areas, and adapting to the major changes that have taken place in the relationship between supply and demand in China's real estate market.

Real estate policies should be adjusted and optimized in a timely manner, the meeting said, adding that the policy toolkit should be well utilized with city-specific measures to better meet residents' essential housing demand and their needs for better housing, as well as advance the stable and sound development of the property market.

As many as 751 policy easing measures had been issued by local governments, covering more than 330 cities across China as of Dec 18, over 140 more than that in 2022.

The easing measures peaked in September, with more than 140 such announcements, according to data collected by Zhuge Real Estate Data Research Center.

The measures included reducing down payment ratios, lowering mortgage interest rates, encouraging commercial banks and borrowers to negotiate more favorable interest rates, providing financial support to ensure the timely delivery of property projects, and giving financial support to local governments' low rental housing, among others, said Guan Rongxue, a senior analyst at Zhuge Real Estate Data Research Center.

Guan said these measures reached a new level in December with the nation's two biggest cities, Beijing and Shanghai, announcing adjustments to their existing home purchase policies in favor of home trading on Dec 14.

The optimization measures, like lowering down payment ratios, cutting mortgage interest rates, and optimizing the definition of ordinary housing, will activate the home market in the two cities and boost overall market confidence, helping to promote the stabilization of the Chinese housing market, said Chen Wenjing, director of research at the China Index Academy.

"The series of measures has gradually paid off, and there are already some positive signs emerging. Overall, China's real estate industry is looking for a new balance," said Pan Gongsheng, governor of the People's Bank of China, China's central bank, at a conference in Hong Kong in late November.

"Although efforts should be made to prevent an extended effect in the short term, the property market's current adjustment will be beneficial to China's economic growth and sustainable development over the long term," Pan said.