Loosen all restrictions on home ownership

The Chinese stock market has just recorded a very strong increase when many local governments simultaneously announced measures to rescue the real estate market, following the signal from the Beijing government.

On September 29, the Guangzhou City government suddenly announced that all restrictions on home purchases would be removed and the decision would take effect from September 30.

Under previous regulations, immigrant households moving to Guangzhou had to pay taxes or social insurance for at least six months to be eligible to buy a maximum of two homes. Singles were limited to one apartment. Now, these conditions have been removed.

The Shanghai government also decided to reduce the mandatory tax payment period from three years to one year (to be able to buy a house). The city lowered the down payment for first-time home purchases to 15%. The new regulations take effect on October 1.

Shenzhen authorities have taken a similar step by loosening home-buying restrictions. Previously, the city limited local families to owning a maximum of two homes. Singles were limited to one. The new rules allow residents to buy an additional apartment in certain districts. Immigrant families with at least two children can buy two homes, instead of one.

China real estate Colliers.gif
Major Chinese cities simultaneously 'turn around' to rescue real estate. Photo: Colliers

The moves to loosen home buying conditions in several major cities in China come as Beijing signals a series of measures to rescue the real estate market after several years of crisis that has severely affected economic growth.

Previously, the Chinese government had just had a series of measures to rescue the economy, such as lowering lending rates for mortgages, considering buying back excess apartment supply...

China's Politburo agreed on September 26 to boost fiscal spending, stabilize the real estate market and be determined to achieve economic targets for 2024.

Bloomberg quoted a source as saying that China's Ministry of Finance plans to issue special government bonds worth several hundred billion dollars in 2024 to stimulate consumption and help local governments solve debt problems.

Earlier, the People's Bank of China (PBOC) cut the reserve requirement ratio (RRR) by 50 basis points, and cut the medium-term lending rate (MLF) and loan prime rate (LPR) by 20-30 basis points.

Real estate stocks rise sharply, will Chinese real estate recover soon?

The Hang Seng mainland property index rose 7% on September 30, extending the rally in the group of stocks. Last week, real estate prices rose more than 30%.

Many other groups of stocks also rose, contributing to the increase of 8.5% of the CSI 300 index of mainland China in the last trading session of September. This index had the strongest week of increase in 16 years (from September 23 to 27).

In the session of September 30, many stocks of real estate giants increased sharply such as Longfor Group Holdings (listed on the Hong Kong Stock Exchange) increased by 12.4%; Hang Lung Properties increased by 12.7%; China Vanke increased by 11.7%...

On CNBC , Allen Feng, managing director at research firm Rhodium Group, said that easing restrictions on home purchases could help boost property sales in first-tier cities - such as Beijing, Shanghai and Guangzhou.

Over the past four years, China's real estate and construction market has been in a serious crisis after the Beijing government took drastic measures to clean up weak businesses in the sector. Some corporations such as Evergrande and Country Garden went bankrupt.

However, real estate and construction account for more than 25% of China's GDP. Therefore, the impact on the world's second largest economy is very heavy. Many real estate-related industries are also struggling.

These signals of a “reversal” to rescue the real estate sector are considered rare. In addition to the real estate rescue policy, Beijing has also launched many solutions to stimulate the financial market.

However, what many people are concerned about is: after many years of crisis, can the Chinese real estate market recover quickly? Can a weak and exhausted body recover quickly?

In a share on CNBC, expert Allen Feng commented that similar measures to relax restrictions on housing purchases have been implemented in some other small cities in China, but have not been very effective.

The reason, according to Gary Ng - an economist from Natixis, is because of "high inventory levels".

In fact, the collapse of the Chinese real estate market over the past few years has caused many negative consequences. The reason is that the Beijing government is concerned about the rapid development of large real estate corporations, the shocking increase in debt ratios and the emergence of a housing oversupply.

However, many experts commented that the conclusion of oversupply of housing in China is not entirely correct. In big cities, even when the real estate crisis occurred, many types of real estate products still increased in price. The shortage of apartments for people in first-tier cities still occurred. People had to live in cramped apartments, one bedroom for the whole family.

The phenomenon of overpopulation mentioned is probably mainly in areas far from big cities, lacking schools, hospitals, jobs, etc. Chinese real estate developers may have borrowed a lot and invested too quickly in places that are not qualified to attract people to live.

Leaders continue to sell shares in the context of automobile businesses facing difficulties in the luxury car business but recording positive signals thanks to selling cheap Chinese cars.