China Considers Easing Home Buying Restrictions to Boost Sluggish Real Estate Market
China's real estate sector has been struggling for four years, and policymakers are exploring new measures to revive it. The potential changes include lifting restrictions on non-local buyers in major cities and ending distinctions between first- and seco
China Real EstateHome Buying RestrictionsHukou SystemEconomic GrowthHousing MarketReal Estate NewsSep 20, 2024
This move is part of a broader effort by policymakers to reverse a housing slump that has persisted for four years, hampering China’s economic growth and leading to widespread job losses. The housing market downturn continues to weigh heavily on China’s economy, with real estate sales and prices continuing to slide in August despite a series of government measures aimed at stabilising the sector.
Economists at UBS Group AG and Bank of America Corp. now predict that China will miss its growth target of around 5 per cent for the year. In response, Beijing has granted local governments greater flexibility to implement policies that would absorb excess housing stock, and the central government is pushing to reduce borrowing costs.
This includes proposals to allow homeowners to refinance up to $5.4 trillion worth of mortgages, with some banks expected to roll out rate cuts soon. Until now, major cities like Shanghai and Beijing have largely refrained from relaxing housing restrictions for non-local buyers without Hukou permits unless they had paid income taxes and contributed to social security for several years.
However, easing home purchase restrictions in top-tier cities could create new economic imbalances by drawing demand away from smaller cities, experts warn. At the same time, Beijing is reportedly considering scrapping the distinction between ordinary and luxury homes, according to local media reports.The proposals would need approval from senior leaders and are subject to change, according to the sources. The potential changes are part of a broader effort to revive China's real estate sector, which has been struggling for four years.
UBS Group AG is a Swiss multinational investment bank and financial services company. Bank of America Corp. is an American multinational investment bank and financial services company.The Hukou system, a powerful tool for controlling population movements, limits access to housing, education, and medical services in major cities.
Frequently Asked Questions
What is the current state of China's real estate market?
China's real estate sector has been struggling for four years, with sales and prices continuing to slide despite government measures aimed at stabilising the sector.
What measures is China considering to boost its real estate market?
China is considering lifting restrictions on non-local buyers in major cities, ending distinctions between first- and second-home purchases, and allowing homeowners to refinance up to $5.4 trillion worth of mortgages.
What is the Hukou system and how does it affect home buying in China?
The Hukou system is a powerful tool for controlling population movements, and it limits access to housing, education, and medical services in major cities. Until now, major cities have largely refrained from relaxing housing restrictions for non-local buyers without Hukou permits.
What are the potential risks of easing home purchase restrictions in top-tier cities?
Easing home purchase restrictions in top-tier cities could create new economic imbalances by drawing demand away from smaller cities, experts warn.
What is the predicted impact of China's real estate market on its economic growth?
Economists predict that China will miss its growth target of around 5 per cent for the year due to the struggling real estate sector.
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