Zhengzhou lifts price restrictions; permits developers to set prices

02 Aug 2024 CW Team

Zhengzhou, a central city in China, has lifted restrictions on ceiling and floor prices for new home sales, according to a notice from the city's housing regulator. This change means developers can now set their own prices for new homes, potentially leading to further declines in house prices and adding pressure to homeowners and China's already struggling property sector. "The housing regulator no longer guides the sales price of new homes, and developers set their own prices for sales," stated the regulator's notice. This move follows similar actions in other cities such as Shenyang in the northeast and Lanzhou in the northwest earlier this year. Ma Hong, Senior Analyst, GDDCE Research Institution in Shanghai, anticipates that more cities in China will relax property market restrictions in the future. This is likely to result in further short-term drops in property prices as developers may reduce prices to clear inventory. While falling house prices could reduce homeowners' wealth, Ma believes the impact on home purchases will be limited. "Homebuyers' confidence is weak as they are concerned that new homes will not be delivered in a timely manner," he said. China's property sector, once accounting for a quarter of the world's second-largest economy, has been in decline since 2021. Efforts to reduce high leverage have led to numerous bond defaults and left many presold homes unfinished. During a recent meeting of the Communist Party's Central Committee, led by President Xi Jinping, Chinese leaders emphasised giving cities the autonomy to regulate the real estate market and to cancel or reduce housing purchase restrictions. The leaders also pledged to support the completion of unfinished projects and to convert unsold apartments into affordable housing. Goldman Sachs, in a research note, projected further reductions in mortgage rates in China, along with increased government funding and operational streamlining for inventory destocking. However, Ma cautioned that without significant additional stimulus to ease the liquidity of real estate companies, the overall real estate situation would remain challenging. (Source:ET)

Zhengzhou, a central city in China, has lifted restrictions on ceiling and floor prices for new home sales, according to a notice from the city's housing regulator. This change means developers can now set their own prices for new homes, potentially leading to further declines in house prices and adding pressure to homeowners and China's already struggling property sector. The housing regulator no longer guides the sales price of new homes, and developers set their own prices for sales, stated the regulator's notice. This move follows similar actions in other cities such as Shenyang in the northeast and Lanzhou in the northwest earlier this year. Ma Hong, Senior Analyst, GDDCE Research Institution in Shanghai, anticipates that more cities in China will relax property market restrictions in the future. This is likely to result in further short-term drops in property prices as developers may reduce prices to clear inventory. While falling house prices could reduce homeowners' wealth, Ma believes the impact on home purchases will be limited. Homebuyers' confidence is weak as they are concerned that new homes will not be delivered in a timely manner, he said. China's property sector, once accounting for a quarter of the world's second-largest economy, has been in decline since 2021. Efforts to reduce high leverage have led to numerous bond defaults and left many presold homes unfinished. During a recent meeting of the Communist Party's Central Committee, led by President Xi Jinping, Chinese leaders emphasised giving cities the autonomy to regulate the real estate market and to cancel or reduce housing purchase restrictions. The leaders also pledged to support the completion of unfinished projects and to convert unsold apartments into affordable housing. Goldman Sachs, in a research note, projected further reductions in mortgage rates in China, along with increased government funding and operational streamlining for inventory destocking. However, Ma cautioned that without significant additional stimulus to ease the liquidity of real estate companies, the overall real estate situation would remain challenging. (Source:ET)

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