China signals more flexible real estate policy

The Central Committee of the Communist Party of China made reviving the country’s struggling real estate market one of the key goals of a policy document released on Sunday to mark the end of a key political meeting.

The third plenary meeting of the Party Central Committee brought together more than 360 top party leaders to discuss the country’s long-term political program.

The four-day meeting, chaired by Chinese President Xi Jinping, ended on July 18 and a few days later a resolution was released on further deepening reforms and accelerating China’s modernization.

The resolution covers the Party’s long-term plans in a wide range of areas, including politics and national security. But economic reform is a particular priority as the Party seeks to get the country’s real estate market back on track.

China’s real estate sector has suffered in recent years, with a developer-debt crisis shaking market confidence and leading to a decline in land and home sales.

To remedy the situation, Party leaders plan to reform the real estate sector by giving city governments “greater decision-making powers” ​​to regulate local markets.

“Depending on local conditions, some cities will be able to lift or ease restrictions on the purchase of apartments and lower the appropriate standards for standard and non-standard apartments,” the resolution stated.

In China, the government classifies residential properties as either “ordinary” housing or “extraordinary” housing, such as mansions or luxury apartments. These extraordinary properties typically come with higher taxes, down payment thresholds, and stricter loan repayment requirements.

Some experts welcomed the prospect of greater flexibility in real estate policies, saying it would provide a boost to market demand. “The orientation of the real estate industry is very clear, namely solving problems that concern people, such as home purchases, property prices and so on,” Yan Yuejin, research director at the E-House R&D Institute in Shanghai, told Sixth Tone.

Abolishing the division into ordinary and extraordinary properties would encourage consumers to upgrade their homes by reducing transaction fees and taxes, said Wang Yeqiang, a researcher at the Chinese Academy of Social Sciences.

Li Yujia, a senior researcher at the Guangdong Housing Policy Research Center, told domestic media that empowering municipal governments would make regulation more effective, given the huge differences in economic conditions between different regions.

“Regulatory authority is devolved to local governments, as is the responsibility for stabilizing the real estate market,” Li said. “In the current context of urban diversity, regional diversity and diverse buyer demographics, local governments need to have the autonomy to implement city-specific policies to manage the real estate market well.”

Experts speculate that the resolution’s reference to authorizing local governments to set housing policy could signal a further easing of restrictions on home purchases previously used to curb speculation.

“This announcement is in line with the real estate policy adjustments and optimizations made in various places this year,” Yan said. “At the same time, it is also a response to the changing nature of housing demand.”

In the first half of 2024, more than 200 local governments in China introduced a total of 341 policies to stimulate housing demand, according to CRIC, a domestic real estate consultancy.

Shanghai was one of several cities to ease a range of restrictions on home purchases, including lowering minimum down payment thresholds, after the People’s Bank of China authorised local authorities to do so in May.

In addition to housing reform, the resolution also focused on reforms to help China adapt to a rapidly aging society, including a pledge to gradually raise the statutory retirement age.

Chinese workers typically retire at the current retirement age, which is 60 for men, 55 for women in white-collar jobs, or 50 for women working in factories.

However, the resolution’s reference to a pension policy based on “the principle of voluntary participation with appropriate flexibility” indicates that workers will be able to work longer in future if they wish.

“This is great news. The current retirement policy does not give workers any choice. ‘Voluntary’ respects an individual’s ability to work and professional status,” Yang Yansui, a professor of health management at Tsinghua University, told domestic media.

The goals of the next stage of reform set out in the document are expected to be achieved by 2029, the 80th anniversary of the founding of the People’s Republic of China.

(Header Graphic: VCG)