MNI: China To Assess Housing Stimulus On Q1 Performance

Authorities in China are expected to assess the need for substantial property market stimulus after Q1, following recent signals in high-level government reports, although local governments are likely to remain constrained by funding gaps and potential spillover effects on surrounding cities, advisors and analysts told MNI.

Officials are likely to review Q1 economic and property data before deciding on the scale of intervention, which could include reducing the downpayment ratio for second homes, currently above 25% in many first- and second-tier cities, said Xie Yifeng, dean of the China Urban Real Estate Research Institute. Policymakers also have room to lower mortgage rates, still above 3%, cut homebuyer tax costs and offer additional individual income tax deductions, he added.

Su Jian, professor of economics at the School of Economics and the director of the National Center for Economic Research at Peking University, said stronger stimulus measures were anticipated after the party journal Qiushi called for policies "aligned with market expectations and rolled out with sufficient force in one go, rather than piecemeal steps". 

While the article urged the removal of restrictive measures that hinder basic and upgraded living requirements, Su said first-tier cities such as Beijing, Shanghai, and Shenzhen are unlikely to drop social security and tax thresholds for non-local buyers, due to a “siphon effect” that could divert demand from nearby cities. The cities could, however, lift caps on homeownership volume.

STRUCTURAL FACTORS

Looking ahead, continuous population inflows and a structural shortage of affordable and upgraded housing may support demand in major cities, said Su. The China Index Academy data showed new home prices in 100 key cities bucked the trend and rose slightly by 2.58% in 2025 due to less new supply amid a significant decrease in construction starts and land transactions. But, in lower-tier markets, oversupply could push prices below construction costs, Su noted.

With 300 million new urban residents expected to settle in big cities, he said household registration reforms will be key to unlocking demand, including equal access to public services for migrant workers. Policymakers must also raise incomes and expand employment, especially as many residents remain reluctant to take on more debt, while encouraging childbirth is increasingly critical amid the property downturn that has coincided with rapid population aging since 2021.

DESTOCKING MEASURES

The China Index Academy estimates new home sales area and revenue will decline by 6.2% and 6.8% year-on-year in 2026, an improvement from the 7.8% and 11.1% drops recorded in the first 11 months of 2025. While sales remain about 50% below their 2021 peak, policymakers now have clearer visibility on the scale of adjustment required.

Following the Central Economic Work Conference (CEWC)'s call to control new supply and reduce inventory, Xie said local governments should accelerate purchases of unsold homes for affordable housing programs and advance urban renewal projects. These measures would absorb excess stock, improve living standards, and support long-term urban development. 

Stronger financial backing will be essential, with the central government's budgetary investment and ultra-long-term special treasury bonds directed to eligible projects, Xie suggested. At the local level, authorities could expand the use of special-purpose bonds and access policy bank loans, while the People’s Bank of China could increase pledged supplementary lending to help policy banks extend credit to qualified projects, he added.

Yan Yuejin, vice president at the E-House China Research and Development Institute, said local governments are taking a cautious but pragmatic approach to regulatory easing, balancing sustainability with supervision. Although the CEWC mentioned reforming the housing provident fund for the first time in a decade, some officials remain concerned that looser withdrawal rules – for example, allowing funds for second-home purchases – could be misused. Still, the renewed focus signals policymakers’ willingness to explore more flexible and targeted tools. (See MNI: China To Target City Specific Near-term Housing Stimulus)