MNI: China's Improved Property Market Reduces Stimulus Need

Beijing is unlikely to roll out major additional property stimulus in the near term amid improving recent data, though cities will continue to introduce incremental support to sustain the March seasonal sales rebound, giving policymakers space to pursue longer-term reforms, advisors and analysts told MNI. 

Real estate slipped from sixth to tenth among priorities in this year’s Government Work Report, noted Xie Yifeng, dean of the China Urban Real Estate Research Institute, signalling easing sector risks following a prolonged correction. The urgency for broad-based, large-scale stimulus has diminished, he said, aligning with the government’s lower GDP growth target of 4.5-5% for the year. (See MNI INTERVIEW: China Would Accept Lower Growth If Yuan Strong)

This should allow more room for structural reforms, including better utilisation of the roughly CNY10 trillion housing provident fund pool and efforts to advance a new development model for the sector, said Xie. He also highlighted new proposals in the Report to expand housing support for newly married couples and families with their first child, reflecting a policy shift tied to demographic trends.

Yan Yuejin, vice president at the E-House China Research and Development Institute, said support for these groups could be strengthened through higher provident fund borrowing limits, lower down payments and preferential mortgage rates, alongside dedicated quotas in public rental housing. The market’s adjustment phase is nearing its end, Yan added, with housing inventory appearing close to a turning point, while prices begin to recover.

By end-February, the year-on-year increase in unsold residential floor space had slowed to 0.1%, the lowest in nearly five years. At the same time, new home prices across 70 major cities recorded narrowing month-on-month declines for four consecutive months, with first-tier cities leading the rebound and returning to growth after a nine-month downturn, he said.

MARCH BOOM

Housing activity across major cities is expected to remain firm in April, supported by relatively attractive pricing, supportive policies and improving turnover between new and secondhand homes, said Li Yujia, chief research fellow at the Guangdong Urban & Rural Planning and Design Institute. He noted that a March rebound — mainly driven by stronger secondhand housing activity — has helped reinforce momentum.

Established home prices have broadly corrected to 2015-2018 levels, while earlier easing measures, including lower downpayment requirements, mortgage rates and transaction taxes, have helped unlock demand, particularly among first-time buyers, Li said. Momentum was especially strong in March, with secondhand housing transactions in Shanghai, Shenzhen and Guangzhou rising by an average 24.1%, 57.5% and 30.2% week on week, respectively, over the first three weeks.

Li added that the pickup in resale activity is supporting upgrade demand, feeding through to stronger new home sales, together with increased fresh project launches in April. 

LOCAL SUPPORT

However, sustaining momentum will require stronger local policy support. Authorities should allow more flexible use of housing provident funds — including facilitating inter-city transfers — while increasing subsidies and further streamlining secondhand transactions to improve market liquidity, he said.

Xie expects Beijing, Shanghai and Shenzhen to ease purchase restrictions further in non-core areas alongside reduced social security contribution requirements and an increase to the ownership cap in core districts. Additional cuts to mortgage downpayments, borrowing costs, and transaction taxes and fees are also likely, he said. Xie also called for higher income tax deductions for homebuyers and broader loan interest subsidies from local governments.