China’s real estate sector has faced significant challenges in recent times, grappling with substantial debt, waning demand, and declining prices. Two of the nation’s largest real estate companies, Evergrande and Country Garden, have encountered severe financial difficulties, with Evergrande declaring bankruptcy and Country Garden teetering on the brink of default.
The pivotal role of real estate in China’s economy cannot be overstated. The sector contributes approximately 30% to the nation’s GDP, a significant increase from about 10% in 2000. Real estate also serves as primary collateral for loans, and land sales are a crucial revenue source for local governments. Moreover, real estate accounts for nearly two-thirds of household wealth in China.
Recognizing the critical need to stabilize the real estate market without distorting market mechanisms, China’s leadership has introduced a series of targeted measures. These initiatives aim to address residents’ housing needs and promote the healthy development of the sector.
Key measures include:
- Increasing Affordable Housing: Efforts are underway to expand the availability of affordable housing to meet the diverse needs of residents.
- Transforming Urban Villages: The redevelopment of urban villages is being accelerated to improve living conditions and optimize land use.
- Constructing Public Infrastructure: Investment in public infrastructure that serves both leisure and emergency purposes is being prioritized.
- Revitalizing Idle Properties: Initiatives are in place to bring various types of idle properties back into productive use.
In a significant policy shift, borrowers with existing personal housing loans for first homes can apply to their lending financial institutions for replacement loans with lower interest rates. Additionally, for 2024 and 2025, taxpayers who sell their homes and purchase new ones within a year will receive a tax refund on the personal income tax paid from the sale.
Several cities are implementing localized policies to stimulate the housing market:
- Shenzhen has relaxed strict limits on home purchases, rolling back measures that were initially set to curb speculation. The city has also eased homebuying eligibility criteria for certain non-residents and individuals who are divorced.
- First-tier cities like Beijing, Shanghai, and Guangzhou, as well as provincial capitals such as Haikou, Wuhan, and Xi’an, now offer first-time buyer mortgage benefits to individuals regardless of previous home ownership.
- Jilin Province has introduced incentives to encourage farmers to purchase homes in towns and cities, promoting urbanization and economic growth.
These measures reflect a broader vision to establish a new development model for China’s real estate industry. While the government continues to focus on improving people’s lives through affordable housing and enhanced public services, it remains vigilant, monitoring the market closely and adjusting policies as needed to ensure sustainable growth.
Reference(s):
cgtn.com
