As we progress through 2024, the real estate sector is displaying signs of a mild recoveryNevertheless, the market is still navigating through an adjustment cycleWith ongoing refinements to regulatory policies, some cities are witnessing a revitalization in their real estate marketsThis rejuvenation has translated to an uptick in activity, as buyers exhibit increased enthusiasm toward property viewings and transaction volumes riseThe effects of these policies are continuing to unfold, and looking ahead, the implementation of these measures, aimed to reduce inventory and stabilize the market, should further foster a balanced and healthy growth within the real estate sector.

The adjustment in credit policies for real estate has injected much-needed momentum into the marketOn May 17, the People's Bank of China announced significant adjustments to three key real estate-related policies

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By lowering the minimum down payment for housing loans by 5% and eliminating the nationwide floor on mortgage interest rates, coupled with a reduction in the interest rate for housing provident fund loans by 0.25%, the government effectively eased the financial burden on prospective homebuyersThese adjustments have not only alleviated the initial costs of purchasing a home but have also encouraged consumption in the housing market, leading buyers to transition from a wait-and-see approach to actively making purchasesMany are now opting for larger homes instead of the smaller units they previously considered.

Cities across the nation are actively revising their real estate control policies, which in turn is reviving buyer interestVarious municipalities have adjusted their purchase restrictions, often employing more targeted and regionally differentiated measuresMany local governments have reduced the social security requirements for non-residents, enabling greater access to homeownership

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Additionally, some cities have rolled out initiatives to assist families with multiple children in purchasing homes, either by granting them an additional buying qualification or by easing the identification criteria for first-time home purchases in an effort to mitigate the financial load these families faceFurthermore, numerous cities have introduced incentives such as buyer subsidies and exchange programs for older homes to invigorate the market.

Consequently, there are indications of heightened enthusiasm in certain local real estate markets, with noticeable positive shifts observedBy June, confidence among buyers in the new housing market had begun to recoverThe trend of ‘trading price for volume’ in the secondary housing market indicates a stronger overall performance, particularly when compared to newly constructed homesMajor first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, along with a few other hotspot locations, have shown marked improvements in market activity compared to lower-tier cities

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Data from the National Bureau of Statistics reveals that the sales volume and area of newly started residential projects have experienced a slower decline from January to May compared to previous monthsAccording to the China Index Academy, the prices of new homes in 100 cities saw a slight month-on-month increase of 0.15% in June, spurred by better-performing renovation projects hitting the marketThe average weekly transaction figures for second-hand homes in key cities have jumped by 14.5% compared to May.

The commitment to ensuring the completion of residential projects is now a top priority in stabilizing the real estate marketEnsuring project completion is essential for fostering a reliable and healthy real estate climateVarious regions are categorically addressing under-construction, sold but undelivered housing projects to manage the potential risks of unfinished developments, thereby ensuring that consumers receive their entitled properties as per contractual agreements

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This commitment to project completion is vital to instilling confidence among buyers considering new residential properties.

Moreover, cities have established a coordinated financing mechanism aimed at meeting the legitimate financial needs of real estate projects, significantly alleviating funding pressuresInitiated in January 2024, this mechanism has been pivotal in addressing funding difficulties faced by real estate developersPresently, 297 cities across the country have adopted this coordinated financing structure to oversee the completion of housing projectsThe mechanism has been effective in its role, ensuring compliance with designated projects while encouraging financial institutions to provide necessary loans for eligible projectsMany developers have reported that this coordinated effort has been instrumental in easing their financial burdens.

Additionally, government bodies are working diligently to facilitate the absorption of existing inventory by purchasing unsold homes for use as affordable housing

The People's Bank of China has allocated a substantial 300 billion yuan for re-lending targeted at affordable housing projects, incentivizing major banks to lend to local state-owned enterprises nominated by city governmentsThis initiative aims to acquire completed but unsold properties at reasonable prices to boost the availability of affordable housingIt simultaneously aids in reducing existing inventory and supports the completion of housing projects, enabling developers to regain funds through sales to continue their ongoing developments.

Despite these optimistic developments, it's crucial to maintain a rational perspective regarding the ongoing adjustments in China’s real estate marketData from the first five months indicates a downturn in overall real estate investment, with decreases of 10.1% in development investments, 24.2% in new construction area, and a 20.3% decline in sales area, alongside a 27.9% drop in sales revenue

Nevertheless, this adjustment period should be viewed positively, as it helps to foster the establishment of a new model for real estate development, focusing on improved quality and service provision, ultimately striving for high-quality growthThe future of China’s real estate market remains supported by the continuous rise in living standards and ongoing urbanization, suggesting a sustained demand both for upgraded housing and essential accommodations.

Interestingly, within this phase of adjustment, some premium housing properties have experienced steady prices, reflecting an increasing consumer demand for quality homesWhether updating existing housing stock or constructing new properties, there is a pressing need to improve the quality offeredReal estate companies should seize the opportunity to transform and upgrade their offerings, contributing to a higher quality of life for the community and discovering broader avenues for growth in a competitive market environment.