How have Beijing's stimulus measures impacted the Country's Real Estate Sector?

In recent months, the Chinese government has launched a series of economic stimulus measures targeted at the property sector, seeking to stabilize a fundamental pillar of the national economy. After years of restrictive policies to curb developer debt, Beijing authorities are now focused on renewing confidence in the market, incentivizing demand, and boosting prices to mitigate economic risks.

Government initiatives to support the property sector

Among the measures implemented are reductions in mortgage rates, lowered down payment requirements for first and second homes, and the removal of certain restrictions on property purchases for residents. The People's Bank of China has instructed banks to lower mortgage rates and reduce the down payment for second homes from 25% to 15%.

These interventions have already positively affected the markets. The Hang Seng Index, for example, saw a 9.1% increase following a 13% rise the previous week, marking the largest weekly growth in 26 years. Since the announcement of the stimulus package, the combined market value of stocks in Hong Kong, Shanghai, Shenzhen, and New York has surged by $3 trillion.

In Shenzhen, these measures have boosted confidence among both ordinary homebuyers and high-end investors, particularly among the city’s ultra-wealthy, many of whom already own luxury properties.

Presidential commitments and local policies

In response to the crisis, President Xi Jinping has reiterated the commitment to “stop the decline of the property market” and support stable recovery, alongside new mortgage rate cuts from the central bank. Major cities like Beijing, Shanghai, Guangzhou, and Shenzhen have introduced further easing measures:

• Beijing has lowered the minimum down payment for first homes from 20% to 15%, and for second homes from 30% to 20%. Early signs indicate a surge in interest: in the three days following the implementation of the new policies, property visits in Beijing rose by 92.5% compared to the previous year, and purchase agreements doubled.
• Other metropolises like Shanghai and Guangzhou have also adopted similar measures, reducing required down payments and easing purchase restrictions to stimulate the market.

Challenges to the recovery of the property sector

Despite these positive signals, the Chinese property sector is still grappling with a widespread crisis of confidence. Regulations introduced in 2020 to limit developer indebtedness have led to numerous defaults and a surplus of incomplete or unsold properties. This ongoing distrust weighs heavily on both buyers and investors, many of whom fear that purchased projects may remain unfinished.

Experts believe that current policies may help stabilize prices and boost demand in key cities. During the "Golden Week," for instance, many cities that implemented stimulus measures experienced a surge in visits to new projects, with some properties in Guangzhou recording a 200% increase in visits.

A temporary recovery or sustainable growth?

While there has been an uptick in sales in some tier-one cities, the overall impact on the national property market remains limited. To ensure a more robust recovery, many argue that additional interventions are necessary, including tax incentives and special funds to support local governments and stabilize prices. The Chinese Ministry of Finance may indeed introduce further measures to better balance supply and demand.

In summary, the initiatives from Beijing demonstrate the government's commitment to the property sector, but a broader strategy is required for long-term stabilization. Only by addressing excess inventory and completing unfinished projects can lasting trust be rebuilt among buyers and investors.

???Share

If you liked our newsletter and think it might interest your colleagues or friends, don't hesitate to share it with your network.

???Contact us

Does your business need to be reinvigorated? We at Value China can help you! You can contact our team directly from our LinkedIn page or our website.

_______________

Value China

Since 2019, we have supported the digital transformation of hundreds of companies operating in the Chinese market, adapting their digital approach to China. As a consultancy, research and marketing agency, we respond to all digital needs aimed at the Chinese market, differentiating ourselves through multi-sector expertise.

Follow us on social media

?? Linkedin Value China

?? Xiaohongshu @value_china