Rosalind Evans
China’s housing ministry has declared intentions to simplify the property acquisition process for citizens.
This announcement made late on Thursday, highlights how the various tiers of government have begun to take action just days after Beijing indicated a departure from its campaign against real estate speculation.
Proposed initiatives encompass easing the acquisition limitations for those looking to purchase a second home and lowering down payment ratios for individuals buying their first home, per an article published on the Ministry of Housing and Urban-Rural Development’s website.
Previously, to curb speculation in its extensive property market, China had made purchasing a second home considerably more challenging.
For a second home, mortgage rates can be a whole percentage point higher than for the first purchase, and down payment ratios for a second property can shoot up to 70% or 80% in larger cities, according to Natixis.
The housing ministry’s article referred to Minister Ni Hong’s remarks during a recent gathering with eight state-owned and non-state-owned construction and real estate firms.
As it was a central government ministry-level meeting, individual city policies were not addressed, said Bruce Pang, chief economist and head of research for Greater China at JLL.
However, Pang anticipates that Beijing will encourage local governments to roll out real estate policy amendments that cater to their specific conditions. Pang also highlighted that the inclusion of construction firms in the meeting underscores their role in fostering investment and stabilizing growth.
Awaiting Further Details
China has not formally disclosed measures for supporting real estate yet. Nevertheless, top-level leaders signalled a shift towards prioritizing housing demand over supply.
China’s State Taxation Administration has proposed “guidelines” for exempting or lowering housing-related taxes. However, how this would be implemented for home buyers remains unclear.
The briefing of Monday’s Politburo meeting also omitted the catchphrase “houses are for living in, not speculation,” which has been a cornerstone of Beijing’s strict stance and attempts to curb developers’ heavy reliance on debt for expansion.
Jizhou Dong, China property research analyst at Nomura, noted on Friday, “It seems to us that [the housing ministry] is quick in response this time and also gets bolder on relaxing property policies.”
Due to such promptness, Dong believes markets are bracing for specific policy implementations in cities such as Shanghai or Guangzhou.
On Friday, Hong Kong-traded Chinese property stocks such as Longfor, Country Garden, and Greentown China traded higher, set to conclude the week with gains after a sharp drop on Monday due to debt concerns.
“We continue to anticipate the property sector rally to continue and advise investors to concentrate on beta names within the property sector,” Dong from Nomura added.
Stocks such as U.S.-listed Ke Holdings and Hong Kong-listed Longfor, and China Overseas Land and Investment were highlighted in the report, with Nomura issuing a “buy” rating on all three.
“We continue to advise investors to steer clear of weaker privately-owned developers.”
In a nutshell, China’s housing ministry appears to be adopting a more proactive stance toward supporting the real estate sector. These potential policy changes suggest a shift in focus, aiming to ease property purchase restrictions and bolster the market. This could lead to positive events for key real estate stocks, as investors are recommended to watch strong performers. However, caution is advised when considering investments in weaker privately-owned developers.
