Chinese Cities Easing Home-Buying Restrictions to Boost Property Sales

China’s cities, including Suzhou and Shanghai, are easing home-buying restrictions to stimulate property sales and address the ongoing trouble in the real estate sector. 

Suzhou has completely lifted home-buying restrictions, while Shanghai now allows single non-residents to purchase homes in specific areas. 

This follows a similar move by Guangzhou last week. The Chinese government aims to support the distressed property market through various measures, including improved access to cash for developers and relaxed home mortgage rates.

Background on Property Market Challenges:

China’s property market, once a key economic driver, has faced a liquidity crisis since 2021, leading to debt payment delays and defaults by many developers. 

Policymakers introduced support measures to stabilize the sector, but the market recorded the worst declines in new home prices in nearly nine years in 2023. 

The Evergrande Group, one of the largest developers, was ordered to be liquidated, adding pressure to the property market.

Remaining Cities with Purchase Restrictions:

While Suzhou and Shanghai ease restrictions, some cities, including Beijing, Hangzhou, and Hainan province, still maintain purchase restrictions in certain areas. 

The move to relax regulations aligns with a housing regulator statement, emphasizing local autonomy in real estate regulation. 

Experts anticipate additional large second-tier cities to eliminate housing purchase restrictions.

Analysts’ Outlook and S&P Global Ratings Commentary:

Analysts at S&P Global Ratings believe China’s property market is on an extended L-shaped recovery, with national sales expected to decrease by 5% in 2024. 

They note that the Evergrande Liquidation could increase subordination risk in China’s property bonds but has a limited impact on the physical market. 

The property market’s challenges continue to shape government policies and local adjustments.