Chinese Cities Lift Home Buying Restrictions to Boost Real Estate Sector and Economic Growth

Two major Chinese cities, Hangzhou and Xi’an, have eliminated all remaining restrictions on home buying in a bid to revitalize the struggling real estate sector and promote economic growth in the world’s second-largest economy. This move follows similar actions taken by other cities, including Chengdu and Changsha, in recent weeks. These decisions come amidst a broader effort by the Chinese government to address the ongoing property crisis, which began in 2020 when authorities clamped down on developer debt levels in response to mounting financial risks. The crackdown ultimately led to the bankruptcy of Evergrande, formerly the country’s second-largest homebuilder, and the suspension of construction projects at several other major firms. While policymakers have implemented a range of measures aimed at resolving the issue, including mortgage rate cuts and laxer home purchase restrictions, these efforts have thus far failed to significantly enhance demand. Indeed, a recent UBS survey found that Chinese citizens’ intentions to buy a home over the next two years have remained unchanged at 23%. However, a larger proportion (47%) of respondents reported that they had no plans to acquire property, representing an all-time high. In terms of what could potentially boost consumer confidence, the study highlighted income growth and policy initiatives, such as reduced mortgage rates and government subsidies, as key drivers. Some analysts predict that the government may soon allow local authorities to purchase vacant properties as part of a wider strategy to alleviate the housing crisis. This proposal was first discussed at the April Politburo meeting, where officials emphasized the importance of reducing existing housing inventory through “city-specific” policies.