Property sector pivots toward national goals

Experts say real estate industry taking stock of implications of new decision

China's real estate industry is taking stock of the implications of the decisions taken at the July 30 meeting of the Political Bureau of the Communist Party of China Central Committee, and seeking to respond positively, experts said.

At the July 30 meeting, the top leadership stressed that as a long-term mechanism for the smooth functioning and healthy development of the property market is being established, an overall restructuring of the industry would be in order.

The meeting also stressed sticking to the principle of "houses are for living in, not for speculation," and stabilizing the prices of lands, homes and expectations. The larger goal is to promote the stable and sound development of the real estate market and accelerate the development of rental housing.

The reiteration of houses' foremost function shows the Chinese leadership's resolve not to make property a short-term economic stimulus tool but ensure it functions as a long-term ally of high-quality development, industry observers said.

To maintain continuity in the larger policy framework, new regulations or amendments to existing ones were announced more than 320 times since the beginning of this year. Some 46 of such announcements were from the ministry level of the central government, much higher than the 30 such announcements made during the same period of last year, according to data compiled by Centaline Property Agency Ltd.

For instance, the guideline issued by eight government departments, including the Ministry of Housing and Urban-Rural Development, laid emphasis on significantly improving the real estate market order in about three years from now.

In another instance, Vice-Premier Han Zheng urged further development of government-subsidized rental housing, identifying it as a key task in housing construction during the 14th Five-Year Plan period (2021-25).

These developments showed the central authorities' determination to stabilize land prices and home prices, maintain rational market expectations, and promote the stable and healthy development of the market.

The high frequency at which the need for market order is reaffirmed from the high level appears to suggest the authorities concerned are keen to consolidate existing achievements in regulating the market, and secure the long-term stability of the property market by protecting rational living demand, said Xu Xiaole, chief market analyst with the Beike Research Institute.

Thanks to the effective regulations taking effect in the first half, investment demand in hot spot cities was curbed, and irrational market expectations were dealt with, Xu said.

More than providing a guidance for the property market's development and regulating it in the second half of the year, the meeting also made it clear that the Chinese real estate market is currently being restructured and experiencing an in-depth reform. This should not be construed as suppression of the real estate industry, said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.

"To be more specific, the measures are clearly leading the direction of the sector's restructuring," said Yan. He also said the meeting highlighted extending support for the development of the rental housing sector through land and tax measures.

In the past few years, the property market has been characterized by rising home prices in hot spot Chinese cities, and rising need for rental housing among non-local sections of the population and the younger generation, Ren Zeping, chief economist at Soochow Securities, wrote in a report.

Owing to the humongous size of non-local sections of the populations in first- and second-tier cities, there is excess demand for rental housing.

In accordance with the central authorities' call for regulating and developing the rental housing market, it is necessary for cities with considerable non-local populations to formulate policies as per their distinct conditions.

The development of the rental housing market also needs various government wings to function in a coordinated way, in order to effectively implement measures relating to land, capital and taxes, Ren said.

China has been progressively promoting the development of rental housing, so as to solve the living problems for new residents and young people in cities. "We look forward to key cities gradually increasing land supply, particularly for leasing. We hope more favorable tax policies will come into effect, to ensure accelerated development of rental housing," said Chen Wenjing, deputy director of research with the China Index Academy.