China is weighing the removal of major restrictions on home purchases in its largest cities, including Beijing and Shanghai, in a bid to revive its slumping housing market, according to sources familiar with the matter.
Regulators are discussing proposals that would allow non-local buyers—those without a Hukou residence permit—to purchase homes in mega cities. This relaxation would remove a significant barrier that many smaller cities have already lifted, the sources said. The government is also considering eliminating the distinction between first- and second-home purchases, potentially enabling lower down payments and reduced mortgage rates for second-home buyers.
Policymakers are under pressure to reverse a housing slump that has now dragged into its fourth year, slowing China's economy and leaving millions unemployed. Several financial institutions, including UBS Group AG and Bank of America Corp, predict China will miss its 5% growth target for this year.
Additionally, Chinese authorities are contemplating new measures to support the stock market, which has seen the CSI 300 Index fall by almost 7% this year, making it one of the world’s worst performers.
Despite a series of efforts aimed at bolstering the housing market, the real estate crisis continues to deepen, with home sales and prices both declining further in August. Buyers are increasingly holding out for lower prices as previous loosened policies have failed to reignite demand.
Local authorities have been granted more flexibility to devise strategies to stabilize the market, with China’s State Council urging officials to keep formulating new policies to absorb existing housing stock. One of these measures included a lowering of down-payment requirements, part of a broader package introduced in May.
The government is also exploring ways to reduce borrowing costs, including plans to allow homeowners to refinance US$5.4 trillion worth of mortgages, with some banks expected to cut rates soon.
Easing restrictions in top-tier cities, particularly for non-locals, carries some risk. It could pull demand away from lower-tier cities and exacerbate economic imbalances within the country. Historically, the Hukou system has been a key tool for controlling property prices and regulating population flows.
However, some cities, including Shanghai, have already eased certain requirements. In May, Shanghai reduced the period of individual tax payments needed for non-locals to purchase a home from five years to three. Beijing and Shenzhen, however, maintained the ban on non-locals when introducing other housing support measures earlier this year.
The Beijing municipal government is also reportedly planning to remove the distinction between ordinary and luxury homes at an appropriate time, signaling further potential shifts in policy.
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