China's property recovery gains traction as new policies take effect

China has recently rolled out a raft of new property policies covering the home-sales system, mortgage interest subsidies, and housing provident fund rules, aiming to further unlock housing demand.

On October 15, Hangzhou and Shenzhen announced new rules for commercial housing sales, joining Beijing, Shanghai, Guangzhou, Wuhan and Tianjin in rolling out similar measures.

The policies are supporting a recovery in China's property market.

During the National Day holiday, new home transactions in 25 key cities tracked by the China Index Academy, a real estate research institution, totaled 551,000 square meters, with average daily transaction volumes rising 33.8% year on year.

New housing sales system: A shift toward completed-home sales On August 28, China announced plans to gradually transition nationwide to a system centered on the sale of completed commercial housing.

The move is part of broader efforts to reform and improve real estate credit management and introduce new capital market rules to support a new model of real estate development.

Under the new rules, commercial housing projects with newly announced land transfers after August 28 will prioritize sales of completed homes.

Projects that obtained construction planning permits before that date will continue to follow the original pre-sale rules.

A lead bank mechanism is also introduced, wherein over a project's entire life cycle, all funds, including developer loans, equity funds and home-sale proceeds, must be channeled through accounts at the designated lead bank.

The core of the reform is to reallocate risk in China's property market — shifting delivery uncertainty from homebuyers to developers, reducing the sector's high leverage and forcing developers to rely on their own cash flow throughout the project cycle, Gao Yuansheng, deputy general manager of the China Index Academy's East China region, told 21st Century Business Herald.

The cities have raised pre-sale thresholds uniformly to structural topping-out of a single building, while supervision of ready-built home sales varies by city with deposit ratios for supervised accounts ranging from 1% to 5% and different filing requirements.

Demand boost: Mortgage subsidies, easier provident fund access Revised housing provident fund rules took effect on September 20.

Housing provident fund savings can since be withdrawn for new purposes under the revised regulations, including renovating the homes the contributors live in and paying property management fees for such homes.

These policy adjustments are lowering purchase barriers and easing buyers' financial burden, helping stabilize the property market, said Cai Zhen of the Chinese Academy of Social Sciences.