China's new real estate model to be built on three major projects

China is to promote a new real estate development model based on “three major projects”: building affordable housing, renovating urban villages and constructing emergency public facilities. Some analysts are also calling for all real estate restrictions to be lifted for buyers and sellers, and the government bailing out certain property developers in the midst of a liquidity crisis. China’s Housing Minister Ni Hong said that while the country’s real estate market is in a period of transformation that is fraught with difficulties, the foundation exists for sustainable development. “The old development model that pursued speed and quantity no longer suits the new requirements of high-quality development, and a new development model is urgently needed,” he said in an interview with the People’s Daily. “Building a new model of real estate development is a fundamental strategy to solve current problems and promote the stable and healthy development of the real estate market,” Ni added.

Proposed during the twice-a-decade central financial work conference last month, the reworked model is based on the concept of “houses are for living in, not for speculation”, Ni said. The phrase was first used by President Xi Jinping a few years ago and had frequently been cited in property-related policies before this year, until there was no mention of it during a Politburo meeting in July. Analysts speculated that the unexplained omission pointed to a pro-growth shift in the sector. Relaxing measures, including reducing downpayments and scrapping the requirement of “no mortgage records” for identifying “first-home buyers”, have been implemented since the meeting. But despite rounds of stimulus, the property market has remained lackluster, with transaction volumes in major cities subdued. In terms of new affordable housing, Ni said the plan will focus on meeting the rising demands of urban migrants and young people. In urban villages – overcrowded village-style neighborhoods surrounded by skyscrapers in major cities – efforts will revolve around eliminating potential safety hazards and improving the living conditions of residents.

Tao Ran, Professor at the School of Humanities and Social Science at the Chinese University of Hong Kong (Shenzhen), said that while expanding the housing supply in cities with population inflows is a step in the right direction, such projects will face hurdles in implementation and are not a panacea for China’s property sector. “For example, a local government may lack the motivation to promote affordable housing projects, as this would mean a decrease in land-sale revenue,” Tao said. The key problem currently facing the Chinese property market, Tao said, is the general lack of confidence that is deterring people from buying new homes. “The real estate market needs to be rescued as soon as possible,” he added. “All restrictions on property-related purchases, prices and loans, as well as financing constraints on developers, should be lifted,” as reported by the South China Morning Post.