A package of measures are to be implemented to shift home sales in China’s vast property market away from a pre-sales model. A notice to local governments, jointly issued by the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the National Financial Regulatory Administration (NFRA), instructed them to prioritize completed-home sales. Two other documents released the same day dealt with property sector financing. The central bank and the NFRA set out new rules on development loans, while the securities regulator said it would support listed developers in mergers and restructurings. “The policies are stronger than what the market expected,” said Zhang Zhiwei, President and Chief Economist at Pinpoint Asset Management.
China’s sluggish domestic demand was “to a large extent” caused by the troubled property sector, he said, adding that the measures suggested policymakers recognized the urgent need to stabilize the market. The housing notice called for the “vigorous and orderly” roll-out of completed-home sales. Projects on newly transferred land, as well as those on land already sold but without a construction planning permit, should prioritize the completed-home sales model, it said. Projects already holding permits were also encouraged to adopt it. Pre-sales will remain, but under tighter rules. Where they continue, individual buildings must be topped out before units can be sold, and buyers’ down payments, mortgage proceeds and other purchase funds must all be placed in supervised accounts.
To help developers deal with the funding pressures that come with the shift to completed-home sales, the notice also called for greater financing support and a lead-bank system for property projects, with one bank designated for each project to provide development loans or lead a lending syndicate. The central bank and the NFRA set out the terms, requiring development loans to match a project’s construction and sales cycle and to run no longer than five years for presale projects and seven years for completed-home and commercial projects. Mortgage loans will also be released later under the new rules: after a sale is registered for completed homes, and only after a project is registered as complete for pre-sold ones. Buyers would “get the home first, then repay the loan”, a central bank official said in comments published alongside the document. The maximum mortgage term was extended to 40 years from 30, the South China Morning Post reports.
