Investors and policy watchers were looking at last week’s meetings of China’s national legislature and top political advisory body – also known as the “two sessions” – for signals on whether Beijing will advance efforts to reshape the country’s embattled property sector.
Calls to “accelerate the development of a new model for real estate” had featured prominently in government work reports delivered at recent local-level “two sessions” across provinces and cities, according to research compiled by the China Index Academy.
The think tank said its review of local policy priorities offered an early indication of the themes likely to surface at this year’s national meetings.
The proposed shift – first raised two years ago – marks a departure from the traditional “high debt, high leverage, high turnover” model that fuelled two decades of rapid expansion but left developers dangerously exposed when liquidity tightened.
Instead, officials were signalling a more sustainable, “dual-track” system that emphasised higher-quality commercial housing alongside a larger role for government-backed affordable homes, analysts said, citing statements issued after high-level policy meetings.
“The commercial market focuses on higher-quality new homes with largely market-determined prices, while government-backed affordable housing provides for basic demand,” said Xing Zhaopeng, senior China strategist at ANZ.
The shift comes as China’s property sector enters its fifth year of contraction.
Falling sales and prices have dragged down developers from China Evergrande Group to Country Garden Holdings, while even China Vanke – long viewed as one of the sector’s more financially resilient names – has come under pressure from rising debt and refinancing strains.
In February, the country’s top 100 developers sold homes worth 123.4 billion yuan (US$18 billion), down 34 per cent from a year earlier, according to China Real Estate Information Corporation. Vanke’s contracted sales fell 57 per cent in the same month.
The property slump has rippled across the broader economy, weighing on employment, local government finances and household wealth.
With real estate long serving as a primary store of value and source of household wealth for Chinese families, prolonged price declines have dampened consumption at a time when Beijing is trying to boost domestic demand to support growth.
At December’s central economic work conference – which typically sets the tone for the next year’s monetary and fiscal policy – high-level officials pledged to support local governments in purchasing unsold commercial housing for use as affordable units, resettlement housing and dormitories, a move aimed at reducing excess inventory while expanding social housing supply.
Twenty-two of mainland China’s 31 provincial-level regions have since emphasised efforts to revitalise existing housing stock, with many planning to convert commercial units into affordable housing, schools or hospitals, according to China Index Academy.
At least seven regions, including Shanghai and Guangdong province, said they would strive to develop “good homes” and improve property services, signalling a shift towards higher-quality development.
Risk prevention had dominated property policy in recent years, Xing said, as authorities sought to contain financial contagion from developer defaults.
With major risks now largely exposed, “the focus can shift to the new development model”, he added, citing China Vanke’s recent struggle with rising debt.
However, analysts cautioned that sweeping stimulus measures were unlikely. While some experts have called for more forceful intervention to arrest the downturn, expectations for a full-scale rescue remained low.
On the first day of the year, Qiushi, the Communist Party’s flagship ideological journal, urged “all-out efforts” to stabilise the sector.
“Housing prices directly affect people’s interests,” it said.
Twenty-one regions have lowered their gross domestic product growth targets this year, while nine, including Beijing and Shanghai, have kept them unchanged. Jiangxi was the only province to raise its target.
Analysts widely expected that Beijing would also lower the national growth target this year.
A Nomura report published on Monday said the “two sessions” would likely continue to target city-specific policies. So far, 16 regions said they would lay out their property-related policies based on local conditions.
“However, local easing measures are far from sufficient to stabilise the national housing market, in our view,” the report said. -- SOUTH CHINA MORNING POST
