A plan to permit local governments to purchase property stock and increase the quantity of affordable housing has offered cities an option to curtail their property inventories, and is one of the major tasks recognized by the central government in the real estate sector, said industry experts.
During a teleconference on property policies held in Beijing on May 17, Chinese Vice-Premier He Lifeng urged local governments that have more housing inventories than others to purchase some of the stock for use as government-subsidized housing, according to a report by Xinhua News Agency.
“As the supply-side destocking policies gradually intensify, local State-owned enterprises have entered an accelerated phase of ‘purchasing and storing’ residential real estate, provided that funding sources are secured,” said Shaun Brodie, head of research on the China market at Cushman & Wakefield, a global real estate services firm.
Brodie added this trend is conducive to achieving a balance of supply and demand in the property market.
Experts said policies may be rolled out to suit each city and fight the tough battle of solving unfinished commercial housing.
“We will solidly advance key tasks such as guaranteeing housing delivery and digesting commercial housing stock,” He was quoted as saying at the meeting.
In cities where commercial housing inventories are comparatively large, local governments can place orders and purchase some of the commercial housing at reasonable prices to be used as affordable housing, He said.
Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution, said purchasing housing stock and changing that into affordable housing are in line with the tone-setting meeting of the Political Bureau of the Communist Party of China Central Committee held on April 30, which recognized digesting housing inventories and optimization of new demand as major tasks in the property sector.
“The innovative approach takes into consideration both the destocking of existing homes as well as the supply of affordable housing, which offers a new direction for local governments in dealing with their home inventories,” Yan added.
“As many as 8.7 million units (rooms) of rental housing are planned to be added during the 14th Five-Year Plan period (2021-25). Some 5.73 million units (rooms) had been available as of the end of 2023, which means there is still a gap of 2.97 million units (rooms) of rental housing in the coming two years,” said Chen Wenjing, director of research with the China Index Academy.
Transferring the home inventories into affordable housing will not only fulfill the national plan quickly, but also help curb unsold homes and promote the stabilization and recovery of the overall property market, Chen said.
In addition to acquiring existing housing stock, many cities have also implemented practices related to State-owned enterprises purchasing and storing unsold new homes for conversion into long-term rental housing.
“This will alleviate the current inventory pressure faced by the real estate market and will further improve affordability, which should lead to the creation of a more stable and sustainable residential real estate market,” Brodie added.
“There used to be a certain number of housing units developed without clear target consumers or appropriate purposes. Using this approach, these projects can be rearranged into either affordable housing or meeting inelastic home living requirements,” said Chen Sheng, president of China Real Estate Data Academy.
“The transaction and leasing processes will effectively activate capital flow in the property sector, promote market activities, and form a benign cycle in the market,” Chen said.