Shenzhen housing policy changes may spur demand

The new policy package for the technology hub of Shenzhen, Guangdong province, to ease its homebuying rules will be a significant step toward a more flexible and responsive approach to high-quality development of the property sector in China, experts said amid policies primarily focused on inventory reductions and stimulating demand, but also incorporating elements of social support and market revitalization.

"Since the previous policy adjustment by the city in July 2021, a certain level of pent-up demand has accumulated and the new policy is expected to unleash some of this demand, including from multi-child families seeking larger homes, enterprises purchasing homes for employees, and nonlocal residents and singles seeking to enter the Shenzhen housing market," said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

Li's remarks came a day after Shenzhen joined other major cities in China in easing homebuying rules to stimulate demand. The new package, which was issued on Monday by the Shenzhen Municipal Housing and Construction Bureau, highlighted several changes including reduced social security requirements for nonlocal residents, additional home purchase quotas for families with multiple children, relaxed purchase policies for enterprises and support for "trade-ins "and "old-for-new" deals.

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, praised Shenzhen's policy changes and their alignment with a recent meeting of the Political Bureau of the Communist Party of China Central Committee, which demanded "research on policies to reduce housing inventory and improve the quality of newly added housing".

"The release of this policy in Shenzhen aligns with expectations and indicates a wave of policy relaxations across various localities in May. The old-for-new program will revitalize the secondary housing market and expand developers' business opportunities," said Yan.

While both Yan and Li recognized the innovative aspects of the policy changes and their alignment with broader market trends, they differed in their assessment of the impact on nonlocal residents.

"The purchasing power of nonlocals is significantly lower than that of locals, so the overall impact of the policy should not be overestimated," Li said, adding that, "If the market continues to weaken, further adjustments may be implemented, such as complete removal of purchase restrictions on nonlocals and a reduction in the value-added tax exemption period from five years to two years. Ultimately, the key to a sustainable housing market lies in boosting purchasing power through improved income, employment and consumption."

To this, Bai Wenxi, vice-chairman of the China Enterprise Capital Union, provided a more nuanced perspective, highlighting both the opportunities and challenges associated with the new measures.

"The package will undoubtedly increase market confidence, boost transaction activity and expand opportunities for capital operations, but it's also important to note that the impact of policies is uncertain especially on the capital market," Bai said.

According to China Daily's research, approximately 35 cities across China have relaxed purchase restrictions since last year, with 22 cities — including Hefei, Anhui province; Kunming, Yunnan province; Suzhou, Jiangsu province; and Changsha, Hunan province, completely removing purchase restrictions. However, core cities, including the four first-tier cities and Hangzhou, Zhejiang province (for new homes); Tianjin, and Xi'an, Shaanxi province (core area), still maintain purchase restrictions.

The recent policy changes in Shenzhen, along with comprehensive policy packages announced by Beijing and Chengdu, Sichuan province, suggest a growing focus on easing restrictions and promoting a stable and healthy housing market in major Chinese cities.

As a result, data from the Shenzhen Zhongyuan Research Center showed that last week 615 new homes were sold in Shenzhen, which was 6.8 percent more than the previous week. The total area of these sales was 62,665 square meters. In addition, during the same period, 1,040 pre-owned homes were sold in the city.