Housing deals to resume in 2022 in China’s first-tier cities as buyers re-enter the fray with pent-up demand after four years of draconian controls

Median home prices in Beijing, Shanghai, Guangzhou and Shenzhen may rise by no more than 5 per cent in the new year
Easier financing pledged by monetary authorities is helping leveraged developers to get their projects back on track, while genuine homebuyers get their mortgage loans

China property

Daniel Renin Shanghai

Published: 1:00pm, 1 Jan 2022

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Transactions may return to China’s housing market in 2022, most noticeably in the country’s four first-tier tentpole cities, as relaxations in both monetary policy and market-dampening measures attract genuine buyers to re-enter the fray.

Median home prices in Beijing, Shanghai, Guangzhou and Shenzhen may rise by no more than 5 per cent – the level that triggers alarms about property bubbles, which sends policymakers into overdrive – in the new year, as financing pledged by monetary authorities help leveraged developers get their projects back on track, while genuine homebuyers get their mortgage loans.

“All eyes are on mortgage loans because it was the major stumbling block to home purchases by most buyers with genuine demand,” said Yin Ran, a Shanghai-based angel and property investor. “Many of them are seeing a ray of hope after the leadership decided to give economic stability their top priority in 2022.”

The prognosis is a welcomed breather from the relentless attempt to rein in runaway home prices that began in the autumn of 2017. Authorities introduced a raft of draconian measures that seeped into every aspect of the economy, from bank loans to capital-gains tax and even the divorce procedures of property-owing couples, to tamp down on speculation and tame prices.

China’s second-hand home prices in Beijing, Shanghai, Guangzhou and Shenzhen

At the conclusion of the Chinese government’s annual central economic work conference on December 10, policymakers emphasised that economic stability must be ensured in 2022, raising buyers’ expectations for a loosening of credits. The government also pledged to “front-load” policies to shore up economic growth and maintain social order.

That is a relief for Xiao Yue, a 35-year-old Shanghai clerk who failed to close her purchase in June because her bank was reluctant to lend her enough to afford her dream home.

“We are keeping our fingers crossed that the monetary policy would be eased soon,” she said. “In Shanghai, where homes are extremely expensive, middle-income wage earners cannot own a home without bank loans.”

China property: how the world’s biggest housing market emerged

“Banks’ restrictions on mortgage credit [forced] numerous deals to be cancelled over the past six months,” said Song Yulin, a senior manager at the Baonuo property agency in Shanghai. “It makes no sense to curtail homebuying by people who do not own homes.”

Xiao, a first-time buyer, signed a preliminary contract in March to buy a 4-million yuan (US$627,000) flat in the secondary market. Under Shanghai’s lending rules, she had to put down 30 per cent of the home’s value up front, or 1.2 million yuan, before paying for the remainder in mortgage loans.

However, her bank valued her property at only 3 million yuan, and was only willing to lend her 2.1 million yuan, leaving her with a shortfall of 700,000 yuan and few options but to renege on her purchase.

“Many of the measures aimed at curbing over-speculation have ended up hurting buyers like us, who have genuine demand for homes,” she said. “Officials making housing policies should make sure that the policies are well founded before promulgating them.”

An agent shows potential buyers the layout of a new residential development at a real estate fair in Shanghai on 15 March, 2009. Photo: Corbis via Getty Images

To curtail housing demand, banks have been dragging their feet in approving loans, taking as long as 50 days to sign off on mortgages, according to a study by the Beike Research Institute that took a sampling of the average waiting time across 72 major cities in June.

The waiting time was a third longer than what it was a year ago. Dongguan and Zhongshan, two provincial cities in southern China’s Greater Bay Area, topped the scales at 108 days before the typical mortgage was approved.

That may soon change, after the People’s Bank of China ordered banks to cut the reserves they kept with the central bank to free up 1.2 trillion yuan of cash for the economy, in the biggest injection of financial liquidity in three years. That was followed two weeks later by the first cut in loan rates in two years.

Sales staff introduce models of a residential compound to visitors during Dalian Spring Real Estate Fair in Dalian, Liaoning province on April 12, 2018. Photo: Reuters.

Together, the easier monetary policy was flowing into bank loans. A raft of developers in Shanghai received a shot in the arm on December 15 as the banking authorities encouraged local lenders to grant them fresh credit to build rental homes.

The Shanghai headquarters of the People’s Bank of China’s and the local branch of the China Banking and Insurance Regulatory Commission acted as the matchmakers between lenders and developers in an effort to bolster rental home construction in the mainland’s financial capital where lofty housing prices have eroded competitiveness.

“A healthy property market is still desirable in China because of its significance to the national economy and fiscal income,” said Wang Zhen, vice-president of the Shanghai Academy of Social Sciences. “The real estate sector will not stop growing.”

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