Chengdu becomes latest major Chinese city to unveil housing market support measures, scraps home purchase qualifications

The measures effective from Monday range from the removal of restrictions on homebuyers to support for the funding needs of developers
The city might also be ready to scrap a cap on new home prices

China property

Zhang Shidongin Shanghai

Published: 7:40pm, 28 Apr 2024

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The city of Chengdu in southwest China has unveiled a package of measures to bolster its property market.

These measures range from the removal of restrictions on homebuyers to support for the funding needs of developers, underscoring the fact that stabilising the housing market remains the city’s top priority this year.

The city will no longer review the qualifications for home purchases and it has also pledged to meet developers’ reasonable funding demands, the Chengdu Municipal Housing and Urban-Rural Development Bureau said on Sunday.

Chendu, the capital of Sichuan province, also plans to reduce land supply in areas where the supply of residential and commercial properties exceeds demand, while also encouraging market players to convert spare and idle non-residential housing into low-rent homes, it said. These changes well be effective Monday.

The city, which has a population of 21 million and is viewed as second-tier, is the latest to roll out stimulus measures to buttress the property market at a local-government level. While home sales in the city increased by almost 10 per cent last year to buck a nationwide slump, it got off to a low start in 2024, with sales falling 35 per cent month-on-month in January due to weak demand.

It has joined the list of other top-tier cities including Beijing and Shanghai, which eased curbs on their property market earlier through steps such as cuts in mortgage rates and by lowering the bar for home purchases.

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New homes in Chengdu will no longer be sold through lucky draws and developers can arrange the sales on their own, the local housing administration said, a move that suggests the government is ready to scrap a cap on new home prices.

Property was a pillar of China’s growth not so long ago. But, while China’s economy expanded by a faster-than-expected pace of 5.3 per cent in the first quarter of this year, its property market remains a key hindrance to growth.

Home prices in the country’s major cities dropped for a 10th straight month in March, according to the statistics bureau, indicating that more is still needed to be done to revive demand.

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Even the industry’s biggest players are not immune to the downturn. China Vanke, the country’s biggest developer by market value, surprised investors last month by reporting a 46 per cent profit decline for 2023 and skipping the dividend payout for the first time on record. Its bonds suffered from sell-offs on heightened concerns about its debt-servicing ability.

The company has two offshore bonds totalling 5.6 billion yuan (US$772.8 million) maturing in 2024, according to S&P Global Ratings. Another 7.3 billion yuan in onshore bonds becomes due or puttable this year.

“China’s economy is unlikely to bottom out so long as its property sector remains in decline,” Lu Ting, the chief China economist at Nomura Holdings said in a report last week. “Without a stabilisation of the property sector, the rebalancing via exports and consumption … are unlikely to progress very far.”

Beijing might eventually need to fund the completion of unfinished residential projects that have stalled due to a funding crunch, as the ultimate resolution to the housing crisis, which could rebuild confidence in developers and banks and increase demand for raw materials, workers and home appliances, he said.

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