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The city of Zhengzhou in central China has recently relaxed regulations on the ceiling and floor prices for new home sales, allowing developers to set their own pricing strategies. This move comes after other cities such as Shenyang in the northeast region and Lanzhou in the northwest have implemented similar measures.
Zhengzhou's housing regulator announced that it would no longer guide new home sales prices, leaving the responsibility of setting prices to developers themselves. This could lead to a short-term downturn in property prices due to potential price reductions by developers looking to reduce inventory levels.
According to senior analyst Ma Hong from GDDCE Research Institution in Shangh, more Chinese cities might follow Zhengzhou's example and loosen restrictions on their property markets in the future. However, he also mentioned that while this may contribute to a reduction in house prices, it might not have significant implications for homeowners due to weak confidence among potential buyers.
The real estate sector has been experiencing difficulties since 2021 due to efforts med at reducing high leverage levels within房企, which subsequently led to multiple bond defaults and numerous unfinished development projects. The Chinese government plans to give cities more autonomy in managing their local property markets while permitting them to adjust or eliminate housing purchase restrictions.
Moreover, China's leaders have vowed to support the completion of incomplete residential projects and converting unsold apartments into affordable housing units.
Goldman Sachs anticipates that mortgage rates will continue to be reduced in China along with increased government funding for inventory management and destocking efforts.
Despite these measures, without substantial stimulus to ease real estate companies' liquidity issues, the sector's overall situation is likely to remn challenging according to Ma Hong.
The relaxation of price regulations could potentially exacerbate the current financial strns on homeowners if prices drop too quickly or in a volatile manner. This situation might erode homebuyers' confidence and reduce their willingness to enter into real estate transactions due to concerns about timely project completion, says Ma.
In summary, while Zhengzhou's new policy might lead to short-term fluctuations in property prices and potentially impact the sector as a whole, long-term solutions will require broader systemic improvements and consumer confidence restoration.
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Affordability Zhengzhou Lifts New Home Sales Price Ceilings Chinese Cities Relax Real Estate Pricing Regulations Developers Gain Control Over Property Prices Potential Decline in House Prices Follows Move Market Autonomy Increases with Policy Changes Government Supports Housing Completion