China's property markets are having a down cycle. Photo: iStock

Dozens of Chinese cities have launched new measures to encourage homebuyers to enter markets after top economic leaders called for a joint effort to stimulate the slowing economy.

Some traditional methods, such as encouraging those affected by urban renewal projects to buy commercial properties instead of moving into settlement houses, won applause from Beijing.

However, a district in Qingdao in eastern China’s Shandong province was criticized by state media for putting unreasonable pressure on cash-rich residents to buy homes.

Property analysts said some new measures could help reduce inventory of the Chinese property markets but they would be unable to reverse the overall downward trend of home prices in the short run.

The central government had repeatedly called on cities and provinces to curb property prices over the past decade. Different measures, including purchase limits, price caps and higher mortgage rates and down payments for non-first-time buyers were launched, but purchasing a home remained a dream for many people.

The Chinese property down cycle began only after financial regulators in July 2020 announced “three red lines” that barred highly geared property developers from receiving loans for expansion. Last year, many property developers had to sell apartments at big discounts to replenish their cash flow.

This year, many homebuyers adopted a wait-and-see approach, especially after the Covid outbreaks and lockdowns in key cities between March and May.

Of the 70 major cities, 46 recorded a year-on-year decline in new-home prices in May while 57 saw a decline in home prices in the secondary markets, according to the National Bureau of Statistics.

The sluggish property markets slowed China’s economic growth. Early this year, China set a 5.5% economic-growth figure for 2022, but only achieved 4.8% growth in the first quarter.

On May 18, Premier Li Keqiang met with the governors of 12 provinces, including the top 10 economic contributors, at a symposium in Yunnan and highlighted efforts to stabilize economic growth and create jobs.

Li urged the provinces to launch all possible measures to make sure economic growth in the first half stayed within a reasonable range.

Since then, dozens of cities have eased their home purchase limits and encouraged people to buy second and third homes, media reports said.

As of Thursday, at least 20 Chinese cities had resumed their “house voucher” schemes for those affected by city renewal projects to buy commercial properties.

In the past, local governments granted such vouchers as it took time to build settlement houses and relocate people from old to new areas. Now people can use their vouchers plus their own money to choose the apartments they like.

Song Xiangqing, deputy dean of the School of Government at Beijing Normal University, told the China News Weekly that the “house voucher” schemes could provide more choices to people, reduce the city governments; burden of building settlement houses, and help reduce inventory in the property markets.

As of this month, some cities, such as Zhuhai in Guangdong province, have allowed people to withdraw up to 90% of housing provident funds from their accounts as down payments to buy homes.

Chen Wenjing, market research director of the China Index Academy’s index division, said many cities had increased their efforts to boost home sales but only a few saw a recovery of market sentiment. Chen said many cities still had a large amount of unsold properties and would suffer from market correction for some more time.

In the first four months of this year, home sales in Jianye in central China’s Henan province reportedly fell 80% from a year earlier.

Last month, the Jianye city government started a scheme to encourage garlic farmers to use their produce as down payments to purchase houses. That program was scrapped after being criticized by state media.

Property analyst Chen Lei told the Security Daily that many cities launched alternative ways to boost home sales as they could not allow property developers to offer homebuyers big discounts, which would anger existing homeowners and create social instability.

This week, a document has gone viral on the Internet as it said street-level officials on Xuejia Island in Qingdao should take the initiative to meet cash-rich residents and check whether they had “maliciously” refused to buy more apartments, Yicai.com, a financial news website, reported.

According to the document, officials would face a deduction in salary if their street would not meet a certain home sales quota.

The Securities Times said in a commentary this was going too far. It said local governments should think of other ways to release real demand into the property markets.

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