BEIJING: China’s central city of Zhengzhou on Wednesday removed restrictions on ceiling and floor prices for new home sales, a notice by the city’s housing regulator said.
The move could lead to further falls in house prices, putting pressure on homeowners and China’s weak property sector.
“The housing regulator no longer guides the sales price of new homes, and developers set their own prices for sales,” the regulator’s notice said.
This followed the removal of similar restrictions this year in some cities such as Shenyang in the northeast and Lanzhou in the northwest.
More cities in China will relax property market restrictions in the future, which will lead to a further drop in property prices in the short term, as property companies may cut prices to remove inventory, said Ma Hong, senior analyst at GDDCE Research Institution in Shanghai.
Ma said falling house prices might lead to a reduction in the wealth of homeowners, but will have limited impact on home purchases.
“Homebuyers’ confidence is weak as they are concerned that new homes will not be delivered in a timely manner,” said Ma.
China’s property sector, which once accounted for a quarter of the world’s second biggest economy, has been in a slump since 2021, partly due to efforts to cut high leverage which triggered a string of bond defaults and has left lots of presold homes unfinished.
China will give cities the freedom to regulate the real estate market and allow them to cancel or reduce their housing purchase restriction policies, according to a key meeting of the Communist Party’s Central Committee led by President Xi Jinping, known as a plenum, which takes place roughly every five years.
Chinese leaders on Tuesday also pledged to continue to support the delivery of unfinished projects and turn unsold apartments into affordable housing.
Goldman Sachs said in a research note on Tuesday it expected further reductions to mortgage rates in China, as well as more (government) funding and more operational streamlining for (housing) inventory destocking.
Ma said that without additional big stimulus to ease the liquidity of real estate companies, the overall real estate situation would remain difficult.
(Reporting by Liangping Gao and Ryan Woo; Editing by Jane Merriman)
Source Homevior.in
