Experts say demand for homes in Shenzhen could rise
China’s property market is still recovering from the crisis. In addition to the government, local authorities are also introducing measures to stimulate demand. For example, buying a home in Shenzhen is now more affordable for more people.
A new regulation sets new standards for the local property market:
1. The down payment for secondary market properties was 40%. Before it was 80%.
2. The authorities have changed the definition of the status of a conventional or non-luxury home. As a result, this type of home requires a lower down payment.
3. There is no limit on the transaction value threshold in Shenzhen. Previously, the value could not exceed about US$1.6 million.
According to Yang Yuejin of the E-house Institute, the change will help stimulate demand for larger homes. It will also increase the need for property upgrades. The example of Shenzhen shows a trend towards loosening mortgage lending in large cities. Under the new rules, buying a house in a metropolis will cost the buyer less. The down payment for a home, which costs 8 million yuan, is 3.2 million yuan less. Local real estate agency Leyoujia believes such a measure will increase market activity. It will also help boost buyers’ confidence in sellers.
Before the crisis, the property sector accounted for around 20% of China’s economy. The collapse of the largest local developers led to the fall of the entire market. In October 2008, China recorded a record fall in house prices. The decline in value is observed after the introduction of stimulus measures by the government.
Problems in the property sector
One of the sector’s serious problems is the high demand for housing in major cities. Since 2016, the Chinese authorities have tried reducing the demand for property in megacities. To this end, they have tightened requirements for those not buying their first home. For this category of consumers, the cost of the down payment increased. It also included all those who had previously taken out a mortgage. In September 2023, the Guangzhou Municipality cancelled this measure, which reduced the initial rate to 40%. It was the first of the country’s largest cities to take such a step. Shenzhen followed Guangzhou’s example. Experts expect Beijing and Shanghai to follow suit. These cities are the most important for the country, both financially and politically.
At the same time, property values in the megacities remain high despite low demand. The difference is particularly pronounced compared with second-tier cities, where living conditions are also lower. In 2023, a house in a megacity will be around CNY60,000 per square metre. In a smaller city, it was 16.2 thousand yuan per square metre.