Cities ease restrictions on new apartment pre-sales

Several major Chinese cities have begun to ease restrictions on presales of new apartment buildings, and are in some cases for the first time in about a year allowing developers to raise prices slightly.

The loosening in cities such as Shanghai, Hangzhou, East China’s Zhejiang Province, Nanjing, East China’s Jiangsu Province and Xiamen, East China’s Fujian Province, has led to a surge in the marketing of new home developments over the past two months, with developers also eager to ramp up the launches to boost their cash flow.

“Both factors will lead to an obvious rise in housing supply in the top cities in the second quarter,” said David Hong, the Hong Kong head of research at CRIC, a real estate research firm.

“Many developments which have already reached the presales requirements last year will be launched into the market,” Hong said.

The changes highlight competing interests between China’s stability-minded central government and revenue-hungry local authorities, as well as the challenges in artificially containing a still hot market that has remained a one-way bet.

The mild loosening is cityspecific, according to nine developers interviewed by Reuters, and there is little expectation of a nationwide easing in curbs anytime soon. Developers said, for example, pre-sale approvals remain extremely strict in Beijing because it is closely monitored by the central government.

But real estate experts said it could be a sign of things to come elsewhere in the country as the cities, relying heavily on land sales and property taxes, try to boost real estate sales and keep housing supply in line with demand.

Any relaxation should bolster the developers’ profitability and could help to support economic growth at a time when there are fears it could be flagging, though if it is restricted to only a few cities the impact will be modest, economists and analysts said.

The pent-up demand for land development is high as Chinese cities sold a record 5.2 trillion yuan ($817.67 billion) worth of land usage rights in 2017, up 40.7 percent from a year earlier, data from the finance ministry shows.

The Ministry of Housing and Urban-Rural Development did not respond to faxed requests for comment. The housing authorities in Shanghai, Nanjing, Xiamen and Hangzhou didn’t answer calls from Reuters.

The Xinhua News Agency reported last week that the ministry reiterated that policies to control home prices and prevent speculative investment in the property market will not be changed or loosened.