Ease housing market policies, but don’t step on the redline

Local authorities have eased restrictions in the housing market in 56 cities in recent days, with Nanjing, capital of Jiangsu province, backtracking after what could have been a huge step. After recently making public that buyers of second-hand housing no longer need to provide a purchase qualification certificate, Nanjing’s local authorities retracted it within hours, restoring the original restrictions.

Because of continuous real estate regulations and market cooling, the domestic housing market entered a “cold winter” in the second half of 2021. After the central bank and the China Banking and Insurance Regulatory Commission spoke of relaxing policies, many local governments have started easing property market policy restrictions, from lowering mortgage interest rates to relaxing purchase restrictions. Despite such easing, however, there has been no expected “housing sales boom” in March and April and the housing market downturn continues.

In order to break this stalemate, some cities have gradually escalated housing market adjustment policies. Suzhou, also in Jiangsu, adjusted its real estate policy three times in April alone, shortening the time restriction on new and second-hand house trading, and relaxing restrictions on people without a local hukou, or household registration, buying housing in Suzhou.

Various housing regulations adopted by local governments still focus on supporting first-home or second-home buyers. The general principle that “housing is for living in, not for speculation”, reiterated by the top authorities, has not been abandoned. However Nanjing stepped on the redline when it tried to lift its second-hand housing purchase restrictions. It had to quickly retract it following a public outcry.

While trying to ease property market regulation policies, local governments should not ignore the “bottom line” or step on the top authorities’ redline. Both the earlier strict measures and the current policy easing are aimed at promoting the healthy and long-term development of the real estate sector. There is nothing wrong with local governments withdrawing some strict regulatory measures, but “housing is for living in, not for speculation” is the redline that they must not cross. That means local governments can by all means suspend some regulatory measures, but they cannot remove restrictions on housing speculation. They should, thus, be wary of implementing policies that fuel a sharp rise in housing prices.