Northeast city tries to heat up housing market by cooling quickly
Chinese regional authorities are signaling that they want to stabilize rapidly cooling real estate markets, as a northeastern city has taken steps to ease developers’ liquidity concerns and support demand.
A series of measures issued by Harbin, capital of Heilongjiang Province, aims to promote the “stable and healthy development” of its real estate market, according to a local public news site. reported (link in Chinese) Saturday. The measures went into effect on October 1 and will last until the end of next year.
The Chinese real estate market has experienced sales slide and some large developers are facing a liquidity crisis due to their aggressive expansion and the regulators’ deleveraging campaign. Analysts said Harbin’s actions could augur similar actions from other local governments.
Harbin’s measures include easing restrictions on developer presale money.
In China, income from real estate presales must generally be deposited into accounts supervised by the regulator as an anti-embezzlement measure. Developers can request to withdraw the money in phases as construction of the property progresses. Harbin has decided to increase the amount developers can withdraw in each phase by 20% under certain conditions. The government has also asked lower-level authorities to support the sales promotion campaigns of real estate companies.
On the demand side, the Harbin government has decided to offer grants to some first-time homebuyers, with up to 100,000 yuan ($ 15,540) offered to recent college or professional graduates.
Harbin’s real estate policy adjustment shows that the government is actively responding to the cooling of the market that has been disrupted by some developer crises, wrote Zhu Jin, real estate analyst at brokerage firm China Securities Co. Ltd. a note (link in Chinese).
More local governments are likely to take steps to ease the pressure on developers’ cash flow and support demand, Zhu said, but he felt that the position of national policy will not change.
Since last year, regulators have intensified their efforts to defuse debt risks in the real estate sector, in particular by setting ceilings on loans from financial institutions to the sector. Partly because of the decrease in access to finance, some real estate giants, notably Evergrande Group in China, have entered into crisis, causing shock waves in the market and making investors panic.
Caixin’s coverage of the Evergrande debt crisis
To stabilize the market, some local governments have asked developers not to lower prices too much. Local governments in at least seven cities – including Yueyang in Hunan Province and the cities of Tangshan and Zhangjiakou in Hebei Province – have had discussions on the issue with real estate companies or set limits on discounts, according to the reports. analysts from the real estate data collector China Real Estate Information Corp. wrote in a report (link in Chinese) at the end of last month.
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