China In Perspective: From trade-ins to affordable housing plans, China's innovative approaches to destock housing inventory

BEIJING, May 23 (Xinhua) -- China is actively exploring new ways to reduce its housing inventory, such as promoting trade-in programs and encouraging government-backed purchases of commercial apartments for affordable housing plans, as part of an effort to reignite the cooling property market.

Analysts believe such moves, aimed at prompting more deals, are crucial to vitalizing the sector as market expectations remained weak following the boom years.

At a high-level meeting at the end of April, policymakers called for "measures to reduce housing inventory and improve the quality of new housing in a coordinated manner." This new wording signaled the country's property policy focus this year.

Yan Yuejin, research director at E-house China R&D Institute, described the measures to reduce housing inventory as the most groundbreaking policy innovation this year, as it cracks the hard nut of a major shift in the home supply-demand relationship that has occurred over recent years.

At the end of April, unsold commercial housing across the country amounted to 745.53 million square meters, a significant increase from 514.36 million square meters by the end of April 2021, according to the National Bureau of Statistics.

However, only 292.52 million square meters of new housing were sold in the first four months of this year, compared to 503.05 million square meters during the same period three years ago, official data showed.

Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, said the downward spiral is disrupting the circulation in the housing market.

"When the market fails to function, there is an urgent need for the government to step in," Li said. "The immediate priority is to conduct 'flood discharge' for the massive stock of second-hand housing."

Local governments and institutions have moved in swiftly. Over 60 cities have unveiled supportive policies to bring down the housing stock, including Shanghai, Shenzhen, Qingdao and Nanjing.

More than 20 developers and nearly 10 real estate agencies in east China's Shanghai jointly launched a promotion campaign early this month. Under this campaign, homeowners signing to purchase a new property will have their old home sales prioritized by agents. Once the existing home is sold, the transaction for the new property will be finalized. In the event it is not sold, the buyers can receive a refund without any liability.

In central China's Zhengzhou, a local state-owned enterprise (SOE) plans to purchase homes built within the last 20 years to renovate them for affordable rental housing. The city aims to complete 10,000 trade-in deals through such SOE purchasing and other approaches this year.

In a recent case in central China's Wuhan, Wang Wei traded in his hard-to-sell apartment in an old neighborhood of Qiaokou District for over 900,000 yuan (over 126,000 U.S. dollars), while buying a new, larger home still under construction for over 2.1 million yuan.

The deal was made under a program initiated by local developers, real estate agencies and home buying groups since the end of 2023. In Qiaokou, state-owned developers had purchased more than ten old homes for affordable housing projects by mid-May.

As people's demand for better homes are underpinning Wuhan's property market, such trade-in programs are conducive to unleashing home purchase potential and pushing the market back to a positive cycle, said Li Guozheng, market director of the China Index Academy's central China branch.

Additionally, the central bank announced a plan to establish a 300-billion-yuan relending facility designed to finance the SOEs' purchases of unsold new homes, which will be turned into government-subsidized housing to satisfy the needs of low-income families. Tao Ling, deputy head of the People's Bank of China, said the facility is expected to generate banking loans totaling 500 billion yuan.

Analysts believe the relending tool could alleviate the problems of weak loan demand and stimulate capital flows, thereby ultimately restoring market momentum. The recent intensive policy roll-out at both central and local levels indicates that the country is determined and working in full-swing to resolve the issue of its unsold homes, they say.

Although more time is still needed to test the effectiveness of these policies, the measures will play a positive role in energizing the property market in the short term and more cities are expected to take part in the inventory-reducing campaign in the long run, said Chen Wenjing, director of research at the China Index Academy.