news

China Business Network, July 31st: In the first half of this year, the policy orientation of "destocking" in the real estate market was obvious, and the regulatory authorities mentioned "destocking" many times and made arrangements. Among them, "purchasing instead of building" has become one of the destocking models promoted by various places, and more and more cities have followed up and implemented it.

Experts believe that "buying instead of building" can save local governments a lot of time and money in land acquisition, planning approval, construction and other aspects, improve the efficiency of housing supply, and complete the task of preparing and building affordable housing more quickly. At the same time, it will increase the opportunities for wage-earning families to obtain affordable housing, reduce housing purchase costs, improve living conditions, and help alleviate the inventory pressure of real estate companies.

“Buy instead of build” policy expands

On May 27, Kunming Housing and Urban-Rural Development Bureau issued the "Notice on the Collection of Commercial Housing for Use as Affordable Housing", proposing that municipal state-owned enterprises collect completed but unsold commercial housing in some administrative areas for use as affordable housing;

On June 2, the Suzhou Real Estate Long-term Mechanism Pilot Leading Group issued a policy that proposed to adhere to the principle of "ordering according to demand", organize local state-owned enterprises to purchase some existing commercial housing at reasonable prices for use as affordable housing, and encourage and support qualified enterprises, institutions and social entities to purchase commercial housing for employees to rent;

On July 12, Yantai City issued an announcement stating that in order to accelerate the acquisition of existing commercial housing in Yantai City for use as affordable housing and meet the diverse housing needs of the people, it is now launching a call for the acquisition of existing commercial housing for use as affordable housing and inclusion in the housing source database for all completed and completed real estate projects in Zhifu District and Laishan District;

On July 24, the Guangdong Provincial Department of Housing and Urban-Rural Development held a video coordination meeting on affordable housing work across the province to implement the Ministry of Housing and Urban-Rural Development's work arrangements on purchasing completed existing commercial housing for use as affordable housing, and to mobilize, deploy and promote the rectification of illegal subletting and lending of public rental housing and rectification of overdue shantytown renovation projects.

"The state-owned enterprises' acquisition and storage of unsold new homes is becoming a 'destocking' model that the government is pushing hard," said Chen Wenjing, director of market research at China Index Academy, in an interview with China.com.cn's financial reporter. "Local state-owned enterprises' acquisition and storage of unsold new homes is more suitable for cities with high inventory in the current real estate market and strong housing security needs, or mainly second-tier cities."

According to the monitoring of China Index Academy, cities such as Zhengzhou, Jinan, Suzhou and Chongqing have all carried out relevant practices in recent years. "Next, with the support of 300 billion yuan of affordable housing refinancing, the pace of promotion in various places may be accelerated," said Chen Wenjing.

What impact will “buying instead of building” have on the real estate market?

Guan Rongxue, senior analyst at Zhuge Data Research Center, said in an interview with China.com Finance reporter that for local governments, "purchasing instead of building" can save a lot of time and financial costs in land expropriation, planning approval, construction and other aspects, improve the efficiency of housing supply, and complete the task of building affordable housing more quickly.

For working-income families, especially the "purchase instead of construction" of affordable housing, it will increase the opportunities for working-income families to obtain affordable housing, reduce housing purchase costs, and improve living conditions.

For real estate companies, "purchasing instead of building" can help reduce their inventory pressure, improve cash flow, ease financial pressure, and promote their "guaranteed delivery of buildings."

The property market is accelerating its destocking

Since the Politburo meeting in April this year proposed "comprehensive research on policy measures to digest existing real estate and optimize incremental housing", the supply and demand relationship faced by my country's real estate market has changed significantly compared with the previous round of "destocking" in the current stage of "digesting existing real estate".

From the policy perspective, on May 17, a combination of real estate policies was officially implemented. In addition to reducing down payments on the demand side, canceling the lower limit of mortgage rates, and lowering provident fund loan rates, it also proposed the establishment of 300 billion yuan of affordable housing re-loans to support local state-owned enterprises in purchasing completed but unsold commercial housing at reasonable prices for use as allocated or rented affordable housing.

On June 7, the State Council executive meeting arranged real estate-related work and explicitly mentioned "destocking". The meeting proposed to continue to study and reserve new policies and measures for destocking and stabilizing the market. For the digestion and revitalization of existing real estate and land, we must not only liberate our minds and broaden our thinking, but also grasp them prudently and make solid progress.

On July 21, the "Decision of the CPC Central Committee on Further Comprehensively Deepening Reform and Promoting China's Modernization" further emphasized "increasing the construction and supply of affordable housing to meet the rigid housing needs of the working class." Affordable housing refers to both rented affordable housing and sold affordable housing.

On July 30, the Political Bureau of the CPC Central Committee meeting once again emphasized the need to implement new policies to promote the stable and healthy development of the real estate market, adhere to the combination of digesting existing stocks and optimizing new stocks, actively support the acquisition of existing commercial housing for use as affordable housing, further do a good job in ensuring the delivery of housing, and accelerate the construction of a new model for real estate development.

From the data point of view, the data from the National Bureau of Statistics shows that as of the end of June, the area of ​​commercial housing for sale nationwide was 738.94 million square meters, a year-on-year increase of 15.2%. Among them, the area of ​​residential housing for sale increased by 23.5%. According to the monitoring data of China Index Academy, as of the end of May, the saleable area of ​​commercial housing in 50 representative cities, calculated based on the average monthly sales area in the past 12 months, the short-term inventory clearance cycle was 21.3 months, which was 3.9 months longer than the end of 2023. Among them, the clearance cycle of representative third- and fourth-tier cities reached 30.7 months, and the short-term inventory clearance pressure was high.

"Considering the government's efforts to build a housing security system in recent years, combining the digestion of existing properties with the supply of affordable housing will be an effective way to digest the existing stock at present," said Cao Jingjing, general manager of the Index Research Department of China Index Academy.

However, Guan Rongxue also pointed out that "purchasing instead of building" is still in the early stages of exploration, and the rationality of the purchase price, the sustainability of the source of acquisition funds, and the operational management capabilities of the acquired commercial housing need to be further improved.

In the future, there will be more detailed supporting policies released around "purchasing instead of building". How can we implement the policies in detail?

"The selection criteria for 'purchase instead of construction' projects should be clarified to ensure that the projects meet the needs of urban development and residents. At the same time, a transparent fund supervision mechanism should be established to ensure the rational use and efficient operation of funds." Guan Rongxue said.

Guan Rongxue said that institutional guarantees and internal and external supervision should be strengthened, and voluntary participation, purchasing based on demand and reasonable pricing should be adhered to. The addition of new local hidden debts should be strictly avoided to effectively prevent risks. The operational management capabilities of purchased and stored commercial housing should also be strengthened to ensure the sustainability of the "purchase instead of construction" model.

It is worth mentioning that in the past two years, local governments have also made many explorations and practices, such as state-owned enterprises replacing old properties with new ones and non-residential properties being rented out, which are also important supplementary models for digesting existing properties. "The path and model for digesting existing properties have gradually become clear. If they can be implemented as soon as possible, it will help ease the operating pressure of real estate companies and stabilize market expectations," said Cao Jingjing.

Guan Rongxue concluded that the main ideas for local destocking at present include but are not limited to the following points: first, stimulate market demand by adjusting housing purchase policies, providing housing purchase subsidies, lowering loan interest rates and other measures; second, adjust the real estate supply structure according to market demand, reduce inventory backlogs, and increase the types and regional supply of houses urgently needed by the market; third, "purchase instead of build" to reduce the stock of commercial housing, thereby balancing the relationship between supply and demand and stabilizing the real estate market.

In addition, in Cao Jingjing's view, since the source of new housing supply is land supply, policies also need to be coordinated in conjunction with the land market. Activating existing land is also an important measure to control and destock market inventory.