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Securities Times reporter Zhang Da

The "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization" (hereinafter referred to as the "Decision") reviewed and adopted at the Third Plenary Session of the 20th Central Committee of the Communist Party of China established the reform goal of building a new model of real estate development, and clarified the reform tasks in key areas such as improving the supply system, optimizing regulatory policies, and changing operating methods. The roadmap for real estate industry reform has become clearer.

Experts and scholars interviewed by the Securities Times believe that the Decision takes into account both the current and long-term development and establishes the direction and goals for the long-term development of real estate. Accelerating the construction of a new model for real estate development is inseparable from policy guidance and support. Formulating and implementing financial policies, land policies, tax policies, etc. that are conducive to the construction of a new model is a must.

Clarify reform goals

Taking into account both the present and the long term

The statement on real estate in the Decision is placed under the framework of "improving the system of safeguarding and improving people's livelihood". "The reason why the Decision focuses more on real estate this time is that it takes into account both the present and the long-term, focusing on solving the current urgent problems and taking into account the sustainable development of the future, ensuring the comprehensive and coordinated development of the economy, society and environment, and establishing the direction and goals for the long-term development of real estate." Qin Hong, a senior researcher at the National Development and Strategy Institute of Renmin University of China, said in an interview with a Securities Times reporter.

In Qin Hong's view, "accelerating the establishment of a housing system that promotes both renting and purchasing" directly responds to the current real estate market problems of high housing prices in some cities, unregulated and immature rental markets, and combined with the deployment of the "Decision" to "implement a system of providing basic public services by registering household registration in the place of permanent residence", it can be foreseen that by accelerating the construction of a housing system that promotes both renting and purchasing, the current problems of difficulty in buying and renting houses, and different rights for renting and purchasing for some residents can be alleviated, and people's livelihood can be effectively protected and the quality of people's life can be improved.

"Accelerating the construction of a new model for real estate development" aims to innovate and optimize the existing real estate development model. Qin Hong told reporters that it is especially necessary to change the "high debt, high leverage, high turnover" business model of real estate companies and promote the healthy and sustainable development of the real estate market.

Qin Hong also pointed out that accelerating the construction of a new real estate development model is inseparable from policy guidance and support. Therefore, it is imperative to formulate and implement financial policies, land policies, tax policies, etc. that are conducive to the construction of a new model.

Reform of financing methods and pre-sale system

Building a new real estate development model is a fundamental solution to solving real estate development problems and promoting the stable and healthy development of the real estate market.

Accelerating the construction of a new real estate development model requires further deepening of reforms in key areas.

This "Decision" clearly proposes to "reform the real estate development financing methods and commercial housing pre-sale system", which is one of the important contents of institutional and mechanism reform in building a new development model.

"In the past, real estate development financing was closely related to the use of pre-sale funds for commercial housing. When pre-sale funds were not properly supervised, developers misappropriated pre-sale funds and used interest-free leverage to acquire land for development, which brought the risk of project unfinished." Qin Hong said that reforming and improving the pre-sale system for commercial housing, strictly supervising the use of pre-sale funds or implementing sales of existing homes can greatly reduce the housing purchase risks for buyers; but it also requires reforming the financing methods of real estate development so that development funds can cover the construction process.

Zou Linhua, head of the housing big data project team of the Institute of Finance and Economics of the Chinese Academy of Social Sciences, told the Securities Times that "reforming the pre-sale system of commodity housing" means that the pre-sale system of commodity housing will not be abolished, but the market trend is mainly for the sale of existing houses, and the proportion of pre-sale houses is declining. The overall direction of the reform of the pre-sale system of commodity housing should be to improve the efficiency of fund supervision and use on the basis of protecting the rights and interests of home buyers.

Yang Kewei, deputy general manager of CRIC Research Center, also believes that the pre-sale system will not be completely withdrawn in the short term, considering that the problems of the pilot spot sale system, such as long cycle, slow collection of funds, and increased operating burden on real estate companies, have not yet been effectively resolved.

Improve regulatory policies

Fully empower local governments

Due to the distinct regional characteristics of the real estate market, the transaction volume and prices of various cities vary greatly. In recent years, the central government and regulatory authorities have always emphasized the need to "take measures based on the city". This "Decision" once again emphasized that "the autonomy of real estate market regulation in each city should be fully given to the city government, and measures should be taken based on the city", and further clarified that "relevant cities are allowed to cancel or reduce housing purchase restrictions and cancel the standards for ordinary and non-ordinary residential properties".

"Giving local governments autonomy in regulation can avoid the inadaptability and side effects caused by 'one-size-fits-all' policies and increase the flexibility of regulatory policies," said Qin Hong. "Allowing relevant cities to cancel or reduce housing purchase restrictions" will help encourage local governments to innovate regulatory measures based on their own circumstances, stabilize housing prices, meet the housing needs of a wider range of residents, and explore real estate development models suitable for local areas. "Canceling the standards for ordinary and non-ordinary residential properties" will help relax the housing purchase restrictions that still exist in some cities, promote reasonable housing demand, and increase market activity.

According to statistics from CRIC Research Center, at present, the vast majority of second- and third-tier cities in the country have fully lifted restrictions on housing transactions, leaving only the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen and parts of Tianjin and Hainan still implementing purchase restrictions.

Chen Wenjing, director of market research at China Index Academy, predicts that in the short term, there is a strong expectation that Guangzhou, Tianjin and parts of Hainan will cancel the purchase restriction policies, while it may still take time for Beijing, Shanghai and Shenzhen to cancel the purchase restriction, and the short term may still focus on gradual progress.

In terms of the standard for ordinary residential housing, Zou Linhua believes that "canceling the standard for ordinary and non-ordinary residential housing" means that the transaction tax for purchasing improved housing will be further reduced, which better reflects the support for the improved housing needs of ordinary residents. Because most non-ordinary residential housing is just relatively large in area or relatively high in price, it is not actually a luxury house, and most of the buyers are ordinary resident families.

Yang Kewei pointed out that in 2023, Shenzhen, Shanghai and Beijing all cancelled the total price limit for ordinary residential housing, and only used building area, floor area ratio, unit price, etc. as distinctions; in the future, the standards for ordinary residential housing are expected to be further relaxed or even cancelled, such as Beijing canceling the unit price limit, and Shanghai and Shenzhen relaxing the area limit, thereby reducing the burden of housing transaction taxes and fees.

It is worth noting that the Decision also proposes to "perfect the real estate tax system". Qin Hong believes that the improvement of the real estate tax system should be considered from an overall perspective. First of all, it is necessary to improve the legal framework of real estate taxation, sort out and optimize the scope, standards, methods and uses of relevant taxes, and reduce what should be reduced and increase what should be increased. Reducing taxes in the development and transaction links and increasing taxes in the holding links have been the direction discussed in the past. From the future perspective, adjusting this tax system requires systematic design and implementation from multiple aspects such as laws and regulations, tax base and tax rates, assessment systems, tax collection and supervision, tax exemptions, and policy publicity. It also ensures the smooth progress of reforms through pilot projects, data integration, and supporting policies, and ensures the operability and transparency of laws and regulations.

Regarding the highly-watched real estate tax, Chen Wenjing believes that in the medium and long term, legislation and reforms related to real estate tax may continue to advance, but the current real estate market is in a stage of deep adjustment, and the timing for the introduction of real estate tax is not yet ripe. Further reducing taxes and fees in transaction links, such as reducing the deed tax rate, is also an important measure to support housing security.