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Following the policy of “recognizing houses but not loans”, the recognition standards for first homes in various places are gradually being relaxed. More than 20 cities across the country recognize the number of housing units by district. In addition, some cities have introduced policies: if housing is listed for sale, the number of units can be reduced accordingly.

The scope of housing unit identification in more than 20 cities has been narrowed down to districts

Since August last year, the standards for determining the number of housing units have been gradually relaxed at the national level.

On August 25, 2023, the Ministry of Housing and Urban-Rural Development, the People's Bank of China, and the Financial Regulatory Bureau jointly issued the "Notice on Optimizing the Standards for Identifying the Number of Housing Units in Personal Housing Loans" to promote the implementation of the policy measures of "recognizing the house but not the loan" for purchasing the first home loan. This policy is included in the "one city, one policy" toolbox as a policy tool for cities to choose independently.

The policy clearly states that when a resident household (including the borrower, spouse and minor children) applies for a loan to purchase commercial housing, if the family members do not own a complete house in the local area, banking financial institutions will implement the housing credit policy based on the first home, regardless of whether they have used the loan to purchase a house.

On August 30, Guangzhou launched the first first-tier city policy of "recognizing housing but not loans". Shenzhen, Shanghai, Beijing and other first-tier cities also followed suit and implemented the policy of "recognizing housing but not loans".

Judging from the policies issued by various regions, the standards for determining the number of housing units are still being optimized, and the scope of the standards for determining first-home purchases in more than 20 cities has been narrowed to the district level.

According to statistics from the China Index Academy, as of August 14, more than 20 cities across the country have identified housing units by district, narrowing the scope of loan approval to the district where the purchase is located. As early as last year, Chongqing, Tianjin and Kunming had already issued relevant policies to optimize regulation by district.

Since the beginning of this year, the scope of cities has further expanded. According to incomplete statistics from The Paper, policies issued in Hefei, Qingdao, Hangzhou, Yingtan, Chengdu, Fuyang, Bengbu, Huainan, Wuhu, Ma'anshan, Huangshan and other places have optimized the standards for identifying the first home of personal housing loans.

Take Chengdu as an example. On August 12, Chengdu City issued a number of policies on housing purchases, which clearly stated that for new housing purchases within the city, only the housing situation of the buyer within the district (city) or county where the proposed housing is located will be verified. If the buyer has no housing, it will be recognized as the first house.

Taking Hangzhou as an example, in May this year, Hangzhou issued a property market policy that when purchasing a house within the city, only the housing situation in the district, county (city) where the house purchased by the home-buying family is located will be checked. If there is no house in the district, county (city) where the purchased house is located, it can be recognized as the first house when applying for a personal housing loan. For example, if a family has a house in Xihu District but no house in Shangcheng District, when purchasing a new house in Shangcheng District, it can be recognized as the first house when applying for a personal housing loan.

The same operation is also carried out in Hefei. For example, if Zhang San's family has a house in Luyang District but no house in Baohe District, when they purchase a new house in Baohe District, it can be recognized as the first house when applying for a personal housing loan.

Guan Rongxue, senior analyst at Zhuge Data Research Center, believes that the scope of the first-home recognition standards in many places has been narrowed to the district level, which reflects the important direction of continued policy relaxation and one city, one policy. It is expected that the subsequent policy adjustments will further increase in depth and breadth.

In addition, policies issued in many places also mentioned that if houses are listed for sale, the number of houses can be reduced accordingly.

The new policy released by Chengdu mentioned: "If there are houses that are listed for sale within the district (city) or county where the house is to be purchased, the number of houses will be reduced accordingly."

The first-tier city of Guangzhou also has a similar statement: within the restricted purchase area, if resident households use their own homes as rental housing and go through the house rental registration and filing procedures, or obtain housing information codes from the Guangzhou existing housing transaction system and list them for sale, the number of family housing units will be reduced accordingly when purchasing housing.

Optimizing the housing unit identification standards will help release more housing demand

Guan Rongxue believes that the further optimization of the first-home recognition standards, coupled with the fact that the current first-home loan interest rates and down payment ratios are at historically low levels, means that more home buyers will be able to enjoy the purchase and loan conditions for their first home, releasing more housing demand and playing a positive role in the recovery of the real estate market.

Chen Wenjing, director of market research at China Index Academy, also mentioned that there is still a large gap between the down payment ratio and mortgage interest rate for the first and second sets in some cities. In most cities, the down payment ratio for the first set is 15%, and the down payment ratio for the second set is 25%, with a difference of 10%. In some cities, the mortgage interest rate for the first set is around 3%, and the mortgage interest rate for the second set is still higher than 3.5%, with a gap of about 50 basis points in the mortgage interest rate. Optimizing the housing loan recognition policy by district, and judging the first set as the first set if there is no house in the district where the house is purchased, will undoubtedly increase the number of buyers who purchase the first set of housing, and they can enjoy the first set of housing loan interest rate and down payment ratio. The threshold and cost of purchasing multiple houses in different districts will be greatly reduced, which is more conducive to driving the release of improved demand.

Judging from market performance, institutional monitoring data show that the second-hand housing market in key cities continues the trend of "trading price for volume", and the transaction volume maintains a certain scale; at the same time, second-hand housing has diverted the new housing market, and the new housing market may still be under pressure in the short term.

Monitoring data from the China Index Academy shows that from January to July this year, 590,000 second-hand residential houses were sold in 15 key cities, a year-on-year decrease of 2.8%; in terms of monthly data, 99,000 houses were sold in July, a month-on-month increase of 2.9% and a year-on-year increase of 42.5%. In terms of price, according to the China Index 100 Cities Price Index, in July 2024, the average price of second-hand residential houses in 100 cities fell by 0.74% month-on-month, which has fallen for 27 consecutive months and fell by 6.58% year-on-year.

Judging from the transactions in key cities, from January to July, the performance of the second-hand housing market was generally better than that of the new housing market: the second-hand housing prices in Shanghai, Shenzhen, Hangzhou and Qingdao all increased year-on-year, while the new housing prices decreased year-on-year; the cumulative decline in second-hand housing prices in Beijing, Nanjing, Chengdu and Foshan was around 10%, while the cumulative decline in new housing sales exceeded 30%.

The report of China Index Academy shows that the current replacement transmission effect between the second-hand housing market and the new housing market has weakened, while the substitution effect has increased, which has diverted some housing demand. The reason is that, on the one hand, it is the supply structure of new houses. After years of development, the transaction volume of second-hand houses in many core cities has exceeded that of the new housing market, and the supply of new houses has gradually suburbanized. For example, the proportion of new houses outside the Fifth Ring Road in Beijing and the Outer Ring Road in Shanghai is about 80%, while the transaction volume of second-hand houses is more concentrated in the core area. In the downturn of the market, residents are more inclined to purchase real estate in the core area; on the other hand, residents still have some concerns about the delivery of new houses, and prefer existing houses.