Mainland China is gradually removing the review of home purchase qualifications
Recently, the Guangzhou Municipal Government announced the “Notice on Further Optimizing Policies for the Stable and Healthy Development of the City’s Real Estate Market”, canceling the qualification review for buyers of houses with a construction area of 120 square meters (approximately 1,291 square feet) or more, which is the so-called Purchase limit.
The mainland’s home purchase qualification review is not to examine the affordability of home ownership, but to implement the policy of “housing for living, not for speculation” and restricting non-local buyers and people who already own local homes from purchasing local homes. When the real estate market was overheating in the past, the mainland government enacted various purchase restrictions to curb non-owner-occupied investments from distorting the market.
Since a large number of developers in the Mainland experienced explosions, in order to speed up the return of funds, developers have reduced prices for sales, causing prices to drop repeatedly. This situation has caused investors to lose confidence. Not only do they dare not enter the market, some even fight with developers to withdraw from the market, making the market even weaker and causing construction costs to plummet. This kind of development will evaporate the social assets of the mainland and weaken people’s consumption intention and investment ability, which is very detrimental to economic development.
In order to reverse the situation, the mainland has successively lifted home purchase restrictions in third- and fourth-tier cities, but the effect has not been outstanding. Recently, such market optimization policies have been extended to first- and second-tier cities. Although Guangzhou’s relaxation of purchase restrictions this time is limited to large units of more than 120 square meters, the direction of the policy is very clear.
It is obvious that the government has realized that the most urgent need for current policies is no longer to restrict the entry of funds into the real estate market, but to introduce more funds into the real estate market. At least it should no longer hinder the entry of funds into the real estate market. Only in this way can we help developers reduce inventory and give banks a chance to gradually recover the money they loaned to developers. Only in this way can banks continue to provide credit to developers. Otherwise, even if the central government continues to appeal, banks will not lend money to a developer that is about to go bankrupt.
China’s real estate has been over-developed. If the houses built can only be sold to self-occupied households, they are destined to be indigestible, and the funds previously invested in real estate will not be released for a long time. For a society’s economy to develop rapidly, it needs sufficient funds to provide liquidity. At present, China has tens of trillions of funds trapped in real estate. If the idle capital of the private sector is not used to release all of these funds that could originally provide liquidity, China’s economic development will inevitably be hindered.
The announcement of the lifting of purchase restrictions in Guangzhou coincides with the Spring Festival. People are busy preparing for the New Year, so the market reaction is not strong. I believe that the real effect will not be seen until after the Spring Festival. However, the market generally believes that this kind of policy should be promoted not only in Guangzhou, but also in other first-tier cities, and should not be limited to houses with an area of more than 120 square meters. Only in this way can more funds be released.
2024-02-04 20:31:56
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