A combination of tailored policies targeting home transactions and home inventory destocking was announced by Chinese authorities in mid-May, and it has led to a resurgence in sales and growing recognition of the sector's transition to a new development model.

Over more than a decade, city-specific measures were implemented in China to place strict rules on home transactions to curb rapidly rising home prices. A major pillar of the Chinese economy, the sector is gearing up for readjustment amid a market cooldown and industry policy change.

China on May 17 announced new policies to prop up the property market, including policies to cut minimum downpayment ratios, abolish the commercial mortgage rate floors for first and second homes, and establish a re-lending facility that supports local state-owned enterprises to use those funds to buy commercial homes for affordable housing.

A white list mechanism also seeks to help cash-strapped developers access credit, complete housing projects, and ensure homes are delivered to buyers.

Sales uptick

The market has responded quickly to the new policies aimed at boosting home sales. In big cities in east China's Jiangsu Province, popular housing projects have seen numbers of potential home buyers return.

In Jiangsu's Changzhou city, a local kindergarten caretaker who provided his surname as Si just bought his first home in the city's Zhonglou District. Si acquired a 30-year loan of 840,000 yuan (about 118,133 U.S. dollars) to buy the home, which cost a total of 1.33 million yuan. Thanks to lowered mortgage rates, he said he would save more than 40,000 yuan on loan interest.

"Now that I've bought the apartment, my next plan is to register my hukou (permanent household residency registration) in Changzhou, and then my child can enroll at a school here and stay with me," he said.

In Shanghai's Jiading District, property sales director Xiao Xianxing told Xinhua that his company's new property project saw its client numbers return on May 28, the day Shanghai implemented revised measures aimed at propping up the property market. And on the day the project opened its sales, 85 percent of homes were sold.

Shanghai's specific measures included easing home-purchase restrictions for non-Shanghai residents, allowing families with two or more children to purchase an additional home, and lowering the minimum downpayment ratio for individual commercial housing mortgages. Xiao said that these measures increased buyer demand for bigger or additional homes, leading to a rise in sales.

Market data from GF Securities shows that from May 1 to 29, second-hand home transactions increased 31.1 percent year on year in 74 cities in China, with a particularly notable increase from May 17, from which point daily transactions rose 15 percent day over day.

"The policy adjustments, especially the lowered downpayment ratio and mortgage rates, make purchasing homes easier and reduce the financial burden for home buyers," said Yu Xiaofen, head of the real estate research institute at the Zhejiang University of Technology.

White list mechanism for developers

Among efforts to stabilize a property sector weighed down by debt problems and boost confidence in an industry that accounts for nearly 6 percent of the country's GDP, the white list financing mechanism China launched in late January is oriented toward high-quality property projects and works mainly to address the financing needs of qualified developers.

Under the mechanism, local authorities recommend real estate projects eligible for financial support to financial institutions. They also coordinate with financial institutions to fulfill the requirements of these projects.

The mechanism has been implemented in all cities above the prefecture level across the country. By May 16, commercial banks had approved loans totaling 935 billion yuan for white list projects through internal approval processes.

Dong Jianguo, vice minister of housing and urban-rural development, said that the mechanism's role in financing coordination should be given further play to meet the reasonable financing needs of property projects, and banks should do their best to provide lines of credit to projects on the white list.

Moving toward new development model

Analysts say the policy package stemmed from the need to rebalance the supply of homes and market demand, and the need to mitigate risks. They also say that these policies point to a new development model for China's property sector in the long term.

"The new policy package seeks to boost real housing demand, stabilize market expectations, invigorate transactions and boost confidence in the market going forward," said Yu Xiaofen, noting that the refined policies also speak to the sector's development cycle and indicate the future driving force of the sector's longer-term development.

Du Xianghui, deputy director of the housing and urban-rural development department in Changsha, the capital of central China's Hunan Province, believes that the continuously increasing urbanization rate will continue to support the growth of China's real estate market in the long term. "People have a desire to live in good houses, and real estate as an industry has room for development."

"In China, more than 10 million college students graduate every year and a large number of rural residents migrate to cities, and increasing the supply of affordable housing is important to meet their basic housing needs," said Liu Lin, a researcher at the Academy of Macroeconomic Research under China's National Development and Reform Commission.

One of the highlights of the policy package is a 300-billion-yuan re-lending facility. Local state-owned enterprises use the facility to obtain funds, which they are encouraged to use to purchase reasonably priced, completed commercial homes for affordable housing. It is expected that this process will fast-track the destocking of the commercial housing inventory.

Official data shows that 65 cities in China have already unveiled their affordable housing construction plans and relevant projects for this year.

Liu Lin said that affordable housing, along with the construction of dual-use public infrastructure that can accommodate emergency needs and the redevelopment of urban villages, will promote investment and consumption. "They will attract a large amount of direct investment, as well as upstream and downstream investment, and boost consumption directly in sectors such as home decor materials, furniture and home appliances."

Ni Hong, minister of housing and urban-rural development, said that the government is working hard to help more people live in better homes, and that it will work to build livable, resilient and smart cities through improved planning, construction and management.