Two of China’s most prosperous cities, Hangzhou (east) and Xi’an (north), have decided to lift restrictions on property purchases in an attempt to revive a sluggish market. Hangzhou and its 12.5 million inhabitants, which hosts the headquarters of the Chinese e-commerce giant Ali Baba he said on Thursday that he wanted to “promote stable and healthy development” of the real estate market by lifting all restrictions.
From now on, “those who buy their home within the city limits will no longer be subject to verification”, added the municipality located about 200 km southwest of Shanghai. The city of Xi’an, which has 13 million inhabitants, also announced on Thursday the end of restrictions in the same area. Many Chinese cities have implemented very strict regulations in the past ten years to calm the speculative real estate fever that reigned at the time.
Unnecessary measures
But they are gradually coming back on these measures against a background of crisis between the giants of the sector between low demand and falling prices. Hangzhou, famous for its tea plantations and West Lake, is also at the forefront of technological development and is one of the most sought-after and expensive places in China for real estate. This announcement quickly attracted more than 230 million views on the Chinese social network Weibo, where many users questioned the usefulness of these measures.
“Given the real estate prices in Hangzhou, what is the point of reducing purchase restrictions? I still can’t afford it.”, notes one of them. Bill Bishop, the editor of an influential Sinocism newsletter, saw it as a “sign of despair”. More than twenty cities have lifted restrictions on purchases since the beginning of last year, according to an AFP tally, including Chengdu in the southwest last month. Megacities such as Beijing, Shanghai and Shenzhen have simplified the procedures but without abandoning them completely.
25% of Chinese GDP
Real estate has long represented in the broadest sense more than a quarter of China’s GDP (gross domestic product) and constituted an important source of employment. But this key sector is now under pressure, with some developers on the verge of bankruptcy (Evergrande, Country garden…) and the falling prices that dissuade the Chinese from investing in stone. Beijing’s support measures for the sector have so far had little effect. Last month, the International Monetary Fund estimated that Beijing should take “strong measures” to reduce the amount of unfinished housing and give more space to “market based corrections”in a very bad real estate sector.