China Considers Lifting Price Cap on Local Government Housing Purchases to Address Real Estate Crisis
China’s central government is reportedly exploring the possibility of removing the price ceiling placed on local governments for purchasing unsold residential units, as part of efforts to accelerate the sale of millions of vacant homes and revive the sluggish real estate market, according to sources cited by Bloomberg News.
Under the proposed plan, local authorities across the country would no longer be limited by the current price cap, which aligns with affordable housing rates in the same neighborhood. This change could provide city and provincial officials with greater flexibility to offer competitive prices, potentially easing the financial burden on real estate developers struggling with unsold properties.
Currently, for low-cost housing in China, local governments can only sell units to qualified buyers with a profit margin not exceeding 5%, after accounting for land and construction costs.
The potential policy shift is expected to offer local governments more autonomy in managing unsold housing inventory, improving certain economic aspects that have not been appealing to both developers and state buyers. The initiative comes as Premier Li Keqiang reaffirmed his commitment to granting local governments more authority in determining how to handle unsold residential units, following a challenging start to the policy’s implementation.
China has set its GDP growth target at around 5% for 2025, despite looming challenges such as the ongoing trade war and adverse economic conditions. This growth target was outlined by Premier Li in his report during the opening session of the National People’s Congress, underscoring the government’s ambition to foster economic growth amid persistent economic difficulties.
The Chinese economy is currently grappling with a prolonged real estate crisis, weak consumer spending, and sluggish private sector investments. These challenges highlight the need for strategic policy changes to stabilize the market and foster growth.
Sources:
- Bloomberg News
- China’s National People’s Congress