China Props Up Slumping Housing Market

Apartments in Shanghai. (Catr82/Wikipedia)
Apartments in Shanghai. (Catr82/Wikipedia)

To combat a growing lack of confidence in China’s real estate market, local governments are loosening restrictions on who can buy houses, offering incentives for those who do, and winding back previous price controls.

Communist Party media has also begun to talk up the market’s latent potential, in an apparent attempt to bolster confidence in housing prices.

But across China, real estate developers are scrambling to get rid of inventory, resorting to unorthodox sales techniques that suggest a deep concern about the future.

A collapse in real estate prices would be catastrophic for the Chinese economy: the vast majority of Chinese wealth is tied up in housing, and the real estate industry has been the locomotive of growth for at least a decade.

‘Saving the Market’

In mid-level cities across China—which are still enormous by global standards—officials have wound back restrictions that have been in place for some years, in order to get people to buy more houses. Such measures are known in Chinese as “jiushi,” or “saving the market.”

Wuhan, a transportation hub in central China on the banks of the Yangtze River, has encouraged college students to move there to study. They can obtain a local residency permit once they graduate, gain local employment, and crucially, purchase a home, the new policy says.

Official residency status in Chinese cities is controlled by the government through what it calls the “hukou,” or household registration system, which acts as an internal visa or passport mechanism inside China.

People born in the countryside are relegated to rural hukous. Without a city hukou, they become second-class citizens upon moving to a city, unable to send their children to school or buy apartments or cars.

Other cities have dangled the promise of local hukous in exchange for a purchase of housing, according to Xinhua, the official Chinese news agency.

Read original article here.

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