China’s efforts to revive homebuyer demand gathered steam on Thursday when two major cities scrapped all their remaining curbs on residential property purchases, a move that more local governments are expected to follow.
Developer stocks surged after Hangzhou, the capital of eastern Zhejiang province, said it will remove eight-year-old restrictions on residential property purchases and no longer review the qualifications of homebuyers. Xi’an, the capital of Shaanxi province, announced similar steps hours later.
“Hangzhou is sending a strong signal that homebuying loosening can be absolute and decisive,” said Yan Yuejin, research director at E-house China Research and Development Institute. “There has been growing criticism that current local easing measures are too small and too slow, just like squeezing toothpaste out of a tube.”
Hangzhou, a city of about 13 million and home to Alibaba Group Holding Ltd. and Ant Group Co., made the move after the ruling Communist Party vowed last week to study measures to tackle excess housing inventory that’s exacerbating the nation’s property slump. Larger cities including Beijing and Shenzhen have taken only incremental easing steps since the policymaker meeting.
Xi’an, with a population of about 13 million, will remove all restrictions on residential property purchases and no longer review the qualifications of homebuyers for both first and second homes, a statement on the local government’s website showed Thursday afternoon.
A Bloomberg Intelligence gauge of Chinese developer shares climbed 5.5% on Thursday. It has gained 28% since mid-April on hopes for further easing.
“Hangzhou’s fully lifting of home purchase curbs will benefit property stocks and it’s in line with earlier expectations for easing trends,” says Jeff Zhang, an analyst at Morningstar Inc. in Hong Kong.
All cities — with the exception of Beijing, Shanghai and Shenzhen, where the housing market is stronger — will emulate Hangzhou to remove homebuying curbs, said Zhang Hongwei, founder of Jingjian Consulting, which advises real estate companies.
Last month, the southwestern city of Chengdu fully removed buying restrictions, joining dozens of smaller peers. The capital of Sichuan province has a population of about 21 million.
Sentiment among homebuyers in China has been crushed by falling prices and worries that cash-strapped developers won’t be able to finish building properties. Home sales at major developers dropped about 45% in April.
Hangzhou will also strengthen credit support for the property sector, including lower mortgage payments for some homebuyers, according to the statement.
