China is considering banning pre-sales of homes, requiring developers to sell only completed properties to reduce risks and stabilise the housing market.
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The proposed reform is part of a “new model” of real estate development being formulated by the central government, though details are still being finalised.
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The rule would apply only to future land sales, excluding public housing, with local governments allowed implementation flexibility.
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The move aims to limit new housing supply and prevent further price declines, especially in smaller cities where the downturn has been more severe.
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China’s pre-sales system fueled excessive supply and developer debt, leading to unfinished projects and mortgage boycotts.
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Around 90% of homes were pre-sold in 2021, falling to 74% in 2023, but developers remain reliant on advance payments for cash flow.
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Analysts warn the ban may exacerbate funding strains, slow land purchases, and curb new construction and investment.
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The government has pledged to accelerate supportive financing mechanisms for this new model, though details remain sparse.
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April data showed new-home sales from top developers fell 8.7% y/y, adding urgency for reform amid weak demand and fresh U.S. tariffs.
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Over 30 cities have already piloted finished-home sales, and the central government signaled it will promote this nationwide in 2025.
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The info was out Thursday ICYMI.
This article was written by Eamonn Sheridan at www.forexlive.com.