Lingang free-trade zone lowers bar for home purchases, as China’s property easing measures arrive in Covid-19 ravaged Shanghai

Lingang will allow talent to buy homes after working there for three months, down from at least one year previously
China ‘needs a stable property market to support its economic growth’: CGS-CIMB Securities analyst

China property

Sandy Li

Published: 5:30pm, 14 Apr 2022

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China’s property easing measures have reached Shanghai, the site of its worst Covid-19 outbreak, as Beijing tries to bolster the world’s second-largest economy.

Lingang Special Area of China (Shanghai) Pilot Free Trade Zone, which is home to Tesla’s first manufacturing facility outside the United States, will allow talent to buy homes in the free-trade zone after working there for three months, down from at least one year previously, according to the Lingang Special Area’s website.

The free-trade zone has attract a total of 19,800 people, including 13,000 who settled there in the last year alone, since launching the scheme in 2019.

“China is facing a challenging year ahead. It needs a stable property market to support its economic growth,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities.

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Covid-19 outbreaks are yet again weighing on China’s economy. It was hit hard in the first quarter of 2020, shrinking by 6.8 per cent after coronavirus outbreaks triggered a near-nationwide lockdown. Fresh outbreaks are popping up around the country once again and have led to massive lockdowns, such as those in Shanghai, its financial and trade capital.

Last month, Premier Li Keqiang confirmed that China had set an economic growth target of “around 5.5 per cent” for 2022 after its economy grew by 8.1 per cent last year.

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“The real estate industry [usually] accounts for a third of China’s gross domestic product, which is why it is so important to the nation’s economy and job market,” Cheng said.

Sales of China’s top 100 developers plunged by 47 per cent in the first quarter of 2022 from a year earlier, as rising cases of debt defaults kept buyers on the sidelines, industry data shows.

“To a certain extent, policymakers in Beijing have had to compromise, in light of the unprecedented challenges ahead for China,” Cheng said. A statement issued following a central government meeting led by Vice-premier Liu He on March 16 was a “turning point” for the property sector, he said, adding that “we anticipate more supportive measures in the near future that will help developers resolve their liquidity problems, in turn reducing the risk of defaults”.

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Zhengzhou, the capital of China’s central Henan province, was the first mainland Chinese city to ease property restrictions last month. The city eased restrictions on the purchase of a second home in early March. It was followed by Harbin in Heilongjiang province and Fuzhou, the capital of Fujian province, which also eased property curbs to stimulate sales.

This week, Suzhou and Nanjing joined the list of cities easing property restrictions. Suzhou will now allow non-local residents to buy homes after they have paid 24 months’ worth of social security, down from three years’ worth previously. It has also cut the restriction on the resale of homes to three years from five.

Nanjing said it will allow non-locals with identity cards to buy their first homes in the city.

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More than 60 local governments have ripped up old, restrictive rules in the first quarter of this year to revive the property market. They have reduced down-payment requirements and costs of mortgage financing, and stepped up financial support for cash-starved developers.

“Relaxation measures are extending from Suzhou and Nanjing to Shanghai this week,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute. “China’s property market is entering a new era.”

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