CHINA Trends and Developments Contributed by: Zheyuan Jin, Xiang Mao and Lingyue Sun, Merits & Tree Law Offices
commercial formats, including retail, office, mixed-use complexes and hotels. The majority of pipeline pro - jects are located in core business districts of first-tier and strong second-tier cities. Relaxing Purchase Restriction Policies in Major Cities to Boost Residence Housing Market China’s real estate market, especially that of residence housing, has witnessed a fundamental shift in supply- demand dynamics. Some cities are confronted with challenges including downward pressure on housing prices, slow inventory digestion and weak market confidence. As a phased administrative regulatory measure, the optimisation and relaxation of housing purchase restrictions have become a key initiative for local governments to stabilise the market, prevent price declines and safeguard people’s livelihoods as well as family property. Throughout 2025, local governments and housing construction and real estate authorities across the country officially issued documents to lift purchase restrictions, with a view to lowering the threshold for home purchase and unleashing reasonable housing demand. The main local regulations available for refer - ence are as follows. For first-tier cities, policies are targeted at stabilising core area markets and preventing sharp price drops. • Beijing: on 8 August 2025, the municipal gov - ernment lifted limits on the number of new and second-hand homes eligible buyers could pur - chase outside the Fifth Ring Road, aiming to curb excessive price declines in suburban areas. These measures were designed to stimulate upgrade demand and support price stabilisation in urban districts. • Shanghai: on 25 August 2025, the municipal government removed limits on the number of homes eligible buyers could purchase outside the Outer Ring, and lowered the social security or tax payment threshold for home-buyer qualification, easing downward price pressure in outer suburban areas. • Shenzhen: on 5 September 2025, local authori - ties narrowed the scope of purchase restrictions, retaining controls only in core areas while imposing
no limits on the number of properties or waiving buyer qualification reviews in non-restricted zones. This policy diverts home-buyer demand across regions and underpins housing prices at the local level. Based on official data released by the National Bureau of Statistics and local authorities, the easing of pur - chase restrictions has produced a divergent pattern in curbing housing price declines: stabilisation in core cities, recovery in second-tier cities, and slower declines in third- and fourth-tier cities. According to National Overview, from January to Feb - ruary 2026, floor space sold for new commercial hous - ing reached 92.93 million square metres, down 13.5% year on year, while sales volume totalled CNY818.6 billion, down 20.2% year on year. In January 2026, the month-on-month decline in commercial residential sales prices across first-, second- and third-tier cities generally narrowed. Following this wave of relaxation of restrictions, first- tier cities saw relatively strong market activity driven by policy support and released demand, with prices stabilising or edging up slightly. Second-tier cities, including Chengdu and Wuhan, recorded a rebound in transaction volumes thanks to policy stimulus and improved demand, yet remained in an overall adjust - ment phase. However, some cities with strong region - al development potential saw modest improvements in demand. Foreign Capital Expands Buying in China Against a backdrop of sluggish global economic recovery and a reshaped asset allocation paradigm, China’s real estate market has emerged as a key des - tination for global capital deployment. Transaction volumes of foreign investment in China’s real estate sector staged a steady rebound in 2025–2026. Foreign investment in China’s real estate market has picked up noticeably since 2025, with a notable surge in both volume and value of blockbuster deals at the start of 2026, serving as a strong signal of market recovery. Data from the National Bureau of Statistics shows that foreign capital utilised in China’s real estate
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