CHINA Trends and Developments Contributed by: Lingyue Sun, Xiang Mao and Yi Wu, Merits & Tree Law Offices
Overview In 2023, China’s real estate market remained in a complicated situation. Following the passing of the COVID-19 pandemic, demand has been reactivated to some extent, while the supply- demand relationship has changed significantly due to the negative growth of the population in the last few years. Moreover, a number of lead - ing real estate developers have recently run into trouble. In 2023, their situation did not materi - ally improve. Many developers are still looking for financing and restructuring opportunities amid the debt crisis. The positive side is that the central and local governments promulgated a series of policies in 2023 aiming at stabilising the market, including active policies targeting both demand and supply. However, considering the uncertainty of the overall economic environ - ment of the world at the present time, as well as the fact that China’s domestic real estate market has remained depressed for a long time, the real estate industry is still moving forward and con - tinuously seeking new opportunities to improve the situation. Central Government Setting the Tone for the Real Estate Industry Faced with the complex domestic macro-eco - nomic environment, China’s central and local governments have issued successive policies in the past year in order to stabilise the real estate market. It is generally considered that 2023 may be the year in which most impactful policies were issued for China’s real estate industry. In April, during the annual session of the Nation - al People’s Congress, the then premier Mr Li Keqiang set the tone for real estate policy. In summary, he mentioned four objectives, includ - ing:
• responding to the reasonable housing demand; • effectively preventing and resolving the risks of leading real estate companies; • improving the balance sheet and preventing disorderly expansion of real estate compa - nies; and • promoting the steady development of the real estate industry. It seems that the fourth point should be set as the ultimate goal, while the other three points propose solutions from both the demand and supply side. Policies in Relation to Demand Aiming to Stimulate Consumption Policies with regard to demand were concen - trated in the second half of the year. On 18 August 2023, the Ministry of Housing and Urban-Rural Development, the People’s Bank of China, and the National Financial Regula - tory Administration jointly issued the Notice on Optimising the Standards for Identifying of the Number of Housing Units in relation to Individ - ual Housing Loans, according to which, when a family applies for a loan to purchase a resi - dence, so long as the family members do not hold a residence in their names, the loan rate for the first residence should apply, regardless of whether they have borrowed loans in the past. On 31 August 2023, the People’s Bank of China and the National Financial Regulatory Adminis - tration issued the Notice on Matters related to Reducing the Interest Rates of Existing Individu - al Housing Loans for the Purchase of First Hous - ing Units, according to which, if the residence to be purchased by a specific loan borrower is deemed to be their first residence in the city according to the new policy, the borrower may
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