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China is considering reforms in housing sales system to boost property sector

China is undergoing significant reforms in its housing sales system, moving away from the traditional pre-sales model to a „sales after construction“ approach. This shift is part of a broader effort to promote a healthy and sustainable property sector in the country. Dong Jianguo, vice-minister of housing and urban-rural development, has highlighted this reform as one of the key initiatives to transform the real estate market.

The pre-sales system, where developers sell properties before construction is complete, has been the norm in China since the 1990s. This practice was initially adopted to address funding shortages for developers and to expedite urban housing construction in response to surging demand. However, in recent years, the system has faced criticism due to issues such as unfinished projects and disputes over property quality. Ensuring timely and satisfactory delivery of homes has become a top priority for the government.

Recognizing the need for reform, the Ministry of Housing and Urban-Rural Development has started encouraging the sales of completed new homes in regions where conditions are mature. Several cities, including Beijing, Suzhou, and Hefei, have launched pilot programs to test this new approach. The outcomes of these pilots have been promising, with the proportion of completed home sales in the new home market increasing significantly.

Analysts believe that a new property development model should transition from „high leverage and high turnover“ to „low leverage and greater focus on operation.“ The shift towards completed home sales is seen as a step in the right direction to achieve this goal. The Ministry’s efforts align with the resolution adopted at the third plenary session of the 20th Communist Party of China Central Committee, which pledged reforms to change the way real estate development is financed and improve the advance purchase system for commodity housing.

The ultimate goal of these reforms is to eliminate the drawbacks of the previous high-debt, high-turnover, and high-leverage approach in the real estate sector. By improving policies and systems in financing, taxation, land, and sales, China aims to meet people’s demands for better homes and create a more sustainable property market. With a steady shift towards completed home sales, a new development model for China’s property sector is gradually taking shape.

In conclusion, the reforms in China’s housing sales system represent a significant step towards creating a more stable and sustainable property market. By moving away from the traditional pre-sales model and promoting completed home sales, the government aims to address issues such as unfinished projects and property quality disputes. With ongoing pilot programs and policy improvements, China is laying the groundwork for a more efficient and consumer-friendly real estate sector.

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