Harbin, in China's northeastern Heilongjiang province, is providing subsidies of up to 100,000 yuan (US$15,497) for homebuyers under 35.
The city, a provincial capital, said it would also encourage developers with good credit profiles to re-embark on presale activity sooner than allowed earlier. Such companies can now apply for presale permits for each block, as long as work on one floor of a tower higher than eight storeys or two floors of a tower less than eight storeys has been completed. Earlier, its government said in 2019 that presale permits could can only be approved when two-thirds of a block had been fully completed.
"Housing in some cities has gone from overheated to too cold. Such favourable housing policies can help boost the housing market," said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute.
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The change of heart in Harbin, which was announced over the weekend, comes in response to the crisis at China Evergrande Group, the country's largest developer by sales as well as its most indebted home builder. Evergrande's struggles are weighing on sentiment, and other big developers have reported a plunge in their sales.
For instance, Country Garden Group, China's second biggest developer by sales, reported that its contracted homes sales in September had declined by about 20 per cent year on year to 45.66 billion yuan. China Vanke, the third largest home builder, sold 36.11 billion yuan worth of homes last month, only two-thirds of the level seen in 2020.
"Stabilisation is important. We all know that an overly hot market will lead to runaway home prices, but now we are seeing a new problem emerging - a cold housing market in which property developers might face financial risk yet again," Yan said. "We will see more cities [easing restrictions], especially noncore second-tier cities such as Harbin, as well as smaller ones," he added.
Harbin's government also said that developers with good credit profiles will be able to get back part of their presale funds held in government escrow accounts as quickly as possible to relieve their cash flow pressure.
China's new home prices grew at their slowest pace in the past eight months in August. The average new home price across 70 major cities rose 0.2 per cent month on month in August, slowing from a 0.3 per cent increase in July, according to National Bureau of Statistics data.
We will see tailored home price measures in different cities and - whether it is favouring or cooling measures - the only purpose is to keep home prices stable
Yan Yuejin, E-house China Research and Development Institute
"If we continue to see a sharp decline, it is possible that the government will loosen some policies, particularly relaxed credit and easing mortgage policies," Yang Kan, a property analyst with Ping An Securities, said in a research note on Monday. "The central government and the local authorities will work together to stabilise the real estate market."
As a result, cities with sharp home price increases will continue to see cooling measures. Dongguan, for example, issued guidance prices last week for its 218 major lived-in residential estates, some of which were at discounts of as low as 50 per cent on their current asking prices. The Great Bay Area city reported the fastest increase in home prices across China last year.
Mortgages for lived-in homes from banks will be handled based on these guidance prices rather than selling prices, which means homebuyers in Dongguan will need to stump up much larger down payments.
"We will see tailored home price measures in different cities and - whether it is favouring or cooling measures - the only purpose is to keep home prices stable," said E-house China's Yan.
More from South China Morning Post:
- As Evergrande totters, cracks in stressed Chinese developers widen as rating outlook dims and borrowing costs jump
- As the Evergrande saga unravels, China's property market can expect a further slowdown
- China accelerates infrastructure investment plan as Evergrande woes add to economic slowdown fears