Plan aims to clear real estate backlog

Efforts to fix the flagging real estate market in 2026 will be scaled up, with particular focuses on introducing city-specific policies to reduce inventories, promoting the construction of quality housing and advancing the renovation of old residential communities, officials and experts said.

Speaking at a national conference in late December, Minister for Housing and Urban-Rural Development Ni Hong said authorities will implement a targeted, city-by-city approach to manage new housing supply and reduce existing housing inventory.

According to the Shanghai-based E-House China R&D Institute, the average time needed to sell all the existing new home inventory in 100 major cities reached 27.4 months in November — nearly twice the 14-month period widely regarded as the upper limit of a balanced market.

The clearance period varies dramatically by city tier: first-tier cities averaged 17.1 months, second-tier cities 22.6 months, while third — and fourth-tier markets faced a substantially longer wait of 40.3 months.

China's future housing and land supply will be more closely calibrated to population flows and industrial development plans, to avoid the mismatches that have led to housing gluts in some regions, said Chen Wenjing, director of policy research at the China Index Academy.

The Ministry of Natural Resources released a notice in August last year, making it clear that cities facing high inventory pressure and excessively long digestion periods must suspend the release of new land for commercial housing development.

For other cities with relatively long digestion periods, the scale and pace of land supply for commercial housing shall be reasonably controlled, the ministry said.

Reducing housing inventory has emerged as the most urgent task for stabilizing China's real estate market, necessitating support from a broader and more diversified toolkit of policy measures, according to analysts.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, suggested that further relaxation of home purchase restrictions in the core areas of Beijing, Shanghai and Shenzhen could be introduced.

"Such a move would send a strong signal, demonstrating the government's commitment to stabilizing the property sector and boosting overall market confidence," Wang said.

These three cities have already eased certain purchase limits — including lifting restrictions in suburban zones, allowing families to buy additional homes, and removing curbs for non-residents in outer districts — though core urban areas still maintain some controls.

Wang said that the property markets in these major cities act as key national barometers. Their stabilization is likely to generate a positive ripple effect, helping to steady expectations and guide sentiment in smaller cities that are under greater market pressure.

"More importantly, measures such as targeted cuts to existing mortgage rates and fiscal interest subsidies should be rolled out to reduce the burden of housing loans for residents," he said. "This is a crucial step to stimulate market demand and shift property market sentiment at this stage."

Wang also highlighted the potential of "substantial tax and fee reductions in property transaction processes" as another effective measure to revive market activity. He pointed out that there remains "ample policy space" in these areas to provide further support.

The annual Central Economic Work Conference, held in December, also outlined a key measure to reduce real estate inventory, by prioritizing the purchase of existing commercial properties for conversion into affordable housing.

Ni, the top housing regulator, said, "We will strengthen the supply of government-subsidized housing to provide a safety net for low-income urban families facing housing difficulties, and adopt city-specific measures to meet the basic housing needs of various groups, including new urban residents and young people."

The People's Bank of China established a 300-billion-yuan ($42.96 billion) relending facility for affordable housing in 2025, with the central bank able to provide up to 100 percent relending support to commercial banks.

This quota, along with local government bond allocations, is expected to be expanded this year to further fund the acquisition of existing homes, said Li Yujia, chief researcher at the residential policy research center of the Guangdong Planning Institute.

Local authorities across China have also rolled out various measures to stimulate new housing demand and directly reduce existing property inventory, primarily by promoting housing "trade-in" programs and expanding the use of housing vouchers in urban village redevelopment projects.

The housing trade-in is a government-backed initiative to help homeowners swap old homes for new ones, often with subsidies or the government purchase of the old property, while the housing vouchers act as a key mechanism to resettle residents, replacing direct cash for property with vouchers to purchase new homes.

"The policies aim to generate new sales for developers while reducing the overhang of unsold homes in certain cities," Li said.

Controlling the addition of new homes is the necessary first step, the longer-term outlook, however, hinges on higher-quality housing that aligns with people's evolving demand, analysts said.

China's real estate sector continues to show significant potential for development, driven by the ongoing advancement of new urbanization and rising public expectations for higher-quality housing, said housing minister Ni.

Ni called for building "quality homes" with high standards, thoughtful design, quality materials, sound construction and proper maintenance.

"This means not only constructing new homes to meet these benchmarks, but also gradually renovating old housing units into 'quality homes'. By doing so, the approach will help upgrade the industrial chain and fulfill the public's diverse housing needs through high-quality supply," Ni said.

According to data from the China Index Academy, in the first three quarters of last year, the proportion of 120-144-square-meter units on the market in 30 key cities increased to 30 percent. Large unit types have become the mainstream of the new housing market, with the share of units over 120 sq m rising across cities.

An official at the Office of the Central Commission for Financial and Economic Affairs said that a considerable number of urban residents are still not fully satisfied with their current housing conditions, leading to a significant demand for upgrading — whether by swapping old homes for new ones or moving to larger units.

Many cities have reported an increasing willingness among residents to sell their existing properties and purchase new ones. The share of pre-owned home transactions rose from 28 percent in 2021 to 45 percent in 2025, indicating that well-built properties continue to find ready buyers. This trend underscores the considerable latent potential of the housing upgrade market, the official added.

"Halting the downward trend in the property market is crucial to mitigate the negative wealth effect on household consumption," said Robin Xing, chief China economist at Morgan Stanley.

"Restoring confidence in this key asset class will be instrumental in unlocking spending power across the economy," he said.

wangkeju@chinadaily.com.cn