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Major Chinese cities are making it easier to buy homes to boost the depressed real estate market

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Two major cities in China have lifted all remaining restrictions on home buying, a sign that local governments are trying to revive the embattled real estate sector and boost growth in the world’s second-largest economy.

Hangzhou, a city of 12.5 million and home to tech giant Alibaba and EV maker Geely, has eased restrictions on its real estate market since early 2022. Restrictions were lifted in most districts last October and restrictions on second home purchases were eased in March. .

Now it goes one step further. From May 9, the city will no longer check social security information or ‘hukou’ registration status of prospective buyers, according to a statement released by Hangzhou Housing Security and Real Estate Administration on Thursday.

Under China’s hukou system, each citizen is required to have only one registered residence, which determines access to social benefits and other public services.

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Xi’an, a northwestern city of 13 million people, announced a similar move on Thursday.

Other cities have also made great strides to make the process of purchasing real estate easier.

This photo taken on July 12, 2021, shows an apartment building with balconies covered in plants in a residential community in Chengdu in China's southwestern Sichuan province.  - STR/AFP/AFP via Getty Images

This photo taken on July 12, 2021, shows an apartment building with balconies covered in plants in a residential community in Chengdu in China’s southwestern Sichuan province. – STR/AFP/AFP via Getty Images

Chengdu, home to 21.4 million residents, announced last week that it will completely remove restrictions on home purchases from April 29. It would no longer assess the eligibility of potential home buyers, including their household registration status, social security benefits or other conditions. There would be no restrictions on the number of homes people can buy, the report said.

Changsha, the capital of Hunan province, has also lifted restrictions on home buying since last month.

China’s real estate market has been in crisis since 2020, when the government cracked down on excessive borrowing by developers to rein in their high debt levels. The crackdown led to the eventual collapse of Evergrande, once the country’s second-largest homebuilder. Other major developers have since become insolvent, leaving millions of apartments unfinished.

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Beijing has scrambled to contain the crisis, which has become a major drag on the economy and sparked nationwide protests by homebuyers.

But the stimulus measures taken so far, including a series of mortgage rate cuts and piecemeal measures to ease cuts in home purchases, have failed to revive the sector as demand has remained weak.

Last week, the Politburo, a top decision-making body of the Chinese Communist Party, pledged to explore new measures to tackle the housing crisis, including implementing “city-specific” policies to reduce housing stock.

But a UBS survey on Wednesday found Chinese people’s intentions to buy homes remain tepid.

The share of respondents planning to buy a home in the next two years remained weak at 23%, the same level as in March 2023, the survey said. The share of respondents who have no plan at all to buy a home was 47%, a record high.

Respondents cited income growth and policy measures, such as interest rate cuts and government subsidies, as the most important factors in boosting confidence.

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“Looking ahead, job promotion and salary increases remain the most important factors that can boost the confidence of those with weaker sentiment,” the study said.

The analysts expect that the government will soon try to organize a bailout for the sector by allowing local authorities to buy vacant properties.

“The April Politburo meeting set a more supportive tone for the real estate sector, prioritizing the reduction of existing housing inventory,” they said.

“This could indicate that more local authorities may be allowed to purchase homes directly from the market for social housing purposes.”

Xiaofei Xu contributed reporting.

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