Opinion | China’s real-estate market enters a new phase as cities end bitter war against property speculators

Cities in China are moving quickly to dismantle long-standing housing policies that were put in place to deter speculators. Hangzhou and Xian are the latest major cities to remove all home purchase restrictions, allowing anyone to buy property for either personal use or investment purposes.

This shift marks a significant change in direction for major Chinese cities. While some cities like Beijing and Shanghai still have measures in place to control who can buy property, the trend is moving towards more openness in the housing market due to a decline in property prices.

The crackdown on property speculators in China began nearly twenty years ago as housing prices soared and complaints about unaffordable housing increased. Authorities blamed speculators for driving up prices by buying and selling property for quick profits.

One infamous group, known as the “Wenzhou housing-speculation legion,” was singled out for allegedly fueling the property market frenzy. While the actual size and influence of this group was never confirmed, it became a convenient scapegoat for rising housing prices.

In an effort to control property prices, China implemented a system to differentiate between genuine homebuyers and speculators. This system required potential buyers to meet certain criteria to prove their need for a new home.

Despite these restrictions, property prices continued to rise across Chinese cities. Local authorities limited land supply and imposed buying restrictions, which only served to drive prices higher and create a frenzy among buyers.

The allure of property as a wealth management option led to extreme measures, such as urban couples divorcing to obtain additional “house coupons” for buying property.

As the housing market dynamics shifted from too many buyers to too few, cities are now lifting restrictions to attract more buyers. The overarching principle that “houses are for living, not speculation” remains, but policies on the ground tell a different story.

China has been slow to implement structural reforms in its property market, relying instead on state control to dictate supply, demand, and prices. The dismantling of purchase restrictions is just the beginning of a new chapter for China’s real estate market.