Zhengzhou City in China Encourages State-Owned Companies to Purchase Pre-Owned Homes to Decrease New Housing Stock

The central city of Zhengzhou in China is taking a unique approach to boost its local property sector by encouraging residents to sell their second-hand homes to a state-owned company and buy new ones instead. This initiative aims to reduce new-home inventories and stimulate the real estate market in the city.

According to a notice released by the Zhengzhou Real Estate Association, the local state-owned company, Zhengzhou Urban Development Group Co., will buy 500 second-hand homes from residents between April 20 and June 30. In return, residents must purchase a new home in the main urban area for a total price that is not less than the total price of the home they are selling.

The property market in many small and medium-sized cities in China has been struggling, with the sector facing a liquidity crisis since a crackdown on high leverage on developers in 2021. In Zhengzhou, new home prices have been falling for the 12th consecutive month as of March, according to data from China’s statistics bureau.

While local cities have been implementing policies to ease restrictions on home purchases, lower mortgage rates, and offer subsidies, the impact has been limited due to concerns about the financial stability of developers. Economists like Lynn Song, chief economist of Greater China at ING, believe that the property market will continue to be a drag on growth unless further stabilizing policies are implemented.

As the city of Zhengzhou embarks on this innovative strategy to revitalize its property sector, residents and experts alike will be watching closely to see if this approach yields the desired results.