Shanghai's Clever Approach to "Rescuing" the Real Estate Market: A "Triple Win" Strategy
Release date:
Apr 28,2015
Shanghai recently adjusted the criteria defining standard commercial housing, sparking widespread debate. Launching this new "market-rescue" policy at this particular moment may not have been politically sensitive—but it was perfectly timed, coming just after the central bank eased mortgage lending restrictions and the State Council’s executive meeting clearly emphasized boosting housing consumption. This move not only reflects Shanghai’s proactive response to the central government’s call but also demonstrates its strong support for the nationwide decision. The last time Shanghai revised its standards for ordinary commercial housing was in March 2012. Logically speaking, these standards should be adjusted periodically based on actual market conditions; a two- to three-year cycle would typically be appropriate. After all, this practice aligns with Shanghai’s commitment to administering the city according to the law—a routine yet essential aspect of its governance.
Shanghai recently adjusted the criteria defining standard residential properties, sparking widespread debate.
Launching the new "market-rescue" policy at this particular moment may not be sensitive, but it’s perfectly timed—coming right after the central bank relaxed its lending restrictions and just as the State Council Executive Meeting clearly signaled support for housing consumption. This move is both Shanghai’s response to the central government’s call and a strong endorsement of the decisions made by Beijing.
Shanghai last adjusted the standards for standard residential properties in March 2012. Logically, these standards should be revised periodically based on actual conditions—perhaps every two to three years—which aligns with Shanghai's regular practice of administering according to the law. However, market conditions in the first half of this year didn’t actually justify such an adjustment. Now, though, the timing feels just right.
The central bank's removal of lending restrictions is essentially unlocking the demand for upgrade housing among the existing population, while Shanghai’s relaxation of standards for ordinary residential properties also targets this same segment—addressing the growing need for better living spaces. By stabilizing demand for upgrade housing, the policy indirectly helps stabilize the broader real estate market. It’s a clever move that achieves three objectives with one stroke.
Comment: No need to expect a short- to medium-term rebound in housing prices.
There’s no need to anticipate a short- to medium-term rebound in housing prices, nor should you pin your hopes on policy-driven market support. By the time market trends become clear, any attempt to defy the natural flow of the market—no matter how well-intentioned—will ultimately prove futile, like trying to stop a speeding car with your bare hands.
Since the second half of this year, a series of government policies aimed at supporting the housing market have still failed to reverse the increasingly bleak real estate data. On November 18, data from the National Bureau of Statistics revealed that in October, prices of newly built residential properties in 70 major cities remained unchanged month-on-month—marking the first time this has happened—and year-on-year, they continued to decline for the second consecutive month, with the drop widening to 2.62%.
Although some market participants remain hopeful, citing the "narrowing month-on-month decline in housing prices in October" and the "ongoing government policies aimed at supporting the market," they believe home prices have entered a phase of gradual bottoming out and recovery. However, anyone with a rational and analytical mindset will quickly realize that these two arguments simply don’t hold up under closer scrutiny.
First of all, market price movements can never follow a straight line—within a certain range, they always fluctuate and consolidate as they search for an underlying trend. Based on this reality, it would clearly be overly optimistic to prematurely conclude that housing prices have entered a phase of gradual recovery simply because "the month-on-month decline in October narrowed." After all, October’s prices still fell compared to the previous month, and the year-on-year decline actually deepened further.
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