Last newsletter we gave an update on the status of China’s national real estate market, so in this newsletter we’ll zoom in on recent residential market policy changes in Shanghai, where we find – to the relief of many – that people no longer need to get married just to buy a home, among other positive developments.

Following orders from above

Announced at the end of August, the new Shanghai policy changes give a picture of how a city is implementing the central government’s real estate market directives while responding to local housing market dynamics. Those central gov’s directives have included, for at least a year now, orders to reinvigorate the housing market and stop the decline in prices that is still ongoing in much of the country.

Shanghai already stimulated housing demand with a set of policy changes in autumn 2024, but the effect was only temporary, and local officials began planning a second round of stimulus measures around April this year. The new policy changes, announced at the end of August, expand the scope of the earlier measures, further reducing financial burdens and loosening requirements for buying a home.

The new changes fall under four broad categories, as detailed below:

1) Relaxing homebuyer requirements

• Single individuals and families can now buy as many homes as they like outside the Outer Ring Road. The new new rule applies to both hukou holders as well as non-hukou holders, and to new as well as previously-owned homes. The only requirement for nonhukou holder is that they must have paid social security or personal income tax for the specified number of years.

• Single adults now enjoy the same rules and incentives as families when buying a home. Previously, families were treated preferentially with regards to number of homes they were allowed to purchase and other considerations. This change responds to growing home buying demand from single adults in recent years, and accords with the government’s goal of providing stable living conditions for the professional workforce.

2) Expanding how homebuyers can use the Housing Provident Fund (HPF)

The HPF is a government-run system that requires workers to make monthly contributions to individual accounts for the purpose of buying a home. Residents can use their funds to pay off mortgages, and they can also obtain cheap loans from the HFP.

• Individuals can now use the money in their HFP funds for making the initial downpayment on a pre-sale purchase of a newly built home.

• Using HPF funds to make the downpayment on a home will not affect the maximum HPF loan amount that the buyer is able to obtain.

• The maximum HPF loan amounts for buying a home built to “2-star green building” standards has been increased by 15% . For firsttime home buyers, the amount is now 1.84 million yuan, or 2.16 million yuan for multiple-child families. For second-home buyers, the maximum HPF loan is now 1.495 million yuan.

3) Lowering interest rates

• Whether a buyer is purchasing their first or second home will no longer affect the interest rates charged on mortgages from banks and other financial enterprises; these institutions will determine the rate for an individual’s loan solely based on their operating situation, risk associated with the particular buyer, etc.

4) Easing the property tax burden

• Households without a Shanghai hukou will no longer be charged property taxes on their first home. For further homes they purchase, they will be charged property tax only on the area of the home in excess of 60 sqm per family member.

These new policy adjustments create conditions that are more favorable for buying a home, eliminating restrictions on targeted groups (households without a city hukou, single adults), making it easier for people to use their HPF funds and loans, reducing mortgage costs and cutting taxes.

At least one analyst has stated that conditions for home buying in Shanghai are more favorable now than at any previous point in the city’s history. But we have yet to see firm evidence that the changes have reversed the trend of declining prices, for the long term. It should not be long before we find out.