China’s Xi touts ‘new model’ of property development in rare meeting

[BEIJING] Chinese President Xi Jinping called for the acceleration of a “new model” for property development, advocating a more measured approach to urban planning and upgrades while falling short of some investors’ expectations for more aggressive policies.

China will “steadily advance renovation of urban villages and dilapidated houses”, the official Xinhua News Agency reported, citing the Central Urban Work Conference that was held on Monday (Jul 14) and Tuesday.

The announcement follows a pledge by the government last October to renovate one million homes in older, rundown dwellings in large cities.

Ahead of the official readout, there was much anticipation of the meeting reminiscent of a 2015 campaign that was then used to boost home-buying demand and galvanise domestic investment. That year, China also held the Central Urban Work Conference, which was the first of its kind in decades and attended by Xi and top Politburo members.

While Tuesday’s announcement lacked detailed support measures that some investors were hoping for, it’s not uncommon for China’s top leaders to set a general policy direction and task lower-level officials with working out specifics to be revealed in the weeks and months that follow.

The country’s prolonged housing downturn has stifled efforts to boost consumer demand and shore up the economy as exports remain at risk from trade tensions with the US. Official data on Tuesday showed a weakening home market in June, with new-home prices falling the most in eight months.

“Investors pinned too much hope on the meeting earlier and may sell the news now,” said Jeff Zhang, a property analyst with Morningstar. “Usually, a meeting convened at such a high level wouldn’t announce detailed measures in its official readout.”

A gauge of Chinese developer stocks fell as much as 4.27 per cent on Tuesday in Hong Kong, trimming gains from last week’s rally driven by speculation over potential stimulus.

The 2015 programme pumped at least 3.2 trillion yuan (S$573 billion) into the economy, by replacing older buildings with shiny new tower blocks. At the time, it worked by using newly-created central bank yuan to give occupants of old communal housing brand-new apartments, cash, or both.

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Now, China is seeking to “change its approach in urban development”, as its pace of urbanisation has stabilised, according to the readout. It said urban development should shift to improving existing homes from large-scale incremental expansion.

One of the goals is to make cities more comfortable and convenient. Such a goal would mean a variety of measures including supplying more affordable homes with better quality, said Yan Yuejin, vice-president of Shanghai E-house’s research arm.

The country will carry out “high-quality” urban renewal and limit extremely tall buildings and enhance housing safety. That includes improving infrastructure such as upgrading old pipelines.

It will also “steadily promote” the renovation of urban villages and run-down houses, according to the meeting readout. China has already renovated at least 33 million shantytown units between 2015 and 2020, according to government announcements and official media.

Despite expectations for China’s property market to stabilise as soon as this year, its real estate recovery has stalled. The top 100 developers’ contracted sales may fall another 12 per cent this year, after tumbling 66 per cent in the four years to 2024, according to Bloomberg Intelligence.

China’s demand for new homes in cities is expected to stay at 75 per cent below its 2017 peak in the coming years due to a shrinking population and expectations of price declines that have been hurting investment interest, according to a Goldman Sachs report in June. BLOOMBERG