1. China’s Housing Market Regulation Moves Beyond the Logic of Incremental Expansion
Q: The 15th Five-Year Plan for Expanding Consumption has, for the first time, placed housing alongside automobiles, home furnishings, and household appliances within the category of major durable consumer goods, with housing listed first. What fundamental change in the role of housing in China’s national economy does this landmark definition signify?
Zhao Yanjing: Strictly speaking, housing is not merely a single category of major durable consumer goods; it is also the core platform that underpins all major forms of consumption. Almost all durable consumption scenarios—including automobiles, household appliances, home furnishings, and renovation—are dependent on housing. Once housing consumption weakens, major durable goods consumption across all categories will inevitably decline as well. Supporting housing consumption, therefore, is key to expanding overall consumption of major durable goods.
This adjustment in the positioning of housing in China’s top-level policy planning sends a clear signal of policy reorientation: housing consumption, which had previously been subject to moderate constraints in order to prevent overheating in the Chinese property market and curb speculation, is now returning to a central position in the effort to expand domestic demand. This represents a targeted optimization and dynamic adjustment of the previous approach to China’s property market regulation.
Q: From the Special Action Plan to Boost Consumption in 2025, which incorporated housing consumption into initiatives to upgrade and renew major consumer goods, to the current 15th Five-Year Plan, which places housing at the top of the major durable goods category, the policy positioning of housing consumption in China has been upgraded in less than a year. Compared with the previous regulatory logic of “houses are for living in, not for speculation” and curbing speculative demand for incremental housing, what policy signal does this change send?
Zhao Yanjing: Compared with the previous logic of “houses are for living in, not for speculation,” which focused on incremental housing, the emphasis of the “major consumer goods renewal initiative” is on “renewal” rather than “new construction,” targeting the existing housing stock rather than incremental supply. Housing consumption should not be equated with a return to the previous model centered primarily on the consumption of newly built homes.
Placing housing at the top of the major consumption category is fundamentally about highlighting its unique role as a platform for generating economic activity. Automobiles, household appliances, and home furnishings are all forms of point-based consumption, whereas a single housing upgrade or renewal can drive a whole chain of consumption, including renovation, smart devices, furniture, plumbing and heating, property management, and other related sectors. This ability to stimulate consumption across an entire value chain is something no other major consumer good can replace. This also means that the central issue for the future development of China’s property market will no longer be to follow the old path of “incremental expansion,” but rather to use “improving the quality of the existing housing stock” to stimulate household demand for durable consumer goods.
2. Unlocking the Credit-Driven Momentum of Housing Consumption
Q: Housing has a long consumption chain and broad industrial spillover effects, making it a key lever for stabilizing domestic demand. Under this new positioning, what conditions are needed to fully unleash the multiplier effect of housing? What is the biggest challenge currently facing this effort?
Zhao Yanjing: From a macroeconomic perspective, major durable consumer goods drive “consumption”; for individual economic actors, however, major durable consumer goods represent “investment” and an expansion of the balance sheet. Major durable consumer goods cannot be financed through wage income or savings; they must be financed through credit. Only through credit can banks create sufficient money to support consumption. And in order to create “credit,” there must first be “trust.” Unlike the government’s use of land-based fiscal revenues to obtain financing, the primary source of credit for market participants—particularly households—is the housing they own.
Image source: Online
At this level, finance must play a critical role. For banks to be willing to accept housing as collateral, China needs a well-developed secondary market for housing, in which every property can be traded with the same ease and convenience as a stock. Future policy should focus on building a highly liquid market for real estate rights and interests.
First, expectations of falling housing prices must be reversed. Only in a market where some participants expect prices to rise while others expect them to fall can high-frequency trading take place. The greater the volume of transactions, the better the liquidity of assets and the lower the cost of financing. Therefore, the methods for registering, valuing, and trading real estate must undergo comprehensive innovation. In this sense, a secondary market for real estate is no less important to market participants than the primary land market was to the government during the earlier period of land-based development.
During the phase of expansion driven by increasing the quality and scale of development, China’s land authorities established a well-developed primary land market. Now, as the focus shifts toward improving the quality and utilization of the existing housing stock, the spotlight of history once again falls on the government authorities responsible for natural resources. The success or failure of the real estate rights market will determine the success or failure of the “major consumer goods renewal initiative” and, indeed, the broader strategy of expanding domestic demand.
At the implementation level, China could leverage real-time market transaction data and AI algorithms to provide dynamic fair-value estimates for all properties that have not yet been transacted, replacing traditional manual appraisal methods. Digitalizing property registration could create standardized contracts through which real estate rights can be divided and circulated, allowing each property to obtain an immediate market price in much the same way as stocks. In addition, the financing chain connecting bank mortgages with exits through the secondary market must be fully established, eliminating financial institutions’ concerns about lending and truly unlocking the credit-driven momentum of housing consumption.
3. The Core Is to Renovate Existing Housing
Q: We have noticed that, following the new positioning of housing as a “major durable consumer good,” cities such as Wuhan and Nanjing have been promoting housing consumption through measures including coordination between the primary and secondary housing markets, higher-quality housing supply, and “trade-ins.” Can these local experiments be elevated into a national-level strategic initiative? What risks need to be addressed?
Zhao Yanjing: These cities have all recognized that reversing expectations of housing price appreciation is critical to whether housing inventories can be reduced and leverage can be brought down. Nanjing, Guangzhou, and other cities, in particular, have been purchasing “old, run-down, small apartments” and promoting “trade-ins,” thereby combining inventory reduction with the “major consumer goods renewal initiative.” The problem at present is that the repurchase prices are too low and the scale is too small to provide a strategic floor for the market. To elevate these local experiments into a nationwide strategy, coordinated action at the central level is needed, backed by substantial financial resources. Taking advantage of the current low-interest-rate environment, tools such as special-purpose bonds could be used to support large-scale purchases of old housing by local governments. Without adding new housing supply, the upgrading and appreciation of old, run-down, small apartments could be used to achieve the renewal and upgrading of existing real estate assets.
It must be emphasized that special-purpose bonds issued by the central government must not be used for “shantytown redevelopment” or “urban village redevelopment.” A model that relies on demolition, increasing development capacity, and real estate development to balance the books would only lead to more existing housing supply and more debt that cannot be repaid. Funds used to repurchase old, run-down, small apartments should only be used to absorb existing housing inventory. Old housing should achieve financial balance through measures such as improving supporting facilities and adding elevators and parking garages, without increasing the number of housing units. The core objective of the new round of housing consumption policies is to stimulate domestic demand and activate the existing housing stock, rather than increase land-based fiscal revenues or expand the scale of incremental real estate development.
Image source: Online
Q: Some argue that, in the era of existing housing stock, the core of housing consumption is not buying new homes, but renovating existing ones. Yet residents currently face institutional barriers when attempting to independently “demolish and rebuild” their homes. Now that housing has been designated as a “major durable consumer good,” what institutional breakthroughs do you think are needed?
Zhao Yanjing: Any policy subsidy can only shift consumption among different consumers; it cannot increase aggregate demand in the economy. An increase in subsidized consumption of goods necessarily means a reduction in consumption of goods that are not subsidized. To give households an incentive to consume, the key is first to ensure that their wealth after consumption is greater than their wealth before consumption. Housing is one of the few major durable consumer goods whose value can increase as a result of consumption. As long as the value of a home after renovation is higher than its value before renovation, the market will naturally have an incentive to undertake such renovations. In the era of existing housing stock, housing consumption will be driven primarily not by the purchase of new homes, but by the renovation and upgrading of existing homes.
However, not only are there policy gaps in this area, but many existing policies themselves constitute obstacles to consumption. For example, residents independently demolishing and rebuilding their homes is one of the primary forms of housing consumption in an era dominated by existing housing stock. Yet because there is no compliant policy pathway for such activity, in most cases independently undertaken renovations are deemed “unauthorized construction” and subject to compulsory demolition. Only by establishing legal approval and renovation pathways can residents feel confident enough to spend, allowing housing to function as a “major consumer good” in an era dominated by existing housing stock. What is needed in this era is an entirely new institutional framework, rather than piecemeal adjustments to policies established for the era of incremental development.
4. Establishing Expectations of Rising Housing Prices as Soon as Possible
Q: The 15th Five-Year Plan for Expanding Consumption calls for “deepening reform of the housing provident fund system and expanding its scope of use.” On July 31, the State Council Executive Meeting also reviewed and approved the draft amendments to the Regulations on the Administration of Housing Provident Funds. Why is reform of the housing provident fund system being advanced so intensively at this particular point in time? What role does it play in the new round of policies to promote housing consumption?
Zhao Yanjing: To activate housing as a major form of consumption, the first core issue to resolve is: where will the money for consumption come from? As of the end of 2024, the balance of housing provident fund deposits nationwide stood at approximately RMB 10.93 trillion. The stock of funds is substantial, yet large amounts have remained dormant in accounts for extended periods, with more than half of contributors making little use of their account balances. This is because the existing regulations focus only on home purchases, mortgage repayment, and rent, and therefore cannot cover many of the housing-related expenditures people actually face.
This reform expands the range of permitted provident fund withdrawals from six categories to nine, adding everyday housing consumption scenarios such as home renovation and property management fees. It also allows flexible workers to participate in the provident fund system, fundamentally breaking with the traditional limitation of provident funds serving only home purchases and mortgage repayment. In doing so, it establishes a full-chain channel for financial support covering both “home purchase + living,” directly addressing the shortage of funds for housing consumption. It is an important supporting institutional measure for unlocking the potential of housing consumption across the population.
Q: Recently, Beijing and other cities have substantially increased the maximum amount of housing provident fund loans. Some, however, argue that given the currently cautious outlook among households regarding their future incomes, increasing loan limits may not effectively translate into actual demand for home purchases. How do you view this issue? What are the limits of housing provident fund policy?
Zhao Yanjing: The primary determinant of households’ willingness to purchase housing is their expectations regarding whether housing prices will rise or fall; the availability of funds comes second. Reform of the housing provident fund system addresses the question of whether people have sufficient funds to purchase housing. It is a necessary condition for activating housing consumption, but not a sufficient one. It cannot substitute for other policies aimed at reversing expectations about housing prices.
As long as expectations of falling housing prices have not been reversed, simply increasing loan limits and lowering the barriers to home purchases will have limited effect in stimulating genuine demand. Housing provident fund policies can provide a floor for households’ consumption capacity, but they cannot, on their own, restore market expectations. They must work in coordination with complementary policies aimed at stabilizing expectations, improving market liquidity, and optimizing housing supply in order to produce tangible results.
Q: Measures such as home-purchase subsidies can stimulate consumption demand in the short term. But if the goal is to generate a long-term driving force for housing consumption, where do you think the key breakthrough lies?
Zhao Yanjing: The key breakthrough is to suspend new land supply in the primary land market, including all forms of urban renewal and infrastructure investment that rely on real estate development to balance their finances. This should be combined with policies such as buybacks and “trade-ins” to rapidly and substantially reduce land supply and clear the existing stock of real estate. At the same time, efforts should be made to expand demand as much as possible: all restrictions on home purchases should be removed, including restrictions on housing demand from overseas buyers who settle transactions in RMB; low-interest loans, including support through the housing provident fund system, as well as access to public services such as household registration, should be provided for both home purchases and replacement purchases.
By rapidly reversing the supply-demand relationship, China can establish stable expectations of rising housing prices as soon as possible and restore liquidity in the secondary market, as reflected in transaction volumes. As long as housing prices rise, households’ property income will increase. Once households have money, consumption requires no stimulus policies at all; it will naturally develop into a long-term source of momentum.
Editor: LQQ
