Property fix in China will hurt before it heals

Country Garden Holdings

15/09/2026 04:43

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Ka Sing Chan
HONG KONG, Sept 15 (Reuters Breakingviews) - Beijing is determined to solve a demand problem by constraining supply. Its answer to a six-year housing slump that has left 4 million homes unsold spans everything from new rules on housing sales and developer finance to mortgage repayments. The measures announced late last month should rebuild buyer trust, but it will take time. Until then, the property market is in for yet more pain.
Officials in late August revealed a coordinated package involving no less than 10 ministries and regulators. The most comprehensive property reform in decades challenges some of the foundations of the housing model that had powered China's private residential market and spurred urbanisation over the past three decades.
The existing practice of selling unfinished homes is being dismantled. Presales allowed developers such as China Evergrande and Country Garden 2007.HK to finance rapid expansion with buyers' money, helping lift the proportion of the population living in towns and cities from about one-third in 2000 to nearly 70% today. But the era of shortage has passed. Urban living space per person has climbed from less than 7 square metres in the late 1970s to around 40 square metres.
The reforms also tackle one of the sector's biggest failures. Buyers who purchased homes from collapsed developers were left paying mortgages on apartments that never arrived. By tightening fund supervision and delaying mortgage disbursements until projects are completed, Beijing hopes to prevent a repeat of that crisis. Extending mortgage terms from 30 to 40 years, the first such change since the 1990s, serves a similar goal.
All these measures are likely to help - eventually. But they run against expectations for a short-term demand boost such as subsidies for first-time buyers. Goldman Sachs expects land-sale revenue to fall at least another 30% this year, extending a multi-year slump and putting further pressure on local government finances. China's property sales by floor area declined 12.1% year-on-year in the first eight months of 2026, official data released on Tuesday showed.
Developers, even the state-backed heavyweights expected to gain market share at the expense of private-sector rivals which lack access to easy credit, face a harsher adjustment. China Resources Land 1109.HK and China Overseas Land & Investment 0688.HK have together lost about $6.7 billion in market value since the new measures were announced. That implies a loss of roughly $800 million in annual earnings based on their forward price-to-earnings multiples.
The resulting squeeze on new supply should help stabilise prices over the long term. But coming so many years after the housing market turned, the latest measures are yet more evidence that Beijing is committed to structural reform over stimulus.
     
CONTEXT NEWS
China's property sales by floor area declined 12.1% year-on-year in the first eight months of 2026, official data released on September 15 showed. 
A total of 10 ministries and regulators on August 28 announced coordinated reforms on regulating China’s real estate market. The package includes measures to tighten presale requirements, extends mortgage and development-loan tenors and increases project funding supervision.

(Editing by Una Galani and Hudson Lockett; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))