Overview

The Chinese government continues to play an active role in determining the future direction of the real estate and particularly the residential market with the key goal being the stablisation of China’s real estate especially as the country deals with unprecedented economic challenges. The most recent significant policy announcement was by the People’s Bank of China (PBOC) and the Ministry of Housing and Urban-Rural Development (MOHURD) in August when they introduced the “345” rule that looks to control the scale of interest-bearing liabilities held by developers. The rules are set against three “red lines”, and developers will be divided into four categories accordingly. Their future growth in interest-bearing liabilities will be capped by 0%, 5%, 10% and 15%. Additional guidance was provided to commercial banks to rein in mortgage lending and to be more stringent when reviewing applications.

Land

The land market has proved surprisingly active in recent quarters as local authorities look to accelerate the collection of land sales revenue to shore up coffers that have been depleted by COVID-19. 24 for-sale residential land plots were sold with a total site area of 1 million sq m in Q3/2020, a total buildable area of 1.9 million sq m and an average accommodation value (AV) of RMB34,700 per sq m. Several high-quality residential land plots within highly-favoured areas were sold during the quarter, including the North Bund, Qiantan and Yangpu. Among these, a plot sold in Jiangpu Community, Yangpu, recorded an average AV of RMB85,764 per sq m, a new high for residential land sales. Five pure for-lease residential land plots were sold in Q3/2020, with a total buildable area of 328,000 sq m and an average AV of RMB5,065 per sq m.