Chinese city of Zhengzhou tells state-owned firm to buy second-hand homes to reduce new housing stock

BEIJING (Reuters) – The central Chinese city of Zhengzhou has asked residents to sell their used homes to a local state-owned company and buy new ones, in a bid to reduce inventories of new homes and boost the local property sector.

Local state-owned enterprise Zhengzhou Urban Development Group Co. will buy 500 used houses from April 20 to June 30, according to a notice released by the Zhengzhou Real Estate Association on Monday.

Residents must purchase a new home in the main urban area for a total price that is not less than the total price of the home they are selling, the notice states.

Most of China’s small and medium-sized cities have suffered fragile property markets, with the entire property sector in a liquidity crisis since the crackdown on developers’ high leverage in 2021.

In Zhengzhou, new home prices fell month-on-month for the 12th consecutive month in March, according to data from China’s statistics bureau released on Tuesday.

Local cities that were granted full autonomy to adjust housing market policies eased restrictions on home purchases, lowered mortgage rates, reduced down payments, and offered subsidies for home purchases.

These policies have only a limited impact in the short term, in part because potential buyers have been cautious about purchasing new homes due to concerns about the ability of debt-laden developers to deliver projects on time.

“As the bottom has not yet been confirmed, we expect the housing sector to continue to be a major drag on growth this year. Policies to stabilize the market will likely still be needed in the coming months,” said Lynn Song, chief economist at Greater China in ING. said in a research note on Tuesday.

(Reporting by Liangping Gao and Ryan Woo; Editing by Gerry Doyle)