China curbs presale financing model

China’s latest property package is less about reigniting the old housing boom than about changing how housing gets financed and sold. Measures reported by official and state-backed outlets on September 1 and 2 target commercial-housing sales and property finance, with the stated aim of accelerating reform of the sector’s development, financing and sales systems. (english.shanghai.gov.cn) The most important change is to the presale model. (caixinglobal.com) Caixin reported that mortgages for presold homes will be withheld until projects are completed, delaying developers’ access to buyer-linked cash and forcing developers and banks to rethink how construction is financed. (m.cnfin.com) Authorities said the rules take effect Tuesday, according to Caixin’s reporting. The package arrived alongside efforts by local governments to support demand. Securities Times, cited by China Financial Information Network, said cities are easing purchase restrictions, adjusting down-payment ratios, raising provident-fund loan limits and offering subsidies such as interest support and “sell old, buy new” incentives before the traditional “golden September, silver October” sales period. (english.shanghai.gov.cn) ### Why is Beijing changing the presale model now? China’s presale system had allowed developers to collect money from buyers before projects were finished, making homebuyers part of the sector’s financing chain. Caixin said the new rules rewrite that arrangement by withholding mortgage proceeds for presold homes until completion, after years in which stalled projects undermined confidence in developers and in the delivery model itself. (caixinglobal.com) China Daily, in a report republished by the Shanghai municipal government, said the broader package is designed to speed the formation of a “new development model” for real estate. That framing places the measures within a longer-running policy effort to rebuild the sector’s financing and sales structure rather than rely on the old cycle of rapid presales and leverage. (m.cnfin.com) ### What does withholding mortgage money actually do? Mortgage proceeds are a critical source of project cash flow under the presale model. By delaying access to that money until completion, regulators are shifting more financing pressure onto developers, banks and other funding channels during construction. (caixinglobal.com) Caixin described the move as one that forces both developers and lenders to rethink how projects are funded. A separate Caixin finance report said the new credit guidelines also tighten oversight of project funds and mark a shift away from the presale model. That same report said the package includes mortgage terms of up to 40 years, pairing tighter controls on developer cash access with support measures aimed at households. (english.shanghai.gov.cn) ### Is Beijing also pushing completed-home sales? Shenzhen offers one clue. China Financial Information Network, citing Securities Times, said data from Leyoujia Research Center showed completed-home sales accounted for 42.1% of Shenzhen’s new-home market in August, up 3.1 percentage points from the prior month. The report said buyers favor completed homes because they offer greater certainty. (caixinglobal.com) That local data fits with the central policy direction described in official coverage: changing the timing of cash collection and reshaping sales practices to reduce reliance on unfinished-home presales. The result is a system that gives more weight to delivery before cash extraction. (caixinglobal.com) ### If financing is tighter, why are cities easing buying rules? Beijing and Shanghai have already loosened some housing rules, and other cities followed. China Financial Information Network said Chengdu and Xi’an were among the cities adjusting purchase restrictions, down-payment requirements, provident-fund loan limits and subsidy programs as local governments tried to support transactions. (m.cnfin.com) Zagdim said investors treated the late-August policy package more as stabilization than as a clean recovery plan. It reported that the package announced on August 28 included the presale-funding overhaul, a 40-year cap on personal mortgages and a pledge to fund developers “of all ownership types on an equal footing,” but that developer stocks signaled skepticism about a quick rebound. (english.shanghai.gov.cn) ### What should readers watch next? September is the next test. China Financial Information Network said the policy adjustments are aimed in part at the “golden September, silver October” selling season, when developers and local governments look for stronger transaction volumes. (m.cnfin.com) The near-term markers are concrete: how many cities adopt completed-home-oriented sales rules, whether banks change mortgage disbursement practices under the new regime, and whether core-city transactions improve as Beijing, Shanghai, Chengdu and Xi’an roll out their latest demand-support measures. (english.shanghai.gov.cn) (m.cnfin.com) (zagdim.com)