China rewires property financing

China’s latest property package is less about pushing buyers back into the market than about changing how the market is financed. Regulators in late August issued measures on commercial housing sales and separate credit rules that curb developers’ early access to money from presold homes, according to Caixin and state media. The change strikes at the presale model that long let developers use homebuyers’ mortgage proceeds to fund construction before projects were finished. At the same time, Beijing paired the financing rewrite with looser mortgage terms and local easing measures aimed at supporting transactions heading into the traditional September sales season. ### Why is the presale funding rule getting so much attention? Caixin reported on September 2 that mortgages for presold homes will be withheld until projects are completed, forcing developers and banks to rethink how construction is financed. That is a break from the older model, in which developers could tap buyer-linked funds much earlier and recycle them into new projects. China Daily said the package is designed to accelerate reforms to the sector’s development, financing and sales systems and to speed the formation of a “new development model” for real estate. (caixinglobal.com) State-backed coverage framed the rules as stronger safeguards for homebuyers, especially after years in which stalled projects damaged confidence in presales. (caixinglobal.com) ### What else was in the package besides tighter control of buyer funds? China’s regulators also extended the maximum term for personal mortgages to 40 years from 30, according to Caixin and market reporting. A separate credit guideline issued with the package said development loans can run as long as five years for presale projects and seven years for completed new-home sales and commercial property projects, CGTN reported. (english.shanghai.gov.cn) Zagdim described the late-August package as a three-part overhaul: the presale-funding rewrite, the 40-year mortgage cap and a pledge to fund developers “of all ownership types on an equal footing.” That mix suggests Beijing is trying to keep credit available while changing the mechanics of how projects are financed and supervised. ### If the package was meant to help housing, why did markets treat it cautiously? (caixinglobal.com) The CSI300 Real Estate Index fell after the measures were announced, Zagdim reported, even as officials presented the package as support for the sector. Zagdim said investors treated the move as triage rather than a classic stimulus package, reflecting doubts that the new rules would quickly revive demand or restore the old development cycle. (zagdim.com) Caixin’s framing points to the same issue from a different angle: if developers can no longer rely on early access to presale mortgage money, they will need other funding sources to keep projects moving. That raises pressure on banks, state support channels and developers’ own balance sheets at a time when the sector is still dealing with weak sales and unfinished projects. That is an inference from the financing changes described by Caixin and the credit-rule adjustments reported by state and market sources. (zagdim.com) ### Why are cities still loosening purchase rules if Beijing is tightening financing discipline? Shanghai government-linked coverage on September 2 said the national package would help reform the sector while local markets moved to support transactions. Separate Chinese media reports said multiple cities adjusted purchase restrictions, down-payment terms and housing provident-fund lending in an effort to encourage deal flow before the “golden September, silver October” selling period. (caixinglobal.com) That leaves China pursuing two tracks at once. National regulators are trying to reduce the risks embedded in presales and project funding, while city governments and brokers are trying to lift viewings and purchases in the near term. The next test will be September transaction data, developer financing conditions and whether banks adapt to the new rules without slowing project delivery further. (zagdim.com) (english.shanghai.gov.cn)