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Fitch: CN New Property Policies to Reinforce Financing Regulation Rather Than Boost Demand
2026-09-01 17:39:11 China's new property financing policies should fortify financing constraints and support project delivery, but are unlikely to meaningfully boost housing demand or reverse the downbeat outlook for property sales and investment, Fitch Ratings opined. The latest measures are aimed at establishing a more systematic financing framework, with greater emphasis on project delivery, closed-loop fund management, and a gradual shift away from the traditional pre-sale model. Housing demand may remain meager, as easing policies for residential mortgages are unlikely to cushion the impact of high inventory levels and subdued homebuyer confidence, the rating agency said. The cap on households' monthly debt servicing-to-income ratio has been raised from 55% to 60%, while the maximum mortgage tenor has been extended from 30 years to 40 years, which may improve housing affordability and loan accessibility. However, sales of newly built commercial residential properties may continue to decline, while nationwide home prices are estimated to remain broadly stable in the near term. Nevertheless, reduced supply of newly built homes could provide some support to secondary home prices in certain cities, particularly higher-tier cities with relatively balanced supply and demand. As the new policy package steadily shifts property financing toward the project level, the measures should tighten financing discipline. Assessments of development loans will increasingly focus on projects rather than risks at the developer group level. Meanwhile, projects must maintain separate accounts, independently managed funds, and closed-loop capital management. Many Fitch-rated banks are already implementing similar practices, meaning the new rules are more likely to institutionalize existing constraints and strengthen risk controls among smaller and unrated banks. In addition, loan tenors will be differentiated based on project type, with completed-home sales projects eligible for longer loan tenors than pre-sale projects. As the new rules gradually push China's property sector toward a completed-home sales model, financing pressure on developers may rise over time. Pre-sales can only commence after completion of the main structural works, while mortgage funds for pre-sold homes can only be disbursed after project completion filings are finalized. Tighter supervision of pre-sale funds, together with the orderly promotion of completed-home sales, should improve fund security and support project completion. Over the long term, these changes may help stabilize homebuyer confidence, but they could also lengthen developers' working capital turnover cycles and reduce capital efficiency. Delayed receipt of pre-sale proceeds may cause developers to rely more heavily on development loans, equity financing, or capital market debt financing. This may increase developers' leverage and pressure project returns, although lower land acquisition costs and more flexible land premium payment arrangements could partially alleviate such pressures. ~ AASTOCKS Financial News Website: www.aastocks.com | |