North China's Shanxi province, known as China's coal capital, has been undergoing a worsening economy as the coal market plunges. Now the province has lifted its limits on home purchase restrictions to relieve the pressure on its local real estate market, echoing the Chinese government's determination to destock the country's real estate inventory in 2016.
Struggling through the worst economic growth in years, Shanxi's many industries are under great pressure. The real estate market is one of them. In the capital city Taiyuan, many real estate sales offices are seeing fewer customers and less business.
Since 2005, more and more real estate developers have started their business across Taiyuan. So far, the city has about 10 million square meters of residential buildings up for sale. With a population of more than 4 million people, it will take the city at least two to three years to sell all of these properties.
With China trying to reduce its real estate inventory, many people are watching on the sidelines for house purchases.
"In the last quarter, when the destocking of the real estate inventory was emphasized, some of our customers decided to wait and see," said Zheng Yaning, sales supervisor of Poly Champagne Int'l in Taiyuan.
"I will be watching on the sidelines because there are too many buildings in stock. I guess the price of houses in the second- and third-tier cities might drop," a Taiyuan resident said.
So far, Shanxi has become the fourth province in China to lift home purchase restrictions. The province will also relax its housing fund policy. China is promoting the reform of the hukou system to let more migrant workers settle in cities. But experts believe it will take time for these favorable policies to take effect.
"The sluggish real estate market has been the result of a downward macro economy. The fact remains that the rigid demand for home purchases has been decreasing. We can't deny that various kinds of favorable policies will help the development of the real estate industry. But these policies will take effect gradually in a long-term process," said Niu Peihua, senior planner of Shanxi Cric Real Estate Consulting Company.
Experts also warn that many county-level cities in China also have large amounts of residential buildings for sale. But these places are facing an outflow of people, whilst there is also a lack of industry. So it will be even harder for these county-level cities to reduce their real estate stock.
