Wuhan, first major Chinese city to ease the limit on home purchases

By: News Team

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Wuhan, first major Chinese city to ease the limit on home purchases

Wuhan, in central China, became the first major Chinese city to ease the limit of residential properties a family can buy, a move aimed at trying to revive activity in the Asian giant’s battered real estate market, local media reported today.

The authorities of the city, capital of the province of Hubei and eighth locality that produces the most GDP in the country, will allow local families to have up to three apartments, while those from other places will be able to acquire a maximum of two.

The measure undoes the limits imposed by the national government in 2017 in the face of the overheating situation that the market was experiencing then, which contrasts with the current situation, in which the prices of new construction have been falling for 16 consecutive months, according to official data, before a significant drop in sales.

Specifically, the agreed sales of the 100 main developers in the country fell by 32.5% year-on-year in December, according to figures from the real estate consultancy CRIC.

Some smaller cities such as Dongguan or Foshan, both in the southeastern province of Guangzhou, had already removed the aforementioned limits, but Wuhan is the first among the ten richest towns in the country to do so, although analysts cited by the Hong Kong newspaper South China Morning Post do not believe that this will be replicated in megalopolises such as Beijing. Shanghai or Shenzhen.

The financial position of many Chinese real estate companies worsened after Beijing announced restrictions on access to bank financing for developers that had accumulated a high level of debt in August 2020, supporting their growth for years in aggressive leverage policies, among which Evergrande (HK:3333), with liabilities of more than $300 billion.

In recent months, faced with the crisis in the sector, the Government has changed its tone and announced various support measures, with state banks also opening multimillion-dollar credit lines to various developers, marking as a priority objective the construction of projects sold off-plan.

The lack of liquidity in the sector caused numerous promotions throughout the country to be forced to stop the works, which resulted last summer in a “mortgage boycott” that extended to more than a hundred cities, with buyers of unfinished flats communicating to banks that they would not continue paying their loans.

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