Periodic/Sector reports
China Property: Presale System Reform Trades Near-term Pain For A Healthier Development Path
UNDERWEIGHT (Maintained)
Analyst
Analyst
Highlights
The China government announced polices to reform housing pre-sale mechanism. Pre-sale funds now contributing to over 30% of developers’ funding. Thus, financial regulators have updated financial policies to align with the new development model.
Near term, the reform tightens developers’ funding channels and is negative on balance and P/L; over the medium to long term, it improves demand and supply dynamics – a positive on property price and developers’ margins.
Maintain UNDERWEIGHT on near-term headwinds to developers’ financials. Greater clarity on the near-term earnings impact could provide a catalyst for a sector re-rating. Our top picks are COLI and CR Mixc.
Analysis
The China government announced polices to reform housing pre-sale mechanism. On 28 Aug 26, MOHURD, the Ministry of Natural Resources and the NFRA jointly issued the Notice on Improving the Commodity Housing Sales System, marking a key step towards the reform of China’s presale system. The key policy changes include:
a) Promoting completed-home sales. Newly granted land parcels and projects that have not yet obtained construction planning permits will be prioritised for completed-home sales;
b) Tightening presale requirements for residential projects. The requirement will be raised from the previous national standard of “all four permits obtained and more than 25% of construction and installation investment completed” to requiring “each building to have completed structural topping-out”;
c) Tightening presale fund supervision. All home-purchase funds, including buyers’ down payments and individual mortgage loans, must be deposited into designated escrow accounts. Funds may only be released to developers after project completion acceptance and once supporting utilities and infrastructure are ready for delivery;
d) Projects already under construction will be allowed to follow the existing presale framework to ensure a smooth policy transition.
Highlights
The China government announced polices to reform housing pre-sale mechanism. Pre-sale funds now contributing to over 30% of developers’ funding. Thus, financial regulators have updated financial policies to align with the new development model.
Near term, the reform tightens developers’ funding channels and is negative on balance and P/L; over the medium to long term, it improves demand and supply dynamics – a positive on property price and developers’ margins.
Maintain UNDERWEIGHT on near-term headwinds to developers’ financials. Greater clarity on the near-term earnings impact could provide a catalyst for a sector re-rating. Our top picks are COLI and CR Mixc.
Analysis
The China government announced polices to reform housing pre-sale mechanism. On 28 Aug 26, MOHURD, the Ministry of Natural Resources and the NFRA jointly issued the Notice on Improving the Commodity Housing Sales System, marking a key step towards the reform of China’s presale system. The key policy changes include:
a) Promoting completed-home sales. Newly granted land parcels and projects that have not yet obtained construction planning permits will be prioritised for completed-home sales;
b) Tightening presale requirements for residential projects. The requirement will be raised from the previous national standard of “all four permits obtained and more than 25% of construction and installation investment completed” to requiring “each building to have completed structural topping-out”;
c) Tightening presale fund supervision. All home-purchase funds, including buyers’ down payments and individual mortgage loans, must be deposited into designated escrow accounts. Funds may only be released to developers after project completion acceptance and once supporting utilities and infrastructure are ready for delivery;
d) Projects already under construction will be allowed to follow the existing presale framework to ensure a smooth policy transition.
UNDERWEIGHT (Maintained)
Analyst
Analyst
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