Trade-in moves in housing gather steam

Although more than 70 Chinese cities have expressed support for trade-ins in home transactions, it may take more time for such efforts to mitigate the mounting pressure to destock housing inventories, property experts said.

As of June 3, over 70 cities, including Shanghai, Guangzhou in Guangdong province, Nanjing in Jiangsu province and Zhengzhou in Henan province, have announced measures to support homeowners to sell their old homes and buy new ones. On offer are subsidies or favorable policies, according to the China Index Academy.

"Data from various cities showed their local trade-in initiatives are well underway, meeting the needs of potential homebuyers who plan to improve their housing conditions," said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

In Shanghai, homebuyers will sign expressions of interest with property developers, and their existing homes will be given priority in the secondary trading market by real estate agencies.

In Guangzhou, as many as 206 residential projects, 68 property developers and 67 real estate agencies are taking part in trade-in initiatives. And 262 groups of clients have reached contracts, and 603 groups of consumers are intending to reach a deal, China National Radio reported.

"Home trade-ins could spawn a market worth more than 1 trillion yuan ($137 billion), and local governments can leverage this housing demand by using various methodologies," said Yan Jinqiang, an expert with the China Society of Urban Economy, in an interview with Xinhua News Agency.

According to Yan, as more cities join, the trade-in measures will likely be categorized into three types: purchasing old flats via a government-backed entity; giving priority to selling the pre-owned home by real estate agencies; and offering subsidies or favorable conditions for home transactions.

"In terms of policies, trade-ins are still nascent, and it takes time for the market to fully understand the policies," said Chen Wenjing, director of research at the China Index Academy.

Chen said that since the launch of the trade-in policies in Nanjing at the end of April, transaction volumes in the new homes segment have seen week-on-week growth for two consecutive weeks, showing a gradual recovery.

"Trade-in initiatives are growing to scale and receiving greater support, so it can be said the measures will play a better role in market recovery and stabilization," Chen said.

Industry experts said the trade-in activities initiated by local governments are a response to the tone-setting meeting of the Political Bureau of the Communist Party of China Central Committee on April 30, which stressed that the real estate market should digest housing inventories and optimize new demand.