Since the beginning of this year, favorable policies for the property market have been introduced frequently, and **one trend is that new homes are no longer subject to "price caps."

　　According to statistics from the China Index Academy, since the start of this year, cities such as Shenyang, Lanzhou, Zhengzhou and Ningde have explicitly stopped implementing sales price guidance for newly built commercial housing, that is, they have abolished sales price caps. Cities such as Yangjiang, Zhuhai and Wuhu have also optimized their price-cap policies, for example by shortening the interval for adjusting filed prices and abolishing floor price-difference restrictions.

　　The price-cap policy was first issued in 2010, aiming to curb overheating in the real estate market. Under the policy background of "stabilizing land prices, housing prices and expectations," "price caps" played an important role in stabilizing land prices and housing prices during the past period of relatively high market heat.

　　However, since the second half of 2021, the real estate market environment has undergone dramatic changes, and the one-way upward trend in housing prices has become history. In many places, the guided prices for new homes have become "mere formalities," price cuts by developers have become the mainstream, and the "price cap" policy has also reached a point of adjustment.

　　Weakening of price controls

　　During the deep adjustment period of real estate, local governments are weakening their control over property market prices.

　　Recently, Tianshui and Baiyin in Gansu successively issued notices to cancel price filing for newly built commercial housing, promoting the steady and healthy development of the real estate market. Tianshui also stated that "sales prices will be adjusted by development enterprises in a timely manner according to market sales conditions."

　　Previously, Lanzhou also stated that when real estate enterprises apply for commercial housing pre-sale permits, they no longer need to apply to the Municipal Development and Reform Commission for price filing, transactions of newly built commercial housing are no longer subject to filed price limits, and homebuyers and real estate enterprises may negotiate prices on their own.

　　Zhengzhou abolished price guidance for new homes. The local housing security department announced the cancellation of sales price guidance for commercial housing, and development enterprises may set prices independently for sales or for handling pre-sale (sales) permit filing procedures. Since then, its property market policies have been fully relaxed.

　　While governments no longer guide new home prices or directly cancel filing, many places are also becoming increasingly "tolerant" of price cuts by real estate enterprises.

　　The reporter saw on the leadership message board that since the beginning of this year, in cities such as Wuhan, Baoding, Chengdu, Guangzhou and Chongqing, homebuyers have reported sharp price cuts by projects and "malicious price cuts," but officials have all stated that "price cuts by real estate enterprises are market behavior."

　　For example, a homebuyer in Wuhan said that the filed price of the Wanhe Guanggu project was more than 20,000 yuan, but now it is being sold at 12,500 yuan through "malicious price cuts." In response, officials stated that the project's filed price was about 23,124 yuan/square meter, and the average transaction price was about 18,300 yuan/square meter. Due to a debt dispute between the enterprise and the construction party, some homes were transferred to the construction party to offset debts. Recently, to recover funds, the construction party sold these "debt-offset homes" at low prices, with the highest price cut reaching 6,000 yuan.

　　The local government also stated that commercial housing prices are independently set by development enterprises according to market supply and demand, and the final transaction price is agreed with homebuyers through contracts, but must not exceed the filed price in the pre-sale plan. Upon verification, the prices of the homes sold in the project did not exceed the filed price and did not violate prohibitive provisions of laws and regulations.

　　A homebuyer in Baoding also reported that in 2022 they bought a home in the Fengfan Jiayuan residential compound at a price of more than 14,000 yuan per square meter. Recently, the developer suddenly cut the price to 11,000 yuan per square meter, resulting in a loss of 300,000 yuan on a 90-square-meter home, seriously harming the interests of homeowners.

　　In response, the Baoding Municipal People's Government stated that commercial housing prices are market-regulated prices, development enterprises may independently determine sales prices according to market conditions and supply-demand relationships, and homebuyers and developers may negotiate and determine prices, which are included in the contract agreed by both parties.

　　A homebuyer in Chengdu also said that the Tianfu Heyin project in Tianfu New Area obtained its permit at a price of about 22,000 to 25,000 yuan, but now it is being "dumped" at an average price of 17,000 yuan with free parking spaces and property fees, and asked relevant departments to thoroughly investigate its "malicious price cuts."

　　The Park City Construction Bureau of Sichuan Tianfu New Area replied that commercial housing prices are subject to market-regulated prices. At the project sales site and on Chengdu Housing and Urban-Rural Development Rong e-Ban, the prices of homes to be sold are clearly marked by unit and publicized as "one price per home." On the premise of not exceeding the publicized price, the sales price of each home is negotiated and determined by the buyer and seller.

　　A homebuyer in Guangzhou said that in 2022 they bought Poly Wanshang at an average price of more than 20,000 yuan, and now the project is being sold at a reduced price of 13,300 yuan. Guangzhou's Nansha District stated that development enterprises may enjoy independent pricing rights in light of actual market conditions and handle price filing or adjustment with the housing and urban-rural development department. The district housing and urban-rural development department did not find any relevant violations by the development enterprise.

　　Experts: Housing price performance will become more differentiated

　　As can be seen from the above cases, local governments are gradually weakening control over new home prices. Some have directly canceled filed prices for new homes, some no longer issue guided prices, and some still stipulate that prices must not exceed the filed price but no longer interfere with project price cuts, making the overall situation more market-oriented.

　　Chen Wenjing, market research director of the China Index Academy, said that with changes in the real estate market environment, the negative effects of the price-cap policy have become more prominent. On the one hand, price inversion not only increases the difficulty for genuine housing demand to buy homes, but also fails to reflect the real market situation; in addition, limiting the extent of price declines also leads to poor sales for real estate enterprises and obstructs capital recovery.

　　In her view, in the past two years, regulatory authorities have repeatedly emphasized the need to build "good houses," which requires matching policy support. Canceling sales price caps and returning prices to the market will help enterprises create good products that meet demand and is a manifestation of actively responding to the call to build "good houses." At the same time, canceling sales price caps also helps enterprises price reasonably to destock, helps enterprises accelerate capital recovery, and alleviates funding pressure.

　　Li Yujia, chief researcher of the Guangdong Provincial Housing Policy Research Center, believes that after the cancellation of new home sales price caps, developers can set prices freely, and even later price cuts will not require them to bear responsibility, unless they explicitly promised in advance not to cut prices. This allows better use of prices for promotions and inventory clearance. However, if the price cut is too large, surrounding projects may also be forced to cut prices.

　　"The cancellation of the price-cap policy also has a positive impact, namely that some products with higher premiums will no longer be subject to price control restrictions. These products can set relatively higher selling prices, provided that their quality must match the set price," Li Yujia said.

　　It is worth noting that although many cities no longer control new home prices, for hot cities, fluctuations in project prices will still attract attention.

　　For example, this year a homebuyer in Beijing said that Shoukai Wutong Shanyu opened in July 2023 at a unit price of about 46,000 yuan/square meter, with a 62-square-meter unit at a fixed price of 2.806 million yuan, and the sales consultant guaranteed that the opening price was the lowest. However, in late February 2024, the total price of the same 62-square-meter unit on the same floor and of the same layout was cut by about 400,000 to 500,000 yuan, a unit price cut of 15%, as the developer cut prices at will.

　　In response, the Changping District Housing and Urban-Rural Development Commission stated that due to cyclical price fluctuations in the real estate market, some units of the project with poorer locations and floors in the 62-square-meter layout have seen price cuts. If the developer promised that this layout would not be discounted, citizens may provide corresponding evidence. If verification shows that the project has violations, the commission will take corrective measures against the enterprise in accordance with relevant regulations, and citizens may also safeguard their lawful rights and interests through judicial channels.

　　Overall, as property market control measures gradually withdraw, future housing price performance in various places will also become more differentiated and market-oriented. Chen Wenjing believes that short-term housing prices in first-tier cities still face downward pressure, but the agglomeration effect of population and resources continues. As restrictive policies are further optimized and adjusted, policy effects may gradually appear, housing prices still have support, and are expected to gradually bottom out and recover.

　　"Among second-tier cities, housing prices in core cities are expected to bottom out, while in ordinary second-tier cities expectations of price cuts and promotions by enterprises remain, and the downward trend in housing prices may continue in the short term," she said. In third- and fourth-tier cities, housing demand is released slowly, support for housing prices is relatively weak, and overall housing prices may continue to bottom out. Overall, the current bottoming and stabilization of housing prices still requires continued policy efforts.