CITIC Construction Investment: Shanghai Implements a Combination of Housing Market Policies, Leading to Dual Improvements in Fundamentals and Policy Expectations

CITIC Securities Research Report states that on February 25, Shanghai introduced new policies for the real estate market. The focus of this round of policies is to eliminate restrictive measures, significantly reduce the thresholds for non-Shanghai residents to purchase housing within the outer ring, and increase the housing provident fund loan limit. This move expands the homebuyer base within the outer ring and lowers mortgage costs. Coupled with previous measures to acquire second-hand homes in the three districts of Shanghai, the policy package is beneficial for both fundamental improvements and positive expectations. The anticipated positive effects and subsequent policies aimed at stabilizing expectations and investment are worth looking forward to. Since the beginning of the year, transaction volumes and prices of second-hand homes in core cities have improved, with Shanghai’s listing price index rising for five consecutive weeks. This new round of policies is expected to consolidate Shanghai’s stable market trend.

CITIC Securities: Shanghai Implements a Policy Package to Improve Fundamentals and Expectations

On February 25, Shanghai announced new policies focusing on removing restrictions, significantly lowering the thresholds for non-Shanghai residents to buy homes within the outer ring, and increasing the housing provident fund loan limit. This move broadens the homebuyer base within the outer ring and reduces mortgage costs. Combined with previous measures to acquire second-hand homes in the three districts, the policy package is conducive to both fundamental and expectation improvements. The positive effects of these expectations and future policies aimed at stabilizing expectations and investment are promising. Since the start of the year, transaction volumes and prices of second-hand homes in key cities have shown improvement, with Shanghai’s listing price index rising for five consecutive weeks. These policies are expected to reinforce Shanghai’s market stability.

On February 25, five departments in Shanghai jointly issued the “Notice on Further Optimizing and Adjusting the City’s Real Estate Policies,” which includes further reductions in housing purchase restrictions, optimization of housing provident fund loan policies, and improvements to personal property tax policies.

This policy focuses on removing restrictive measures, with significant reductions in thresholds for non-Shanghai residents to buy homes. The main aspects of Shanghai’s new real estate policies include adjustments to purchase restrictions, optimization of the housing provident fund, and improvements to property tax policies. Regarding purchase restrictions, the social security requirement for non-Shanghai residents to buy homes within the outer ring has been reduced from three years to one year, and those with over three years of social security can purchase an additional home within the outer ring. Residents holding a Shanghai residence permit for five years can buy one home citywide without social security requirements. For the housing provident fund, the maximum first-time family loan amount has been increased from 1.6 million yuan to 2.4 million yuan, with additional allowances for families with multiple children or purchasing green buildings, which can increase the loan limit by up to 35%. Regarding property tax, Shanghai households with adult children owning their only home may be temporarily exempt from property tax. These adjustments significantly lower the barriers for non-Shanghai residents to purchase homes, supporting rigid demand, and combined with the policy allowing additional home purchases after three years of social security, they address improving housing needs. The increase in the housing provident fund loan limit can effectively reduce mortgage interest burdens; for a 30-year mortgage, increasing the limit by 800,000 yuan can reduce annual mortgage costs by approximately 2,300 yuan.

This policy package is expected to improve both market fundamentals and expectations, with positive effects worth anticipating. It expands the homebuyer base within the outer ring and lowers mortgage costs, likely boosting market sales momentum. Coupled with previous measures to acquire second-hand homes in the three districts, the policy package is expected to promote the housing replacement chain, help stabilize low-priced housing within Shanghai’s outer ring, and accelerate inventory clearance. Since the publication of “Improving and Stabilizing Real Estate Market Expectations” in Qiushi magazine earlier this year, market expectations for supportive real estate policies have improved. Shanghai’s proactive policy introduction is expected to further stabilize expectations and investment in the future.

Since 2026, core cities, especially Shanghai, have shown signs of stabilization. The new policies are expected to reinforce this trend. Since the beginning of the year, second-hand home transaction volumes have remained roughly flat on a high base, with 13 key cities recording a total transaction area of 12.61 million square meters from January 1 to February 24, a 1% year-on-year decrease, narrowing the decline by 27 percentage points compared to Q4 last year. In terms of prices, according to the Iceberg Index, the nationwide second-hand home listing price index has seen nine consecutive weeks of narrowing declines. First-tier cities have already stabilized, with Shanghai’s listing price index rising for five consecutive weeks. These policies are expected to further solidify Shanghai’s market stability.

We remain optimistic about the overall performance of the real estate sector and recommend investors pay close attention to the dual improvement of fundamentals and policy expectations. We favor high-quality commercial real estate companies, as well as developers and property management firms focused on core cities.

Risks in the real estate industry mainly include sales and project delivery falling short of expectations: ongoing risks of downturns or slower-than-expected recovery; delayed project delivery due to continued sales decline and pressure on developers’ cash flows, which may lead to delays in construction and project completion.

Risks in the property management industry mainly involve intensified competition within the sector, hindering expansion efforts, and potential delays in delivery by parent companies: as coverage rates increase, companies shift from incremental growth to competition within existing communities and units, which may slow growth and reduce profit margins; ongoing sales declines may also lead to decreased project completion volumes by parent companies, affecting delivery schedules.

(Source: Southern Finance Network)