In recent days, measures encouraging farmers to surrender their homestead land and purchase houses in cities have been introduced in multiple provinces including Jiangsu and Anhui, sparking widespread discussions. A renowned Chinese financial news platform analyzed that “targeting farmers’ homestead land, a last-ditch effort to save the real estate market!” Following the so-called “5·17 new policy” issued by the Chinese Communist Party in May, official data showed that it did not prevent a significant continued decline in the housing market.
On June 21, Nantong, Jiangsu issued a notice stating that to enhance incentives for home purchases, from April 1, 2024, to June 30, 2025, individuals buying newly-built residential properties in the main urban areas would receive a subsidy of 1.5% of the total purchase amount. Those voluntarily relinquishing (abandoning) rural homestead land to buy houses in the city would be granted a certain amount of incentive subsidy.
On June 20, the WeChat public account “China Fengyang” reported that the Fengyang County Real Estate Working Joint Meeting issued a notice on promoting stable and healthy development of the real estate market, providing incentives to rural residents who surrender homestead land to move to cities for house purchases.
According to the notice, from June 20, 2024, to December 31, 2024, homebuyers purchasing newly-built residential properties within the county would be subsidized 1% or 1.5% of the purchase contract price based on the home’s area.
Furthermore, during this period, rural residents in need of homestead land allocation in the county who voluntarily abandon their homestead land for urban housing and return the original site for agricultural cultivation after demolishing structures would receive a one-time housing incentive of 50,000 Chinese Yuan (approximately 6,878 US dollars).
As early as April, Ezhou in Hubei Province had issued a document encouraging rural residents to voluntarily surrender homestead land and receive certain subsidies to purchase houses in cities.
After the relevant notice was released in Fengyang County, Anhui, the location of Xiaogang Village, known as the “first village of rural reform” in the CCP, quickly trended. Yan Yuejin, Director of Research at E-House Research Institute, told media that the policy recently attracted attention mainly due to the 50,000 Yuan subsidy, which might not be considered high enough to persuade rural residents to give up their homestead land.
Shanghai real estate lawyer Guo Ren mentioned that once rural residents permanently relinquish their homestead land, the guarantee of proper compensation, as well as ensuring education, pension, housing, and employment in the city, will be a significant challenge for the government.
An article by the platform “Deep Blue Finance,” which gathers seasoned Chinese financial journalists, pointed out that “rural homestead land is finally targeted!” The article mentioned that several regions have introduced policies encouraging farmers to abandon their rural homestead land, primarily with two objectives:
Firstly, to encourage local farmers to buy houses in cities, which could be considered the final attempt to rescue the real estate market in smaller areas. With local governments losing land finance support, many have begun to shrink within the system. As no one inside the system is willing to take over the real estate market, small local markets have completely lost purchasing power and have turned into a “real estate” market, now eyeing farmers.
The article noted, “A large number of online comments mostly express unwillingness,” as “in this day and age, 50,000 Yuan doesn’t amount to much; wealthy farmers don’t need that 50,000, and for those without money, 50,000 can only cover a down payment, followed by bigger financial burdens in the city.”
The second objective is to promote urban-rural integration and increase land utilization. In recent years, urbanization and industrial development have progressively encroached upon arable land, surpassing the red line designated for ensuring food security of 1.8 billion mu of arable land. To meet arable land goals, the focus has shifted towards the homestead land and construction land of villagers.
Moreover, these policies have led to a substantial amount of public criticism, with comments suggesting, “(Making farmers surrender homestead land) saves the government money, eliminating the need for resettlement compensation, the government doesn’t even care anymore.” “The establishment of any system that doesn’t prioritize people’s interests or long-term social stability is playing rogue!”
Despite the CCP’s introduction of the “5·17 new policy” in May, the latest official data indicates its inability to halt the significant decline in the housing market. Data released by the National Bureau of Statistics on June 17 showed that from January to May, the sales area of newly built commercial housing was 366.42 million square meters, a 20.3% decrease year-on-year, with residential sales area dropping by 23.6%. Sales of newly built commercial housing totaled 3.5665 trillion Yuan, a 27.9% decline, with residential sales revenues decreasing by 30.5%.
The data reveals that in May, the average price of newly built commercial housing recorded the largest drop in nearly a decade, while second-hand residential properties experienced the biggest drop in at least 13 years.
To prevent the public from developing expectations of further price declines due to market influences, at least 15 cities including Beijing, Hangzhou, Hefei, Wuhan, and Nanjing have stopped displaying the transaction prices of second-hand houses. Previously publicized historical data related to transactions is no longer available.
Chief Researcher at the Guangdong Housing Policy Research Center, Li Yu Jia, stated that the current secondary housing transactions are predominantly focused on the “lowest price transaction” within the community, with financially strained homeowners eager to cash out, potentially triggering a new round of price reductions.
On June 20, S&P Global Ratings forecasted a 15% drop in China’s residential sales this year, exceeding their previous prediction of 5%. The rating agency indicated that sales would be less than 10 trillion Yuan (approximately 1.4 trillion US dollars), about half of the peak in 2021.
Fitch Ratings revised the estimate for China’s annual residential sales decline from 5%-10% to 15%-20%.
Since last year, the CCP government has successively introduced various measures to rescue the property market, yet the market continues to plummet. After the burst of the Chinese real estate bubble, its disruptive effects have become the most significant deadlock in Chinese politics and economy.