Li Qiang: Take Strong Measures to Consolidate the Trend of Stabilizing the Real Estate Market and Stemming Further Declines – What Impact Will This Have on the Current Real Estate Market?
On August 18th, Premier Li Qiang of the State Council presided over the 9th Plenary Meeting of the State Council. Li Qiang emphasized taking strong measures to consolidate the trend of stabilizing the real estate market and stemming further declines, promoting the renovation of urban villages and dilapidated/old housing in tandem with urban renewal, and employing multiple approaches to unleash improvement-oriented demand. What impact will this have on the current real estate market?
Viewpoint 1:
The term “stem declines and stabilize” seems to have appeared quite frequently. A simple keyword search yields countless results; various departments have been emphasizing “stemming declines and stabilizing” for at least over a year. Generally, economies see significant declines taper off within about 3 years, and a secondary deterioration shouldn’t occur. Yet, here we are in 2025, and the market is still trending downward. In terms of base effects: a rise from 50 to 100 is a 100% increase, while a fall from 100 to 50 is only a 50% decrease numerically. Both year-on-year and month-on-month figures still show no signs of improvement amidst continuous declines.
Especially in the secondary market, some places have long started “covering their eyes” – no longer displaying historical transaction prices. It’s purely a “greater fools” game to lure people in. Sadly, those who couldn’t see the situation clearly were already trapped between 2019 and 2022: high prices, high interest rates, high risk of unfinished projects, frequent quality issues. The result of “covering their eyes” is a further deterioration in market credibility and information transmission, continuously pushing up listing volumes, extending the inventory clearance cycle. Without clearance, how can declines stop?
Previous analyses have pointed out that stabilizing the real estate market is truly different from other economies. The core problem isn’t about creating new demand – like monetized shantytown renovations or forcing farmers into cities. These worked in the past era of growth. But now, we face a systemic collapse of real estate credit. No one trusts anyone, and no one’s promises are reliable anymore. In this situation, restoring credit requires real, tangible restitution – coughing up real money. People bought at high prices; losses are a matter of personal decision-making, but the prerequisite is that they actually receive the asset. Banks dared to lend to developers without mortgaged assets; developers dared to divert presale supervision funds without delivering houses. Banks also play the victim, but funds wouldn’t have been transferred without “instructions.” When everyone is responsible, no one is responsible. Only some become the cost. This is absolutely unavoidable for stabilizing the real estate market and ensuring its healthy development in the future. In the past year, many loudly shouted “stem declines and stabilize,” but mentions of resolving unfinished building (“rotting-tail” / “Lantou”) projects became fewer and fewer. Even reforms mainly focus on new buildings, like the “good housing” policy or substantially reducing or even eliminating shared areas – all for new construction. Some people truly are just dust buried by history, their only role being to warn future generations with their tragic experiences.
Finally, looking at the special bond buybacks and old neighborhood renovations many pin their hopes on, analyzed one by one:
- Special Bond Buybacks: How much have you heard or seen of this? Not much at all. It’s even become a debt transfer game to bail out local government financing vehicles (LGFVs). Even in the most transparent coastal areas of the south, it’s full of “tailor-made loopholes” – requirements for whole buildings, specific floor areas, clear property rights, geographical restrictions, capped prices. If properties met all these conditions so well, couldn’t they just be sold? Obviously, only pre-selected, custom-qualified parties fit the bill. For example, buybacks/reserves in Shenzhen and Guangzhou are mainly to bail out state-owned assets and LGFVs. The original debt was incurred when LGFVs/state-owned entities borrowed to bid for land. Unable to repay debts or sell houses, they risk default. The buyback involves the government issuing special bonds to take over the LGFV/state debt. Of course, this money will likely be booked under public welfare expenditures (nominally for public rental housing). At year-end: “Wow, public welfare spending surged dramatically!” – still debt-financed. Such a noble justification! But its impact on the market is almost negligible; it’s essentially inter-governmental debt circulation. This outcome was predicted when the policy first emerged. Everyone can keep watching to verify if this holds true.
- Old Neighborhood Renovation: Multiple meetings emphasized the focus is on “renovation” (改, gǎi), with demolition (拆, chāi) as secondary. The difference of a single character leads to vastly different outcomes. This also involves wealth transfer. Previously, demolition costs came from developers paying high prices for land auctions, funded by presale buyers. Essentially, all parties shared the money from buyers. Now, with renovation, the government not only doesn’t profit but also borrows to subsidize infrastructure and safety upgrades for old neighborhoods. Considering the traditional efficiency of government project fund usage, repairing roads, improving facades, and avoiding public safety incidents is already a relatively ideal outcome. This has little direct connection to real estate supply and demand.
Honestly, the advantage of policy should always be maintaining fairness between buyers and sellers. However, once it tilts towards one side and forms an interest community, the nature of the game changes. This is also a crucial part of the current real estate credit collapse. Wanting to stem declines and stabilize is easy – falling 50% and then holding steady still counts as “stabilized.” But repairing real estate credit and achieving healthy development is hard. These are historical legacy issues. Relying on loudspeakers and “greater fools” is becoming increasingly difficult. Fulfilling the most basic obligation – delivering houses on time, with quality, and common areas as agreed – is something no one dares to tackle properly. Always resorting to clever tricks… one can’t blame residents for becoming shrewd; it’s the result of survival of the fittest.
Viewpoint 2:
Today’s statement is extremely clear. Tier-1 cities are about to start demolitions.
Everyone knows Chinese household leverage is already very high, but this time it will go even higher. Because residents in Tier-1 cities, due to long-term purchase restrictions, generally have no mortgages.
This policy is precisely targeting this group.
Specifically: Beijing and Shanghai. Shenzhen is expected to follow within a year.
Why are demolitions effective? The money comes from Pledged Supplementary Lending (PSL) – central bank relending. Demolitions eliminate supply and create new demand. This one-two punch turns the market from oversupply back into undersupply. Hence, prices rise again.
So, we see central state-owned enterprises (SOEs) frantically bidding for land kings. Current land auction prices imply future selling prices at 2-3 times the land cost.
This is a crazy era. Household leverage will exceed 80%.
Viewpoint 3:
Bloomberg said the policy is about having SOEs take over to revitalize inventory and help some developers survive. The key is: SOE money is still money. The properties they buy also need to circulate. Whether internally or externally, it still puts pressure on the whole market. So how does that stabilize? If you say SOEs are just handing out disaster relief money, buying but not circulating the properties… well then, that’s even worse – dragging the entire industry down with a failing real estate sector. Look at the reality of Shenzhen Metro trying to save Vanke to see if it works. In one sentence: the problems are too deep-rooted to be easily resolved.
Viewpoint 4:
If they truly want to save real estate, the first step should be to rehabilitate its reputation, acknowledging its enormous contribution to China’s development over the past two decades. Officials should clearly explain where the land transfer fees went – that they were legitimately used in people’s livelihoods and construction. There’s nothing that can’t be said. Rumors that vilify real estate, claiming the government used it to plunder ordinary people’s wealth and setting officials against the public, should be corrected. Only when everyone acknowledges its contribution, no longer resists it, will they accept it and possibly embrace it again. Otherwise, nowadays, mentioning buying a house makes everyone look at you like you’re an idiot (“shāběi”) – with hateful eyes. How can declines be stemmed and stability achieved under such conditions?
Viewpoint 5:
This statement is the rescue policy itself. “Consolidate the trend of stemming declines and stabilizing” implies a second-order derivative – meaning a soft landing. The decline curve needs smoothing. Psychological comfort needs to be given to those trapped. A short-term selling window needs to be provided. All rescue policies cannot change the fact that housing is shedding its financial attributes. Ultimately, all rescue policies focus on expanding demand, but no new money is flowing into the property market.
Key Clarification: It’s not that they don’t want to inject liquidity (“release water”), it’s that they can’t. “Releasing water” requires not just water, but also receptors. The problem now isn’t lack of water, it’s lack of receptors. The financial system is spinning its wheels (“empty rotation”) because everyone is already waterlogged – they truly can’t absorb more. So, the water just churns uselessly in the reservoir. Rescue policies are genuinely out of ideas. Anyone talking about releasing water, monetized shantytown renovation, demolitions, or adding more household leverage deserves to be blocked – none are wronged.
Viewpoint 6:
On August 15th, the National Bureau of Statistics released the Changes in Sales Prices of Commercial Residential Buildings in 70 Large and Medium-sized Cities in July 2025. The data shows that for new homes, only 6 cities saw price increases: Changchun, Shanghai, Urumqi, Yichang, Sanya, Changde. Prices were flat in 4 cities: Beijing, Dalian, Nanning, Xuzhou. The remaining 60 cities saw continuous declines (“chattered incessantly”). For existing homes (secondary market), only Taiyuan saw an increase, while the other 69 cities all declined.
Price data doesn’t lie. The real data shows the road to “stemming declines and achieving stability” is long and arduous. The Basic Situation of the National Real Estate Market from January to July 2025 shows: From January to July, sales area of newly built commercial housing was 515.6 million sqm, a year-on-year decrease of 4.0%; sales area of residential properties fell 4.1%. Sales value of newly built commercial housing was 4,956.6 billion yuan, down 6.5%; sales value of residential properties fell 6.2%.
Looking at the data above for new home transaction area and value, the rate of decline has widened, running counter to our expectations of stabilization. Some might say July and August are traditionally slow seasons for real estate, which is true, but the trend is not a good omen. Unleashing improvement demand is key to “rescuing the market” and “stemming declines and achieving stability,” because first-time buyers alone cannot save the real estate market! Meanwhile, old neighborhood renovation and urban renewal are the way out for real estate investment (“fangtou”), as improving existing stock is the direction and politically correct (“ZZ correct”). The outlook for real estate is not optimistic, especially in the current poor macro environment. Due to its nature as a big-ticket commodity, and with Evergrande’s delisting being another black swan event (Vanke is still struggling, many others have already laid down waiting for rescue), “ensuring delivery” remains a long road. If stemming declines is this difficult, when might a recovery (“warming”) arrive?
