China has introduced strict measures to phase out the long-used housing presale model, demanding that mortgages be issued only after projects are completed, in a bid to stabilize the beleaguered property market and rebuild consumer trust.
- Mortgage issuance now contingent on project completion to prevent stalled home deliveries
- Local governments tasked with promoting sales of completed units to reduce delivery risk
- Longer mortgage terms and linked bank supervision introduced to ease buyer burden
What happened
China’s central bank and financial regulators released a set of measures to curb the widespread practice of preselling homes before construction is completed. Under these new guidelines, homebuyers will only be able to obtain mortgages after the projects are finished, marking a fundamental shift from the past model focused heavily on presales.
Additional rules require local governments to actively promote sales of completed properties to address long-standing delivery risks. This crackdown on presales is part of a broader strategy to prevent stalled housing projects— a common issue since the market meltdown in 2021 that exposed vulnerabilities in developer financing and shook buyer confidence.
Why it matters
The presale-based funding model fueled rapid growth but also masked deep financial risks, contributing to a liquidity crisis for many developers, including industry giants like Evergrande. Stalled projects have led to buyer protests and worsened market sentiment, further dampening property investment and slowing economic recovery.
By linking project financing with designated lead banks responsible for monitoring fund flows and facilitating loans, the new framework seeks to establish stronger financial discipline and reduce delivery failures. The policies also extend personal mortgage durations up to 40 years, easing repayment pressures and potentially increasing affordability.
What to watch next
These reforms are expected to benefit large, well-capitalized developers who can transition to a completed-project sales model with less strain, while smaller firms may struggle or exit the market due to liquidity constraints. Monitoring how quickly the housing market recovers and whether consumer confidence improves will be critical.
Financial regulators have pledged ongoing support for property sector financing and risk resolution, including backing refinancing and restructuring efforts for listed developers. Observers will be watching for the impact on housing supply, price stabilization, and broader economic implications as China recalibrates its real estate sector toward sustainability.