Shanghai relaxes home-buying rules as China's property market struggles

Shanghai, the commercial and financial hub of mainland China, has further relaxed its home purchase policy, following Beijing's lead to rejuvenate the nation's sluggish property market.

Local residents could now own an unlimited number of flats outside the city's outer ring road, an area where two-thirds of Shanghai's housing is located, municipality authorities said on Monday. Previously, families were restricted to a maximum of two housing units in Shanghai.

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The mortgage rate for buyers of a second home will be reduced to an annualised 3.05 per cent, down from 3.35 per cent, aligning it with the rate for first-home purchasers.

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The policy adjustment aims to address residents' pent-up housing needs and improve living conditions, while promoting stable and healthy growth in the local real estate market, according to a statement from the Shanghai government.

Shanghai's market-boosting measures come after new home prices across 70 mainland cities decreased 3.4 per cent last month from a year earlier, according to the National Bureau of Statistics. Home prices nationwide have been falling since April 2022.

In the pre-owned home market, prices have been falling for more than two years, with July seeing a 5.9 per cent year-on-year drop, following a 6.1 per cent decline in June.

Shanghai is the financial hub of mainland China. Photo: Xinhua alt=Shanghai is the financial hub of mainland China. Photo: Xinhua>

Shanghai's incentives were "in line with expectations", said Zhu Xinhai, a sales manager at 5i5j Real Estate Brokerage, which is based in the city. However, the local policies "may not be sufficient to ignite strong buying interest because of prevailing pessimism regarding the economy and wage growth", he said.

On August 8, the Beijing municipal government initiated a relaxation of housing policies to stimulate homebuying, a surprise move intended to bolster the struggling property sector. Both local and non-local residents can now freely buy new and second-hand homes outside the Fifth Ring Road, a major highway encircling the suburbs.

The property sector, along with related industries such as home appliances and construction materials, contributes about a quarter of China's economic output.

The real estate market, which had experienced three decades of rapid growth, began to decline in late 2020 when Beijing implemented austerity measures to curb excessive leverage among developers and prevent a financial shock to the economy.

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Since 2011, Shanghai has been at the forefront of limiting home purchases to temper its once overheated property market. Local households had been restricted from owning a third flat to mitigate speculation on housing prices.

But amid the property slump, analysts have advocated for the repeal of these curbs.

Last October, Shanghai removed the restrictions on non-local residents buying homes in the city. Now, individuals from other Chinese regions who have paid taxes to their local authorities for 12 months are eligible to buy a flat in Shanghai, down from three years previously.

The city has also exempted owners of primary residences from a 5.5 per cent capital gains tax if they sell after two years, reducing the holding period from five years.

Central and local governments nationwide have introduced similar stimulus measures, including lowering mortgage rates and down payments, to encourage home transactions.

The decline in China's new home sales could slow to 7 per cent this year, an improvement from a previous estimate of 15 per cent, Fitch Ratings said in a report earlier this month.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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