Hangzhou, home to Alibaba and Geely, turns market-friendly by scrapping more barriers to revive home sales

The city, home to China’s tech leaders including e-commerce platform operator Alibaba Group Holding and carmaker Geely Automobiles, removed curbs on second home ownership with immediate effect, joining other top-tier mainland cities in breaking down barriers and ending a three-year slump nationwide.

It will no longer impose eligibility criteria on buyers making their second home purchases in the city, according to a notice published by the housing bureau on Thursday. In the past, only qualified residents were allowed to buy houses in specific areas, subject to a limit.

The decision reflects ongoing policy tweaks as property developers continue to struggle amid weak demand and consumer confidence. Authorities in Hangzhou last October lifted curbs on home purchases in five areas in the city, while also relaxing rules for unmarried buyers to acquire homes to energise the market.

“This policy targets the second-hand home market accurately,” said Gao Yuansheng, executive vice-president at the Zhejiang branch of China Index Academy. “This segment of the market still faces huge supply pressures.” About 70,000 units will enter the market this year, adding to the existing inventory of 140,000, the academy forecasts.

Hangzhou, a city of 12.5 million people, enjoyed a 5.6 per cent growth in gross domestic product to 2 trillion yuan (US$277 billion) in 2023, according to the statistics bureau. Like other big cities such as Beijing, Shenzhen and Guangzhou, Hangzhou erected some of the toughest barriers to cool price speculation before the current industry slump.

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While the move in October lifted demand, it has failed to sustain it. The city recorded 5,849 deals of new homes and 6,875 of second-hand units in the first two months this year. They were 64 per cent and 21 per cent lower than the same period last year, according to data compiled by Zhuge Real Estate Data Research Centre.

Meanwhile, the city has also handed out some goodies to existing homeowners by scrapping a capital-gain tax on sale of properties held for more than two years for those with multiple home ownership, according to Thursday’s notice.

In the past, such owners only get tax exemption on properties sold after a five-year holding period.

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“It will give a welcome fillip to the city’s second-hand home market,” said Guan Rongxue, a senior analyst at Zhuge. “More residents from outside Hangzhou may come to buy properties in the city, while demand for upgrading homes may also improve.”

Elsewhere, the Zhejiang housing bureau also said the city will speed up construction of more than 6,000 units of affordable housing to help resolve poor ownership among the city’s low-income groups.

“Looking ahead, the recovery in market sentiment has been slow,” said Guan. “A short rebound in demand is expected in Hangzhou’s home market but not a surge in prices.” Cities like Nanjing, Hefei and Suzhou, which have lifted home purchase curbs, have yet to see a major recovery, she noted.