China's first intercity housing trade-in scheme aims to revitalize real estate

NANJING - Over 100 cities across China are now encouraging homeowners to swap their old properties for brand-new ones with an additional payment. This scheme has been taken a bold step further in the Yangtze River Delta region, where, for the first time, intercity housing trade-ins are now available.

Liangxi urban development group, a state-owned enterprise (SOE) based in Wuxi, Jiangsu province -- a city with an annual GDP exceeding 1.5 trillion yuan ($210 billion) in 2023 -- unveiled the groundbreaking housing trade-in scheme earlier this month.

Under the new scheme, homeowners can trade in pre-owned residential properties not just within Wuxi but also in the neighboring cities of Suzhou and Changzhou for new homes in the Liangxi district of Wuxi.

This pioneering housing trade-in initiative is the first of its kind in China, standing out from other intra-city "old for new" property schemes already implemented in over 100 cities, including Beijing, Shanghai and Shenzhen.

The housing trade-in scheme primarily involves government-designated agencies or real estate companies purchasing and replacing existing properties, often with subsidies, to assist homeowners in selling their old homes and upgrading to new houses.

This is the second time the SOE has expanded the scope of its housing trade-in scheme since the initial version was launched on April 2, which only covered residential properties in Liangxi district.

The trade-in initiative was first expanded to include second-hand residential properties across Wuxi. Later, it was further broadened to cover commercial properties within Wuxi and second-hand residential properties in neighboring cities.

The trade-in program supports a variety of options, including one-for-one, one-for-multiple, or multiple-for-one swaps. This means that a single pre-owned property can be exchanged for one or more new homes, and multiple pre-owned properties can be traded for a single new home.

However, it is stipulated that the total value of the pre-owned properties must not exceed 60 percent of the new property's price, with the remaining 40 percent to be paid either in cash or through financing options.

Many industry insiders view such property trade-in measures as part of China's broader strategy to reduce housing inventory, facilitate transactions for both new and pre-owned homes, and stimulate overall market activity.

According to data from the China Index Academy, the average price of second-hand residential properties in 100 cities nationwide stood at 14,653 yuan per square meter in July, marking a 0.74 percent month-on-month decline while continuing a 27-month streak of decreasing prices.

The National Bureau of Statistics reported that as of the end of June this year, the unsold inventory of newly built commercial housing in China had reached 738.94 million square meters, an increase of 15.2 percent year-on-year, with unsold residential properties recording a 23.5 percent rise.

Against the backdrop of a sluggish property market, the scheme has garnered interest from those looking to improve their living conditions by effectively addressing the challenge of stagnant second-hand home sales.

Statistics indicate that since sealing its first intra-city deal on April 25 this year, the Wuxi-based SOE had successfully completed over 40 transactions by mid-May. The acquired older properties have been repurposed for resale, affordable housing, or talent apartments.

Zhang Bin, vice-president of the Wuxi Real Estate Association, said that this model will help invigorate both the primary and secondary housing markets in Wuxi, while also attracting homebuyers from Suzhou and Changzhou to settle and invest in Wuxi.

"It's a strategic move to attract and retain talent, promote coordinated urban development and accelerate the flow of professionals within the economically vibrant Yangtze River Delta," Zhang added.

According to Yan Yuejin, deputy director of the E-house China R&D Institute in Shanghai, Wuxi's trade-in scheme is currently the most innovative among policies rolled out by over 100 cities nationwide, and is worth emulating.

"This policy could encourage homeowners in Suzhou and Changzhou to settle in Wuxi," said Yan, adding that it can serve as an inspiration for implementing similar cross-regional home trade-in programs in the future and fostering the movement of young talent within city clusters.

Noting that many individuals working in major cities like Beijing and Shanghai have opted to temporarily purchase homes in nearby cities, Yan said such trade-in policies could present them with new opportunities to eventually buy homes in these high-priced metropolitan areas.

"The potential for such trade-ins across city clusters and metropolitan areas in China is vast," he added.