What is Inventory Reduction?
The real estate industry has built a large number of houses, but no one is buying or living in them. Inventory reduction refers to finding ways to sell these existing houses and eliminate the massive stockpile. Over the past two decades, local governments have been aggressively selling land, leaving developers with vast amounts of land to digest. Now, not only do new homes need inventory reduction, but second-hand homes may also require it!
So, what methods can be used for inventory reduction?
Theoretically, lowering prices is one approach, but there are many other methods, such as relaxing policies on housing provident fund withdrawals, allowing withdrawals for cross-regional home purchases, and enabling household registration through home purchases—all of which are measures to boost housing sales. Currently, many regions across the country have rolled out policies like "trade-in for new homes," new housing provident fund loan policies, and the removal of mortgage rate floors, using these "three policy axes" to continuously reduce homebuying costs for residents. At the same time, measures to optimize purchase restrictions, improve land supply structures, and abolish "shared area" pricing—all aimed at promoting housing consumption—have also been introduced in various regions.
Why is Inventory Reduction Urgently Needed?
According to statistics, in Q1, the inventory of commercial housing in Country Q was approximately 748.33 million square meters, including about 394.58 million square meters of residential properties, 52.04 million square meters of office buildings, 142.46 million square meters of commercial properties, and 159.25 million square meters of other spaces (such as sellable and non-sellable garages, civil air defense facilities, basements, municipal schools, infrastructure, and supporting facilities). In terms of pricing, the national average price of commercial housing was about 9,421 yuan per square meter, with residential properties averaging 9,779 yuan per square meter, office buildings at 13,064 yuan per square meter, and commercial properties at 6,490 yuan per square meter.
A rough calculation based on the above data shows that the capital tied up in developers' inventory is enormous, with cash flow likely locked in unsold properties. If inventory issues remain unresolved, financial institutions will hesitate to provide financing, leaving developers without funds to operate, reinvest, repay debts, or complete construction. If developers stop acquiring land and homes remain unsold, local government revenues—particularly from land sales—will decline, exacerbating local debt pressures.
Hangzhou, once a "hotspot" for homebuying, has now fully deregulated its property market. On May 9, Hangzhou announced a new policy stating that home purchases within the city would no longer require eligibility reviews. This means buyers no longer need to meet requirements such as household registration, social security, tax payments, or purchase quotas. It is expected that more cities, especially second-tier ones, will continue to optimize purchase restrictions, with adjustments likely accelerating. At the same time, core cities may further reduce down payment ratios, mortgage rates, and transaction taxes. If these policies are effectively implemented, Country Q's real estate market could see a wave of inventory reduction, significantly boosting market sentiment and aiding the recovery of the property market.
