China Rewrites Its New-Home Sales Model

China has begun one of the biggest overhauls of its new-home sales system in decades, raising the threshold for property presales, prioritising completed-home sales for some new developments and delaying mortgage disbursement until much later in the construction process. The changes are designed to reduce the risk of buyers servicing loans before receiving their homes, but they will also force developers to fund construction for longer with bank loans and their own capital while property investment, sales and new construction continue to contract.

China Raises the Threshold for Housing Presales

The new framework was released on Aug. 28 by the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the National Financial Regulatory Administration.

It does not abolish presales, but it significantly changes when developers can use them.

For a residential building to be sold before completion, its main structural frame must be topped out. Buyers’ down payments, mortgage proceeds and other purchase funds are required to enter supervised project accounts.

For residential developments on newly transferred land, as well as previously transferred sites that have not yet received construction-planning permits, completed-home sales are to be given priority. Projects that already have permits are also encouraged to adopt the completed-home model. Developments that had secured construction-planning permits before the new rules took effect can continue to use the previous presale requirements.

In an official explanation carried by Xinhua, regulators linked the overhaul to a structural change in the housing market. After almost three decades of rapid expansion, total existing-home transactions now exceed new-home transactions, while the old system built around presales and rapid capital turnover no longer fits the current balance of supply and demand.

For buyers, the distinction matters. Under China’s traditional model, an apartment could be purchased well before the building was completed, leaving years between signing a contract and receiving the property. Financial problems at the developer during that period could therefore become a direct household risk.

Presales Became a Vulnerability During the Downturn

Presales were an important financing mechanism during China’s construction boom. Developers collected money from buyers before homes were completed and used the proceeds to help fund building work.

The model accelerated capital turnover when housing sales were expanding. Once demand weakened, however, the mechanism began working in reverse. Lower sales reduced cash inflows, liquidity shortages slowed construction and concerns over delivery made buyers less willing to commit to unfinished homes.

The scale of the system was illustrated by Bloomberg Intelligence in 2024. Its analysts estimated that at least 48 million homes had been sold in China before completion based on presales from 2015 through the first half of 2024. The estimate should not be interpreted as 48 million officially distressed or overdue homes; it referred to units sold before their construction had been completed at the time of the analysis. Bloomberg said the backlog itself risked encouraging buyers to favour finished new homes or properties on the secondary market.

Beijing’s new framework is intended to shorten the financial gap between the point at which a home is sold and the point at which the buyer can actually receive it.

Mortgages Will Be Released Later

China is changing mortgage rules alongside the sales system.

For newly built homes sold after completion, mortgages are to be released after the sale has been formally registered. For homes sold through presales, mortgage funds must not be disbursed until the development has completed its official completion filing.

That addresses a long-standing problem in which borrowers could begin servicing mortgages while substantial construction work remained unfinished.

The maximum maturity for an individual housing loan is also being extended from 30 years to 40 years, with banks and borrowers determining the actual term. A longer mortgage can reduce monthly repayments for the same principal and interest rate, although it can increase the total amount of interest paid over the life of the loan.

Developer financing is changing as well. Each property project is to have a lead bank responsible for overseeing its financing. Development loans can run for as long as five years for presale projects and seven years for developments using completed-home sales.

Explaining the joint measures issued by the People’s Bank of China and financial regulators, CCTV said the later mortgage-disbursement point is intended to prevent buyers from having to repay loans before receiving their homes and to give banks tighter control over construction financing.

Developers Will Have to Finance Construction for Longer

For developers, the timing change alters the economics of a project.

Under the earlier model, a meaningful portion of funding could arrive from buyers during construction. Under the new system, builders must take projects much closer to completion before receiving most mortgage proceeds associated with presold units.

That increases the need for equity and bank financing and could be particularly difficult for highly leveraged developers with restricted access to credit.

The lead-bank system is partly designed to address that problem. Development financing is expected to cover more of the period between construction starts and formal completion, with longer loan maturities available for projects that sell finished homes.

Banks will also have greater visibility over project cash flows. That matters in a sector where rapid turnover and the movement of cash between projects were central features of the previous business model.

China’s Property Market Is Still Contracting

The reforms are being introduced before the housing market has achieved a sustained recovery.

Real-estate development investment fell 19.2% year on year in the first seven months of 2026 to 4.301 trillion yuan. Residential investment declined 19.1% to 3.317 trillion yuan.

New construction starts dropped 24%, including a 24.6% decline in residential projects. Completed floor space fell 23.2%, while residential completions were down 25.5%.

Sales remained weak. The floor area of newly built commercial property sold declined 11.8% to 450.21 million square metres, with residential sales area down 12.7%. Sales by value fell 13.1% to 4.272 trillion yuan, while residential sales dropped 13.2%.

Financing indicators are particularly relevant to the new model. Funds available to developers declined 20.3%. Domestic bank loans fell 32.1%, deposits and advance receipts dropped 14.4%, and individual mortgage proceeds were down 23.5%, according to China’s National Bureau of Statistics.

The authorities are therefore asking developers to rely on more durable financing at the same time that most of the industry’s traditional funding channels are shrinking.

Home Prices Have Yet to Stage a Broad Recovery

Reducing construction risk does not automatically create additional housing demand.

Average new-home prices across 70 large and medium-sized Chinese cities fell 0.1% in July from the previous month and 3.2% from a year earlier. The annual decline narrowed slightly from 3.3% in June.

Only 17 of the 70 cities recorded month-on-month gains.

Reuters, using calculations based on official data, found that signs of improvement remained concentrated mainly in larger markets and had yet to translate into a sustained nationwide recovery in housing demand.

That creates a mixed effect for the reform. A completed apartment removes much of the risk that a buyer will never receive the property. But households expecting prices to fall further can still decide that waiting is preferable to buying.

Existing Homes Are Reshaping China’s Housing Market

The shift toward completed-home sales also reflects a deeper change in China’s property market.

During the fastest phase of urban expansion, the industry depended heavily on new supply. Developers acquired land, launched large projects and sold apartments during construction.

The secondary market has now overtaken new homes in total transaction volume. Existing properties offer buyers one advantage an unfinished development cannot: the home, neighbourhood and physical condition can be assessed before the final purchase.

China’s completed-home policy effectively attempts to transfer part of that certainty into the primary market.

For developers, however, it creates the opposite financial effect. Land and construction costs must be carried for longer before buyers provide most of the project’s cash.

As a result, balance-sheet strength and access to long-term funding become more important, while the advantages of rapid project turnover decline.

Legacy Unfinished Projects Remain a Separate Problem

The new rules are primarily intended to reduce the risk of similar problems emerging in future projects. They do not automatically complete homes already sold under the previous system.

China has spent several years supporting delivery through mechanisms including bank financing for projects placed on so-called white lists. Yet financially weak developers still carry obligations to buyers.

The International Monetary Fund regards the remaining presold unfinished housing stock as an important obstacle to restoring confidence. In its latest detailed assessment of China, IMF staff estimated that completing presold projects belonging to troubled developers could entail fiscal costs of around 5% of GDP over three years. The IMF recommended accelerating the exit of unviable developers while protecting buyers either by financing completion or compensating them when that is the less costly option.

China’s sales reform therefore deals primarily with future risk. The debt already accumulated by developers, homes already sold and incomplete legacy projects remain a separate balance-sheet problem.

As International Investment experts report, moving sales and mortgage funding closer to actual completion removes one of the most hazardous elements of the previous system: homebuyers are less likely to finance construction while simultaneously bearing the risk that the project will not be delivered. For the broader market, however, the implications are more difficult. Property investment is falling by almost 20%, new construction starts are down roughly a quarter, prices are still declining and bank lending to developers is contracting even faster. China may create a safer housing market for buyers, but it will also create a more capital-intensive market for builders. The durability of the new model will depend on whether banks and developers can replace early buyer funding with long-term capital without creating another cycle of excessive debt.

FAQ: China’s New Housing Sales Rules

Has China abolished presales of unfinished homes?

No. Presales remain permitted, but the requirements are becoming much stricter. The main structural frame of a residential building must be completed, while completed-home sales are being prioritised for some new developments.

What is a completed-home sale?

It is the sale of a property after construction and the required completion procedures have been finished, allowing a buyer to inspect the actual property before final settlement.

When will mortgages for new homes be disbursed?

For completed new homes, mortgages should be released after the sale is registered. For presold homes, mortgage funds should be released only after the project has completed its official completion filing.

What is China’s new maximum mortgage term?

The maximum term for an individual housing loan has been extended from 30 years to 40 years. The actual maturity is agreed between the lender and borrower.

Why is China reforming the presale system?

The previous model made construction dependent on a continuous flow of money from new buyers. Once sales weakened and developers encountered liquidity problems, that dependence increased the risk of delays at homes that had already been sold.

Will the reform cause home prices to rise?

There is no direct guarantee. The rules change financing and delivery risk rather than setting prices. Housing values will still depend on demand, household income, credit conditions, available supply and buyer expectations.

What do the rules mean for developers?

Developers will need more equity or bank financing before a project is completed. That increases capital requirements and is likely to favour companies with stronger balance sheets and reliable access to long-term credit.