Henan city mulls fully abolishing housing presales

Xinyang – a third-tier city in Henan province – may become the first city to completely ban housing presales.

Some context: In China, most new builds are presold, requiring upfront payment years before delivery.

• But developer defaults have delayed the completion of presold properties, while some may never be constructed.
• In response, some cities have trialed pilots to phase out the presales model, but a blanket ban has never been implemented.

That might be about to change: Under a local government policy proposal circulating this week, Xinyang would require construction to be finalized before properties built on newly acquired land can be sold.

This raises the question: Could Xinyang simply be pre-empting a nationwide presales ban?

Our take: That's highly unlikely.

• Nationally, prepaid deposits remain a financial lifeline for developers – an abrupt ban would choke off liquidity and weaken land sales, making it a non-starter for central policymakers.
• In Xinyang, however, the total collapse in home sales means presales are out of the question anyway (year to date, the Xinyang government has only sold one residential land plot), forcing property developers to focus on selling existing, completed properties instead.