China is changing the housing presale model that supported its property boom for more than three decades. Traditionally, buyers paid deposits and began mortgages on apartments that were still under construction, while developers used those funds to finance ongoing and future projects. This model helped accelerate urbanisation, but it also encouraged high leverage and became increasingly unstable as economic growth slowed. The collapse of major developers such as Evergrande exposed the risks, leaving many buyers paying mortgages on unfinished homes.
Under the new rules announced in August 2026, developers will generally need to complete the main structural work of a project before selling units. Buyer deposits and mortgage payments will also be placed in government-managed escrow accounts and released only as construction milestones are completed. The objective is to shift financial risk away from homebuyers and back toward developers, while rebuilding consumer confidence through a “what you see is what you get” approach.
The reform reflects an existing market trend. Completed homes represented only 12.7% of commercial housing sales in 2020, but their share had risen to 35.9% by 2025. Buyers are increasingly cautious and prefer homes they can physically inspect before committing. At the same time, the new system creates a serious financing challenge for developers because deposits, advance receipts and mortgage proceeds still represented 44.6% of developer funding in the first seven months of 2026.
To compensate, the government is encouraging alternative financing channels, including longer-term development and rental-housing loans, financing for urban renewal projects, REITs, and mechanisms that allow stronger developers to acquire assets from weaker companies. The broader aim is to replace the old “high debt, high leverage, high turnover” model with more stable, long-term financing.
China’s property market is entering a fundamentally different phase. The focus is moving away from rapid construction of new housing toward managing and improving the enormous existing housing stock. In the first half of 2026, preowned homes accounted for 50.4% of residential sales nationwide, exceeding new-home sales for the first time. In Shanghai, preowned sales were nearly five times new-home sales, and in Beijing about 3.6 times higher.
Source: China Report
