Enhancing supply-side regulation to activate existing inventory as a key lever for the real estate market

The Securities Times reporter: Zhang Da

As a crucial industry for the national economy and an important source of household wealth, the development direction of real estate has attracted significant attention. A close reading of the “15th Five-Year Plan” outline shows that “unlocking and activating existing stock” has become one of the core keywords for real estate development in the next five years.

The “15th Five-Year Plan” outline not only sets requirements at the source of land supply, such as “coordinated with existing housing stock and population changes,” but also lays out a series of policies to activate existing stock, targeting existing land, projects under construction, existing commercial housing, and more. It specifies that already-supplied but undeveloped land and projects under construction should be “handled through categorized disposal,” and that existing commercial housing and idle office-and-retail spaces should be used to advance “activation and utilization,” among others.

Why does the “15th Five-Year Plan” outline place such emphasis on activating and utilizing real estate stock? Wang Ruimin, a researcher with the Development Research Center of the State Council, told The Securities Times reporter that after urbanization enters a phase of stable development, the intensity of land development in some cities that have net population inflows has already exceeded the international warning line of 30%, and in some cities it has even exceeded 50%. This effectively forces cities to develop from existing stock land, creating space for upgrades in both industrial development and residential quality.

Liu Lin, a researcher with the Macro-Economic Research Institute of the National Development and Reform Commission, said that the main problems in the market at present are high real estate inventory and difficulty in clearing inventory. As of the end of February 2026, the area of commercial housing for sale in China is close to 800 million square meters, at an all-time high. In addition to the area for sale, there is also significant pressure from projects under construction and inventories of already-supplied but undeveloped land. Moreover, due to factors such as overly high planning and allocation ratios, commercial properties and garages have long been supplied in excess. The pressure to clear is far greater than for commodity housing. These inventories tie up large amounts of capital for real estate firms, not only constraining liquidity but also affecting firms’ investment capacity. Continued financial costs further exacerbate operating risks for real estate companies.

Wu Jing, Director of the Henglong Real Estate Research Center at Tsinghua University, believes that inventory-clearing pressure in real estate is high and the recovery of demand is uncertain. What is urgently needed is adjusting from the supply side as the core measure to defuse market pressure. The outline’s emphasis on existing stock is consistent with the “shift of city development toward improving the quality and efficiency of existing stock” proposed at the Central Urban Work Conference. The key to implementation is that each city should formulate policies tailored to different types of inventory assets, and through a gradual advancement process, explore replicable models.

For existing commodity housing, the central government has clearly encouraged the acquisition of existing homes for use as affordable housing. It also supports local governments in issuing special-purpose bonds to increase acquisition funding. This has become an important measure to resolve real estate inventory and improve the housing保障 system. Since 2025, the stock-home acquisition-and-reserve efforts in various regions have continued to advance. According to incomplete statistics, as of now, more than 60 cities nationwide have explicitly supported the acquisition of existing stock homes. According to monitoring by the China Index Research Institute, since 2025, special-purpose bonds issued in provinces including Zhejiang and Sichuan for acquiring and using existing commercial housing for保障 housing have exceeded RMB 4.3 billion in total.

Liu Lin told the reporter that in addition to local government special-purpose bonds, supportive policies regarding acquisition-and-reserve funding also include housing rental group home purchase loans and re-loans for affordable housing. As localities explore the process of acquiring existing properties, supportive policies have been continuously optimized. The acquisition scope has expanded to include various qualifying sources of completed or under-construction but unsold units, judicial disposal properties, and inventory second-hand housing sources. After acquiring and reserving inventory properties, the intended uses have expanded beyond affordable housing to include resettlement housing, student or enterprise dormitories, talent housing, and more.

Funding is the fundamental guarantee for implementing the acquisition-and-reserve plan for existing commodity housing. Ni Pengfei, Director of the City and Competitiveness Research Center and a researcher with the Chinese Academy of Social Sciences’ Finance and Strategy Research Institute, suggests that at present, China should build a diversified acquisition-and-reserve model led by the government with social participation, and also build a government-led diversified funding system, including expanding the scale of special-purpose bonds, expanding the scale of policy lending, supporting commercial bank lending, and attracting social capital to participate. At the same time, the acquisition-and-reserve work also needs to be integrated with new home renovation and city quality improvements, with the release of improved-demand needs, and with the renovation of existing homes. In addition, it is necessary to establish reasonable incentive, constraint, and protection mechanisms.

As for activating and utilizing idle commercial and office properties, Liu Lin said that in the past, various localities have been promoting this—for example, by providing tax incentives to support business format adjustments—and in the future, they may explore more activation paths.

Wu Jing recommended that for office properties under construction or just completed but not yet in use, the conversion of use should be considered promptly. For office properties that are temporarily suspended or have been idle for the long term, priority should be given to use conversion as the activation approach. For the acquisition and renovation scope of completed commodity housing, it should be expanded to include office properties. At the same time, it is encouraged to and supported for existing office properties to pursue differentiated competition, including differentiated conditions in both soft and hard elements, as well as differentiated industrial positioning.

For idle inventory land, Wang Ruimin pointed out that it can mainly be divided into three categories: low-efficiency industrial land, land held by distressed real estate developers, and land auction lots acquired by local urban investment vehicles (chengtou) or state-owned enterprises. For the latter two categories, acquisition-and-reserve may be considered. For low-efficiency industrial land, China can draw lessons from Singapore’s “white land”制度 and explore ways to convert between different land uses, providing rich policy support for conversion-for-industry-to-office/workspace, conversion-for-industry-to-residential, and conversion-for-commercial-to-residential. For social capital and enterprises that actively participate in promoting the activation of inventory land, create “white land” plots with a certain proportion, allowing land users that meet conditions to change land use based on their actual needs in the future, thereby providing effective incentives for social capital to actively participate in city inventory renewal and similar initiatives.

However, Wang Ruimin also noted that many inventory lands, inventory homes, and projects under construction are difficult to activate because the underlying debt relationships are complex and hard to untangle. After asset values decline, acquisition funds are often unable to cover the debts behind the assets. There are also significant disagreements among the relevant interest parties regarding how losses should be shared.

Previously, the central government also supported local governments in issuing special-purpose bonds to repurchase existing idle land. In regions where special-purpose bonds were piloted for self-approval and self-issuance, repurchase land projects funded by special-purpose bonds have already been implemented. According to incomplete statistics by the China Index Research Institute, as of the end of February 2026, the total amount of publicly announced special-purpose bond funding intended for acquiring idle inventory land across 28 provinces nationwide exceeded RMB 770 billion, while the actual issuance of special-purpose bonds exceeded RMB 335 billion, accounting for about 43%.

A relevant person at the China Index Research Institute expects that in the future, local governments may accelerate the pace of acquiring and reserving idle inventory land, while also better adapting planned land supply schemes to market land demand by reasonably adjusting land planning, swapping land sites (换地), and other methods. During this process, supportive and encouraging policies for cross-city and cross-region land swaps, and support for land planning adjustments, still need to be further improved in order to remove bottlenecks.

“To achieve the policy goal of reducing real estate inventory, besides encouraging demand-side policies, supply-side regulation is also equally important.” Liu Lin said that activating inventory can play a positive role in accelerating inventory reduction and stabilizing the market as soon as possible. Next, it is expected that supply-side regulation in the real estate sector will be strengthened further, and medium- to long-term institutional reforms are expected to be advanced. This will help establish a new model for real estate development, promote long-term market stability, and ultimately推动 high-quality development of real estate.

(Editor: Dong Pingping）

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