Broker: UOB Kay Hian
Date of Report: 10 June 2025

Shenzhen’s Housing Provident Fund Policy Boost: What It Means for China’s Property Market in 2025

Introduction: New Policy Momentum in China’s Property Sector

China’s property market is experiencing a new wave of policy interventions aimed at stabilizing the sector. Shenzhen has announced a significant policy shift by allowing homebuyers to tap into their Housing Provident Fund (HPF) for down payments—a move expected to have a substantial impact on market liquidity and buyer sentiment. This policy, following in the footsteps of Guangzhou, positions HPF as a major tool to stimulate the property market in 2025.

Shenzhen’s HPF Policy: A Catalyst for Market Stabilization

– Shenzhen’s government revealed plans to allow eligible home buyers to use their HPF for down payments. – This makes Shenzhen the second Tier 1 city to adopt this approach, following Guangzhou’s lead in August 2024. – Implementation details are still pending but the direction is clear: leverage HPF balances to stimulate home buying.

HPF: A Growing and Underutilized Resource

– From 2022 to 2024, several cities allowed HPF use for house rentals, causing HPF withdrawals to grow at a two-year CAGR of 10.8%, reaching RMB 2.77 trillion in 2024. – Despite higher withdrawals, HPF deposits continued to rise at a two-year CAGR of 10.1%, pushing total HPF balances to RMB 10.9 trillion in 2024. – The HPF loan balance, however, grew more slowly at a 5.4% CAGR, reducing the HPF loan-to-asset ratio from 84% in 2021 to 74% in 2024. – The overall HPF system remains robust even amid macroeconomic pressure.

HPF as a Key Policy Tool for 2025

– Allowing HPF use for down payments unlocks additional bank lending, making it a more potent stimulus than merely increasing HPF loan quotas or lowering interest rates. – If HPF withdrawals for down payments rise 5%, with an assumed 80% loan-to-value ratio, the policy could inject an estimated RMB 700 billion into the housing market—about 7% of national new sales in 2024.

Land Market Divergence: Growth in Key Cities Despite National Weakness

– In the first five months of 2025 (5M25), leading Tier 1 and Tier 2 cities showed strong growth in residential land sales, bucking the national trend. – Nationally, local government land sales revenue fell 11.4% year-on-year in Jan-Apr 2025, after a 16% drop in 2024. – Yet cities such as Beijing, Nanjing, Suzhou, Hangzhou, Chongqing, and Chengdu posted significant land sales revenue growth, underlining a widening divergence in market sentiment.

Property Sales: Mixed Trends and City-Level Divergence

New Home Sales in June 2025: Modest Recovery, Persistent Weakness

– Across 28 monitored cities, new home sales volume (GFA) rose 22.7% month-on-month in early June 2025, but was still down 17.7% year-on-year. – The month-on-month increase is mainly due to the very low base in May 2025. – By city tier: – Tier 1: +41.1% MoM, -13.0% YoY – Tier 2: +17.1% MoM, -21.5% YoY – Tier 3: +36.2% MoM, -8.4% YoY – Tier 4: -8.8% MoM, -25.4% YoY – Outperforming cities in May 2025 included Beijing, Fuzhou, Wenzhou, Jiaxing, and Jiangmen, while Suzhou saw both MoM and YoY declines.

Lower Tier Cities: High Volatility

– Some lower-tier cities saw strong MoM rebounds, with Jiangmen up 351% YoY and Jiaxing up 187% MoM. – Others, like Yangzhou, showed sharp YoY drops of -73%.

Secondary Market: Short-term Rebound, Annual Decline

– In June 2025 (1-8 Jun), secondary home sales in three Tier 1 and nine Tier 2 cities rose 54.6% and 33.8% MoM, respectively. – However, YoY growth was negative: -15.5% for Tier 1 and -20.1% for Tier 2 cities. – Qingdao and Shenzhen outperformed on a YoY basis.

Sector and Stock Recommendations: Overweight on China Property

The report maintains an OVERWEIGHT stance on China’s property sector. While downward pressure persists on both property and land sales, the divergence among cities is expected to widen. Improved supply-demand dynamics in select key cities reduce the need for aggressive policy intervention, with a more moderate policy package anticipated in the second half of 2025.

Sector Top Pick: China Resources Land (CR Land)

Company Focus: Longfor Properties

– Longfor maintains a BUY rating with an unchanged target price of HK\$11.58. – Operational performance for May 2025: – Contracted sales in May 2025/first five months of 2025 fell 25.5%/30.5% YoY to RMB 6.47 billion/RMB 28.55 billion. – Recurring income grew 4.6% YoY in May 2025; rental income from investment properties (IP) up 5.4% YoY. – For the first five months of 2025, recurring income and rental income from IP grew by 2.5% and 5.5%, respectively. – While sales are contracting as expected, Longfor’s resilience in rental income highlights strong operational capabilities.

Conclusion: Outlook for 2025 and Beyond

– China’s property market remains under pressure but is showing signs of stabilization, driven by innovative policy tools like HPF. – Divergence among cities is likely to increase, with top-tier cities benefiting most from targeted policies. – Investors should remain selective, focusing on quality developers like China Resources Land and Longfor Properties, both of which offer strong fundamentals and yield potential. – The HPF policy is poised to be a central stimulus lever in 2025, and further city-level policy relaxation is possible if market pressure intensifies.

Disclosures

This research was prepared by UOB Kay Hian. Please refer to the original report for full disclosures and regulatory information.