Property developers that focus on smaller cities in China are set to be the beneficiaries of a reform that could encourage 100 million rural citizens to move to urban areas.
Policy makers said cities with an urban population of 1 million to 3 million should scrap the residency registration system this year, a move that is seen boosting housing demand in lower-tier cities.
Developers with higher land reserves or housing inventories in those cities, especially growing areas such as the Yangtze River Delta and Greater Bay Area are among the winners from the policy, analysts say.
“The speed of urbanisation should accelerate, which is constructive for real estate developers, especially those focussed on lower tier cities where we can expect stronger demand for residential properties,” said Ken Hu, chief investment officer for Asia Pacific fixed income at Invesco Hong Kong Ltd.
Smaller cities have already seen bigger gains in home prices, according to March data. The recovery was more evident in Tier 2 and Tier 3 cities, where local governments have increasingly loosened home buying restrictions.