Recent Developments in China's Housing Policies
This article discusses recent changes in housing policies in China, focusing on the introduction of 400m-800m zones from city centers and the implications of R2, R3, and R4 zoning regulations. It also provides personal perspectives on the potential impacts of these policies.
Overview of the New Zoning Regulations
The state government has implemented new zoning regulations extending 400 to 800 meters from designated town centers. These areas include locations such as Edgecliff Station, Double Bay, Rose Bay Town Center, and Bondi Junction. The boundaries of these zones are defined by safe walking routes, meaning accessibility is determined by pedestrian-friendly paths with features like red lights and designated walkways. Distance is measured based on these safe walking routes, not direct Google Maps distances. Importantly, if even 1% of a property falls within this zone, the entire property is subject to the new regulations.
R2 Zoning Regulations: Specifics Within 800 Meters
Within the 800-meter radius, R2 zoning allows for four main housing types:
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Duplexes: Require a minimum lot size of 450 square meters and a width of at least 12 meters, with a floor space area (FSA) of 0.65 to 1 and a height of up to 9.5 meters.
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Multi-Dwelling Housing: Also with a maximum height of 9.5 meters, the FSA can exceed 0.7 to 1, requiring at least 500 square meters of land with a width of 18 meters.
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Independent Multi-Dwelling Housing: Allows for interconnected units, maintaining a height of 9.5 meters, an FSA of 0.7 to 1, requiring 600 square meters, and a minimum width of 12 meters.
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Residential Flat Buildings (Apartments): Need a minimum of 500 square meters and 12 meters of width, an FSA of 0.8 to 1, and a height of 9.5 meters.
R3 and R4 Zoning Regulations: 400m vs. 400-800m
R3 and R4 zoning are divided into two distance categories:
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Within 400 Meters: Allows for a higher FSA of 2.2 to 1 and a building height of up to 22 meters. There are no minimum area or width requirements.
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400 to 800 Meters: Permits an FSA of 1.5 to 1 and a height of 17.5 meters, also without minimum area or width restrictions.
A common condition for all R2, R3, and R4 zones is the potential for increased FSR and height by offering affordable housing. Providing at least 20% of units at government-set market rental prices for 10-15 years can result in up to 30% additional FSR and height allowances. Similar benefits are available for projects allocating 10-15% of units as rental properties.
Exclusions and Considerations
Certain areas are excluded from these regulations, including bushfire and flood zones, properties on major transportation corridors, and those affected by aviation routes. Heritage buildings are also excluded. Remote suburbs prone to wildfires, such as Bathurst, Hawkesbury, and the Blue Mountains, are similarly affected by these exclusions.
Personal Opinions and Market Implications
There's speculation about the opportunities these new regulations present, with some hoping to capitalize on increased property values. However, uncertainty remains regarding their actual impact.
Recent high-value land transactions, like Fortis's purchase in Rose Bay, appear promising but often involve complex conditions. These include council approvals, maximum FSR limitations, and potential issues related to neighboring properties' lighting, all affecting project feasibility and timelines.
Experienced developers are approaching these changes cautiously. They prioritize rational pricing and manageable risks, recognizing that project profitability can easily be compromised. Many transactions are subject to conditions that can lead to deals falling through.
Local council resistance to these developments, as seen in areas like Ural and Coringa, can further complicate the process. While the state government aims to increase housing supply, consistent opposition from local councils could result in them being bypassed entirely in future planning decisions.
Final Thoughts
Overall, the impact of these new regulations is unlikely to be as dramatic as some anticipate. Development will likely proceed gradually, influenced by construction costs and the existing price gap between new and second-hand properties. These changes might ironically increase the value of low-density housing and large land parcels in town centers, which are becoming scarcer. This could shift the focus away from high-density development in those areas.
Instead, properties outside the 400-800 meter zones, specifically R1 zoned properties, might become more attractive due to their scarcity, particularly in eastern areas. Market movements should be interesting after the general election in May, with potential central bank activity impacting the market in July and August.