(Yicai) Feb. 3 -- Shanghai has initiated a second-hand home purchase program aimed at better meeting the housing rental needs of new citizens and young people and invigorating the pre-owned house market.

The program kicked off yesterday in urban Jing’an and Xuhui districts, as well as in semi-urban Pudong New Area, as public rental housing and indemnificatory housing companies under the three local governments signed credit cooperation agreements with China Construction Bank.

The program stipulates that the above firms buy small- and medium-sized pre-owned homes under 70 square meters in good locations and with clear property rights for affordable housing rental to meet demand from migrant and young workers. The scale and implementation time of the program are yet to be unveiled.

District government-backed firms buying second-hand houses will help improve Shanghai’s housing security system, an industry insider told Yicai, adding that the purchase of existing homes is much faster than building public rental houses, accelerating the formation of effective supply.

The launch of this program can further improve the housing security system in the three districts, as well as positively impact the overall liquidity of the local second-hand housing market, said Lu Wenxi, senior analyst at Shanghai Centaline Property.

“Many of the owners of the second-hand houses from this program will use the money from the sale to buy better houses and improve their living conditions, thereby promoting the continuous release of local housing purchasing power,” Lu explained.

The second-hand housing market in Shanghai has shown signs of stabilization. The transaction volume of pre-owned homes in the city climbed 25 percent to about 22,000 units last month from a year earlier, staying above the 22,000-unit mark for the third straight month, according to data from the Shanghai Lianjia Research Institute.

The prices of second-hand houses in Shanghai have not declined for three consecutive months, and the market’s wait-and-see attitude has gradually weakened, Li Gen, head of the Shanghai Lianjia Research Institute, told Yicai.

The implementation of the second-hand house purchase program will further boost transaction volumes in the city, Li predicted.

Editors: Tang Shihua, Futura Costaglione