China is pursuing reforms in its housing sales system with a shift from the traditional pre-sales practice -- homes being sold before construction is complete -- as part of a broader effort to steer the property sector to a healthy and sustainable path.

Dong Jianguo, vice minister of housing and urban-rural development, recently highlighted the reforms as one of the six key initiatives to promote the real estate market transformation.

"We will strongly and orderly advance the sales of completed new homes," Dong said, adding that the ministry will guide new development projects to adopt the "sales after construction" model and push for the formulation of supportive policies based on local conditions.

The statement marks a significant departure from the current prevailing practice, where developers sell properties before construction is finished or even starts. Buyers typically pay deposits or full prices upfront, expecting to receive their homes upon completion.

The pre-sales system was initially implemented in the 1990s to resolve developers' funding shortages and expedite urban housing construction against surging home demand.

However, as the real estate market has seen a significant shift in the supply-demand relationship amid a new round of adjustments, the system has drawn more criticism for unfinished projects and disputes over property quality. In fact, ensuring timely and satisfactory delivery of homes has been high on the government agenda in recent years.

Analysts said the need for reform has been widely acknowledged. Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, said a new property development model should transition from "high leverage and high turnover" to "low leverage and greater focus on operation."

The Ministry of Housing and Urban-Rural Development in January 2023 started to encourage the sales of completed new homes in regions where conditions are mature. Multiple cities, from Beijing to Suzhou and Hefei, have launched pilot programs.

The outcomes of these pilots have been notable. According to a report by Huatai Securities, the proportion of completed home sales in the new home market increased significantly from 10.4 percent in 2021 to 18.7 percent in 2023. In the first half of 2024, the figure rose to 26.7 percent, the highest level since 2010.

Xu Yuejin, an analyst with the China Index Academy, projected the total area of completed home sales could make up around 30 percent of the market this year.

With the steady shift in the housing sales system, a new development model for China's property sector is gradually taking shape.

The resolution adopted at the third plenary session of the 20th Communist Party of China Central Committee pledged reforms to change the way real estate development is financed and improve the advance purchase system for commodity housing. Improvements will also be made to the taxation system in the real estate sector.

China will eliminate the drawbacks of the previous high-debt, high-turnover, and high-leverage approach to meet people's demands for better homes with improved policies and systems in financing, taxation, land and sales, said Han Wenxiu, executive deputy director of the Office of the Central Committee for Financial and Economic Affairs.

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