(TMTPOST)—Zhengzhou, a city in central China, is implementing a strategy to address new housing inventory by urging residents to sell their pre-owned homes to a local state-owned company and purchase new ones.

The state-owned company, Zhengzhou Urban Development Group Co., plans to buy 500 pre-owned homes between April 20 and June 30, according to a notice released by the Zhengzhou Real Estate Association on Monday.

Residents participating in this initiative must buy a new home in the main urban area for a total price equal to or greater than the price of the home they are selling.

This move comes as many small and medium-sized cities in China face a downturn in their property markets, with the sector experiencing a liquidity crisis since 2021 due to government measures to reduce high leverage among developers.

In Zhengzhou, new home prices fell month-on-month for a 12th straight month in March, according to data from China's statistics bureau on Tuesday.

Local authorities, with granted autonomy to adjust property market policies, have implemented measures such as easing home purchase restrictions, reducing mortgage rates, lowering down payments, and providing subsidies to homebuyers.

However, these policies have had limited short-term impact, as potential buyers remain cautious amid uncertainties about developers' ability to complete projects on schedule.

The property market is expected to continue exerting downward pressure on growth, suggesting that stabilizing policies may be necessary in the coming months, said Lynn Song, chief economist of Greater China at ING, a global financial institution.