In response to the worsening state of the property sector in China, the government announced plans for local governments to purchase “some” apartments and take forceful measures to deliver unfinished homes. These new efforts aim to stabilize the crisis-hit property market, which has been a key drag on economic growth. The latest data revealed the fastest drop in new home prices in over nine years, indicating the severity of the situation.
Despite multiple waves of support measures over the past few years, the property sector has continued to struggle. Vice Premier He Lifeng discussed the government’s plans during an online meeting with other authorities. He mentioned that local governments would purchase homes at “reasonable” prices to provide affordable housing. However, specific details such as timelines, targets, and funding sources for these purchases were not provided. He also suggested that local governments could repurchase land from developers and vowed to make efforts to complete stalled projects.
To further support the property market, the central bank announced intentions to lower mortgage interest rates and downpayment requirements. These measures are aimed at boosting housing sales and stimulating demand in the market. The news of these supportive actions led to a more than 4% increase in China’s CSI 300 Real Estate index, signaling a positive response from investors and market participants.
Macquarie’s chief China economist Larry Hu viewed the government’s intervention as a positive and encouraging step in the right direction. He praised the initiative of governments stepping in to buy housing inventory, noting its potential impact on stabilizing the market. However, Hu raised concerns about the funding sources for these purchases and the overall magnitude of the government’s intervention. The success of these measures will depend on the execution and effectiveness of the strategies implemented.
Overall, the Chinese government’s new round of measures in the property sector reflects a determined effort to address the challenges facing the industry. By encouraging local governments to purchase apartments, repurchase land, and complete stalled projects, authorities are taking proactive steps to stabilize the market and boost economic growth. The central bank’s decision to lower mortgage rates and downpayment requirements further demonstrates the government’s commitment to supporting the property sector. The success of these measures will depend on their implementation and effectiveness in revitalizing the property market in China.
