China says it will start buying apartments as housing slump worsens

In a housing crisis with no end in sight, the Chinese government is stepping in as the buyer of last resort.

Chinese officials took their boldest step yet on Friday, unveiling a nationwide plan to buy up some of the vast housing stock lying on the market. He also relaxed the rules of mortgage.

The surge in activity came just hours after new economic data revealed a harsh truth: No one wants to buy a home right now.

Policymakers have taken dozens of measures to woo homebuyers and reverse the steep decline in the housing market, which has shown some signs of recovery soon.

On Friday, officials from across China held a video conference to discuss the challenges they face. China’s Vice Prime Minister, He Lifeng, announced substantial changes in the government’s approach to tackling the housing crisis, which has prompted households to cut spending. Mr He said local governments could start buying houses to deal with the large number of vacant apartments.

The houses purchased by the government will be used to provide affordable housing. Mr Trump did not provide any details on when such a program would start or how it would be funded.

Larry Hu, chief China economist at Australian financial firm Macquarie Group, said the approach is similar to the Troubled Asset Relief Program, or TARP, which the U.S. government set up in 2008 to buy up troubled assets after the collapse of the U.S. housing market.

“It’s a change in policy in the sense that now local governments are coming into the market to buy property directly,” Mr Hu said.

Some local governments are already quietly testing this approach in cities like Jinan, Tianjin and Chengdu on China’s coast and Chengdu in the south, but this is the first time a senior Chinese official has said anything about it on a national stage. Is.

Addressing officials on Friday, Mr He said they had to “fight hard” to deal with all the unfinished properties across the country, according to an official account by Chinese state media outlet Xinhua.

The People’s Bank of China said Friday it will create a program to provide $41.5 billion in cheap loans to help local state-owned enterprises buy housing that has already been built but not yet sold. Is.

Official government data shows Beijing still has a long way to go to boost confidence in the real estate market. The number of unsold homes is at a record high and prices are falling at a record pace.

According to China’s National Bureau of Statistics, the inventory of unsold homes as of March was equivalent to 748 million square meters or more than 8 billion square feet. In April, new home prices in 70 cities fell 3.5 percent from a year earlier, while existing home prices fell 6.8 percent, both record-breaking declines.

Hours after the release of home price data on Friday, China’s central bank took steps to encourage home purchases by reducing down payment requirements. It also eliminated mortgage interest rates nationwide.

“Policymakers are desperate to boost sales,” said Roselia Yao, a real estate expert at China-focused research firm Gavecal. The central bank has been lowering mortgage rates for several years and before the move the average rate was already at a record low.

China’s leaders are targeting economic growth of about 5 percent this year, a plan that many independent economists believe is ambitious and will require aggressive government spending.

To that end, China also said on Friday it had raised $5.5 billion from its first sale of 30-year bonds as part of a broader plan to raise $140 billion over the next six months.

China’s housing crisis has been fueled by years of heavy borrowing and overbuilding by developers, which has undercut the country’s remarkable decades of rapid economic growth.

But when the government finally intervened in 2020 to end the risky practices of developers, many companies were already on the verge of collapse. One of its biggest developers, China Evergrande, defaulted in late 2021 due to heavy debt. It left behind hundreds of thousands of unfinished apartments and hundreds of billions of dollars worth of unpaid bills.

The real estate crisis has left many Chinese families who once invested their life savings in property now with no viable options for building wealth. They have no other good options, because China’s stock market, although recovering in recent months, remains volatile. Savings rates are generally low.

Evergrande was the first in a series of major missteps that now plague the industry. A Hong Kong court ordered the company’s liquidation in January. The first hearing in a Hong Kong court was held on Friday in a case brought by an investor seeking the liquidation of the company of another troubled real estate giant, Country Garden.

zixu wang Contributed research from Hong Kong.

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