China’s local governments offer lifeline for builders facing a squeeze in home sales as coronavirus spreads
- From Wuxi to Hengyang, local governments are rolling out measures to release a chokehold on property sales
- Moody’s predicts property sales to decline slightly in 2020 after a 10.3 per cent gain in 2019
China’s local governments are racing to rescue home builders as the coronavirus outbreak threatens to squeeze sales and liquidity in an industry that has become a powerful engine of growth for the economy.
The authorities in Wuxi in the eastern province of Jiangsu unveiled 17 measures on February 12 to help its developers cope with sliding slump. Hengyang, the second largest city in south-central Hunan province, followed two days with some tax waiver for homebuyers to help rejuvenate sales.
Since the epidemic broke out from Wuhan in central Hubei province, the housing market has come to an abrupt standstill. Authorities in more than 110 cities in 12 provinces have ordered developers to shut their sales offices to contain the outbreak, according to consulting firm China Real Estate Information Corp.
The reaction in Wuxi and Hengyang suggests the fallout has been too much to bear amid the worst health crisis in almost two decades. For example, China Evergrande, the third-largest listed developer, will slash prices by a quarter from February 18 for flats in all its 800-odd projects nationwide.
“This could be a lifesaver for developers who may be struggling for cash flow,” said Huang Tao, a general manager at Centaline Property based in Guangzhou. “Property agents can hardly bring in the customers while sales centers are shut.”
Developers in Wuxi, which is located 800km from the epicentre in Wuhan, are now allowed to begin selling homes as soon as they have obtained 25 per cent of project financing, according to its announcement. Under normal rules, such sales can only kick off when 25 per cent of construction is completed.