Local Chinese governments snap up new homes in bid to buoy battered housing market, ease strain on developers
- The authorities in Suzhou in the southern province of Jiangsu snapped up 5,000 new units in September, according to CRIC China
- That and similar moves in Jinan and Xinjiang come as a crisis gripping China’s US$2.53 trillion housing industry deepens
The authorities in Suzhou in the southern province of Jiangsu snapped up some 5,000 new units in September, according to calculations based on data from property information provider CRIC China.
That equates to about half the total number of new flats that were sold in the city that month.
Jinan in northern Shandong province said at the end of August that a local government arm would purchase 3,000 new flats for long-term rental use later.
“The move shows the increasing pressure arising from mounting new home inventories,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.
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“The governments’ moves are much needed to ease the sales pressure on the developers.”
Suzhou, an hour’s drive from Shanghai, sold 1.23 million square metres of residential property last month, more than double the amount in August, according to CRIC China.
“The market is only being drummed up by a home purchase binge by the government,” the data provider said in a report. “Excluding the transactions made by the government, the home sales to individual buyers were on par with August.”
In one project in the suburbs of the city, 400 out of 526 units were bought by the local government. At another residential estate, developed by China Vanke, one of the country’s biggest home builders, 200 out of 357 houses were snapped up by the Suzhou authorities.
The housing authorities of Suzhou did not respond to inquiries by the Post.
The units purchased by the local government will probably be used as affordable homes, apartments for staff and long-term rental homes, Yan said.
The move by local governments comes as a crisis gripping China’s 18.2 trillion yuan (US$2.53 trillion) housing industry deepens.
Holders of a HK$2.5 billion (US$348 million) convertible bond due 2025 issued by Cifi did not receive the payment they were due on October 8.
The People’s Bank of China announced last Thursday that cities where new home prices fell from June through August can reduce mortgage rates for first-time buyers.
A day later, the central bank said it would lower the interest rate for housing provident fund loans by 0.15 percentage points for first-time homebuyers from October 1, while the Finance Ministry said residents who buy new homes within one year of selling their old one will be refunded personal income tax on the sale.
Market observers, though, are not expecting a recovery in the bruised property sector any time soon.
“We don’t think previous quick fixes such as liquidity injections and city-level easing will be as effective this time at reversing the downward trend, given homebuyers’ dented confidence and the mounting pressure on economic growth and the job market,” said Stephen Cheung, an analyst with Morgan Stanley in a research note on October 9.
“We do not expect any material change in the government’s stance on housing in the foreseeable future,” he said.
