China property: will fleet of policies to buoy sales stem slack tides in the housing market?

China has approved local governments and state enterprises to buy land and housing, part of an effort to get the property sector moving

Change in approach welcomed by analysts, but most said more ambitious moves will be necessary to turn the sector’s fortunes around

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China’s beleaguered property market may see some relief in the form of new measures to boost the sale of unsold housing stock. Photo: Bloomberg

Published: 7:19pm, 20 May 2024Updated: 9:23am, 21 May 2024

A new suite of policies from Beijing, intended to give China’s property sector a jolt on both the demand and supply sides, has raised expectations that the real estate slump weighing down the national economy can be alleviated – but analysts argued more support will be needed before they revise their estimates upwards.

To dissipate the shadows cast over the property market after a cascade of defaults from major developers, Chinese authorities gave local governments approval to act as buyers of last resort for undeveloped land and unsold housing on Friday. This provides localities with another way to promote activity in the sector, as financial regulators pour in funds and restrictions on mortgages are relaxed.

Governments as well as state-owned enterprises will be able to purchase stockpiles of vacant homes and undeveloped land from struggling builders. Money for these acquisitions will be funded through China’s central bank and the issuance of local government special bonds. Commercial banks, through 300 billion yuan (US$41.5 billion) in relending finances from the People’s Bank of China, can invest up to 500 billion yuan.

But even with this shift in approach, observers did not seem ready to declare the end of the crisis in sight. “It is really too small to make more than a marginal difference,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at French investment bank Natixis. “The whole programme sounds like a sop to ailing developers.”

Analysts at Morgan Stanley – which estimated a 4.8 per cent rise in China’s gross domestic product this year and 4.5 per cent next year – said they believe a gradual stabilisation of the housing market through new policies may provide some cushion for the Chinese economy, as trade tensions and future restrictions may slow down the country’s exports going forward.