China announced new measures to stabilize the property sector, including plans for local governments to buy some apartments and deliver unfinished homes. This comes as new data showed the fastest drop in new home prices in over nine years, indicating the worsening state of the industry. Despite previous support measures failing to improve the sector, Vice Premier He Lifeng stated that local governments can buy homes at reasonable prices to provide affordable housing, although no specific targets or timelines were provided.
In addition to purchasing homes, local governments were also advised to repurchase land sold to developers. The central bank also announced plans to lower mortgage interest rates and downpayment requirements, which led to a more than 4 percent jump in China’s CSI 300 Real Estate index. Macquarie chief China economist Larry Hu viewed the government’s intervention in buying housing inventory as a positive step, but raised concerns about who would fund the purchases and the ultimate impact of these measures.
The property sector has been a key driver of China’s economic growth, accounting for a significant portion of economic activity. However, it has been a drag on growth in recent years as prices continue to fall and projects remain unfinished. The government’s efforts to stabilize the sector are aimed at supporting economic growth and ensuring affordable housing for the population.
Despite the government’s ongoing support measures, the property sector continues to face challenges. The announcement of plans for local governments to buy apartments and deliver unfinished homes is a response to the worsening state of the industry, with new home prices experiencing the fastest drop in over nine years. The central bank’s decision to lower mortgage interest rates and downpayment requirements is also an attempt to stimulate demand and boost the housing market.
As local governments take on the responsibility of buying apartments and completing stalled projects, concerns have been raised about the levels of debt they already hold. The funding for these purchases and the ultimate impact on the property market remain uncertain. While the announcements led to a positive response in the stock market, the long-term effectiveness of these measures in stabilizing the property sector is yet to be seen.
Overall, China’s efforts to stabilize the property sector through new measures such as local government purchases of apartments and central bank adjustments to mortgage rates reflect the government’s commitment to supporting economic growth and ensuring affordable housing. The challenges facing the property sector, including falling prices and unfinished projects, necessitate government intervention to address the crisis and boost confidence in the market. The impact of these measures on the economy and the property sector will be closely monitored to determine their effectiveness in stabilizing the industry.
