China rolls out property policies across nation to fix slump
In late August, the state council led by Premier Li Keqiang said local governments should use city-specific credit policies to support necessary housing demand.
A flurry of Chinese cities are rolling out measures to boost housing demand, signaling the government’s intention to arrest a real estate slump.
Various local governments have issued at least 70 property easing measures since President Xi Jinping’s Politburo called for efforts to defuse the crisis. Chinese developers’ stocks and dollar bonds rose on Thursday after the Securities Daily reported that more than 120 cities have this year loosened policies restricting the use of housing provident funds to buy properties.
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China’s $2.4 trillion new-home market has shown little sign of recovery, adding to the woes of an economy that barely expanded in the second quarter. Mortgage boycotts by homebuyers waiting for apartments to be completed have damped consumer confidence, putting further pressure on home prices, which have fallen for 11 straight months.
While the central government has avoided outright stimulus, it’s been giving tacit approval to local authorities to unwind property austerity measures.
In late August, the state council led by Premier Li Keqiang said local governments should use city-specific credit policies to support necessary housing demand. Similar signals were issued in April, after the Communist Party’s Politburo led by President Xi Jinping said local governments could “refine” housing measures to ensure stability in the property market.
A Bloomberg stock gauge of builders surged as much as 4.6% on Thursday morning to a near seven-week high. Their offshore bonds gained about 1 to 3 cents on the dollar, according to credit traders.
Chinese cities are likely to continue optimizing property policies based on their own situation, adopting measures such as improving financing conditions for local developers, Golden Credit Rating analyst Wang Qing was cited as saying.
The easing of housing provident funds is just one example of the measures being taken. Cities operate such funds where employees contribute a portion of their salary each month to the pool, which they can tap and borrow discounted loans from to buy a home.
Here are some of the policies coming out from local governments to boost demand for homes:
- A few so-called tier 2 cities, or regional hubs, lowered down-payment thresholds for a second residence by as much as 20 percentage points. Those include Nanjing, Suzhou and Wuxi
- At least 24 cities have allowed parents to fund their children’s home purchases by drawing on their own housing provident funds and helping repay their mortgages, the Securities Daily said on Sept. 9
- The eastern city of Suzhou canceled a requirement for first-time homebuyers without a local residential permit to pay social insurance, China Business News reported Wednesday
- The southern city of Liuyang announced home-purchase subsidies and more credit support, the China Securities Journal reported Monday
- Northern Langfang city, which is about a one-hour drive from Beijing, said on Aug. 9 that it would unwind austerity measures including a ban that restricted non-locals from buying property
- Changchun, the capital of northern Jilin province, plans to give out home-buying subsidies
- Shanghai said on Aug. 20 it would eased buying curbs in the suburban Lingang area, home to advanced manufacturers including Tesla Inc. Non-locals working for companies there are now allowed to buy one residence after a year
- Some cities, including Taizhou in eastern Jiangsu province, adjusted down-payment requirements for homebuyers backed by the provident fund
Still, such measures are unlikely to revive home sales anytime soon, particularly with the prospect of more Covid lockdowns and a grim labor market weighing on demand, according to Bank of America Corp.
“Even with more policy easing by local governments, we believe the negative sentiment shocks will unlikely abate soon,” Bank of America economists including Helen Qiao wrote in a Sept. 12 note. “It could take time to restore home buyers’ confidence.”