Investors hoped the measures marked the beginning of more decisive government intervention to compensate for waning demand for new and old apartments, to slow down falling prices and to reduce a growing stock of unsold homes. Since the property market began its steep downturn in 2021, a string of developers have defaulted, leaving scores of idle construction sites behind, and sapping confidence in what had been the preferred savings instrument for the Chinese population.
Raymond Yeung, chief Greater China economist at ANZ, said, “The biggest problem is whether the government purchase will induce private sector demand. Clearing inventory will increase cashflow to developers, but it does not address private sector confidence.”
After waves of support measures over the past two years failed to put a floor under the property sector, the housing ministry said local governments can instruct state-owned firms to buy “some” homes at “reasonable” prices. Municipal financing vehicles, blamed “hidden debt,” won’t be allowed to buy.
The homes would be used to provide affordable housing, Vice Premier He Lifeng said, without giving a timeline or a target. He also said local governments, already some $9 trillion in debt, can repurchase land sold to developers, and promised that authorities will “fight hard” to complete stalled projects.
China’s central bank said it would set up a relending facility for affordable housing that it says would result in 500 billion yuan worth of bank financing. It would also further lower mortgage interest rates and downpayment requirements.Additionally, it would make another 500 billion yuan available in its pledged supplementary lending facility to support policies including the redevelopment of some urban areas with older dwellings. Officials did not provide an estimate of the total cost of state-directed housing purchases.Consumption slows down
Meanwhile, China’s consumer spending growth unexpectedly slowed in April while industrial production accelerated, highlighting the lopsided recovery of the world’s second-largest economy.
Retail sales rose 2.3%, the National Bureau of Statistics said Friday. That’s down from 3.1% in March. Industrial output rose 6.7% in April from a year ago.
China’s export-driven manufacturing sector has powered the world’s No. 2 economy this year, as a housing crisis continues to weigh on domestic demand. Exports returned to growth in April and factory activity expanded for a second month. But consumer prices remained sluggish, and credit shrank for the first time since 2005.
