China announces measures to extricate themselves from the property predicament
China's property market, a significant driver of economic growth, has faced struggles since 2021. In response, the Chinese government has announced a series of measures aimed at stabilizing the market, ensuring home delivery, containing sector risks, and facilitating a structural market transition.
The People's Bank of China (PBOC) has been at the forefront of these efforts. They have established a 300bn yuan facility to support affordable housing, and reduced the minimum mortgage rate to boost demand. Furthermore, the minimum deposit for first-home buyers has been cut from 20% to 15%, and for second homes from 30% to 25%.
These measures are part of a broader strategy to relax housing purchase restrictions in major cities, such as Beijing, allowing more residents to qualify as first-home buyers with favorable mortgage terms. This aims to boost demand while maintaining overall market stability.
In addition, the government is mobilizing state-owned enterprises to absorb unsold inventory from cash-strapped developers. This move is intended to support developers and reduce market supply pressure amid ongoing demand weakness.
Rather than bailing out real estate companies, China is issuing special-purpose bonds worth trillions of yuan to secure housing delivery, avoid financial contagion, and mitigate macroeconomic risks. The government’s focus is on guaranteeing presold homes and preventing systemic failures, not protecting most real estate firms, many of which are expected to exit or transform.
The long-term outlook envisions a significant reduction (over 80%) in the number of real estate companies, with many exiting or shifting toward property management roles, reflecting an adjustment to reduced urbanization-driven demand.
Despite these measures, housing prices continue to fall and demand remains subdued, indicating the recent stimulus and policy adjustments have so far had limited impact. This necessitates further government action to support recovery.
A notable example of the ongoing struggles in the property market is the case of developer County Garden, which had a potential liquidation hearing in a Hong Kong court on Friday, which has been adjourned to 11 June.
In sum, China’s new measures are designed to stabilize housing demand, ensure home delivery, contain sector risks, and facilitate a structural market transition away from rapid expansion toward sustainable, risk-managed development. He Lifeng, Vice Premier, has informed officials that councils can purchase properties at 'reasonable prices' and sell them as affordable housing, further emphasizing the government's commitment to addressing the ongoing struggles in China's property market.
- The Chinese government is mobilizing finance by issuing special-purpose bonds worth trillions of yuan to secure housing delivery and mitigate macroeconomic risks, a crucial aspect of the ongoing industry efforts to stabilize the housing market.
- To boost demand in the real-estate business, the People's Bank of China (PBOC) has reduced the minimum mortgage rate and cut the minimum deposit for first-home buyers, shown in their broader strategy to relax housing purchase restrictions in major cities.
- In a bid to facilitate a structural market transition away from rapid expansion and toward sustainable, risk-managed development, He Lifeng, Vice Premier, has instructed councils to purchase properties at 'reasonable prices' and sell them as affordable housing, indicating the government's continued involvement in the real-estate industry.
