In a never-ending housing crisis, the Chinese government is stepping in as a buyer of last resort.
Chinese officials made their boldest move on Friday, unveiling a nationwide plan to buy some of the vast housing stock languishing on the market. They also eased the rules on mortgages. The central bank said it will provide $41.5 billion in cheap loans to help state-owned companies buy homes that have been built but not sold.
The flurry of activity came just hours after new economic data revealed a hard truth: No one wants to buy homes right now.
Policymakers have tried dozens of measures to lure homebuyers and reverse a steep decline in the property market, which shows few signs of an imminent recovery.
On Friday, officials from across China dialed in via video conference to discuss the challenges they face. China’s Vice Premier, He Lifeng, announced a dramatic shift in the government’s approach to dealing with the wealth crisis, which has prompted households to cut spending. Mr.
The houses purchased by the government will be used to provide affordable housing. Mr.
The approach is similar to the Troubled Asset Relief Program, or TARP, which the US government established in 2008 to buy troubled assets after the collapse of the US housing market, said Larry Hu, chief economist at Australian financial firm Macquarie Group. .
“It’s a change in policy in the sense that local governments are now directly entering the market to buy properties,” said Mr. Hu said.
Some local governments are already quietly testing this approach in cities like Jinan, Tianjin and Qingdao along China’s coast and Chengdu in the south, but this is the first time a senior Chinese official has said anything about it on a national stage.
Addressing the authorities on Friday, Mr. According to an official account by Chinese state media Xinhua, he said they would have to “fight an uphill battle” in dealing with all unfinished properties across the country.
Official government data shows Beijing has a long way to go to boost confidence in the real estate market. The number of unsold homes is at an all-time high, and property prices are falling at a record pace.
According to China’s National Bureau of Statistics, the stock of unsold homes was equal to 748 million square meters, or 8 billion square feet. In April, new home prices in 70 cities fell 3.5 percent from a year ago, while existing home prices fell 6.8 percent.
Hours after the release of home price numbers on Friday, China’s central bank moved to encourage home buying by lowering down payment requirements. It also eliminated the nationwide mortgage interest rate.
“Policymakers are desperate to boost sales,” said Roselia Yao, a real estate expert at China-focused research firm Kavegal. The central bank has been cutting mortgage rates for years, and before the move the average rate was already at record lows.
While China’s leaders have set an economic growth target of around 5 percent this year, many independent economists believe the plan is ambitious and will require aggressive government spending.
To that end, China also said on Friday it had raised $5.5 billion from its first sale of 30-year bonds as part of a broader plan to raise $140 billion over the next six months.
China’s property crisis has been fueled by years of excessive borrowing and overbuilding by property developers that have underpinned much of the country’s remarkable decades of rapid economic growth.
But when the government finally intervened in 2020 to put an end to developers’ dangerous practices, many companies were already on the verge of collapse. China Evergrande, one of its biggest property developers, defaulted on repayments under huge debt piles by late 2021. It left behind hundreds of thousands of unfinished apartments and hundreds of billions of dollars worth of unpaid bills.
The real estate crisis has left many Chinese families, who once poured their life savings into property, without viable alternatives to building wealth. Although China’s stock market has rebounded in recent months, as volatile as it is, they have some other good opportunities.
The Evergrande is the first in a line of high-end defaults that is now taking the industry by storm. A Hong Kong court ordered the company’s liquidation in January. Another beleaguered real estate firm, Country Garden, held its first hearing in a Hong Kong court on Friday, seeking the liquidation of an investor firm.
Zixu Wang Contributed research from Hong Kong.
