China Rolls Out New Measures To Fix Its Property Crisis, Spur Growth

China launched a slew of new steps Friday to revitalize its struggling real estate business, as the latest data revealed that house prices had fallen over 10% since the beginning of the year.

Among other measures, the central bank said it will lower the minimum down payment for mortgages and eliminate the floor on interest rates for first and second homes.

China’s housing market has plummeted following a crackdown on excessive borrowing by property developers many years ago. This has dragged down a wide range of other sectors, including home furnishings, appliances, and construction, and delayed growth in the world’s second-largest economy.

Dozens of developers, whose armies of high-rise apartments have changed China’s metropolitan landscapes, still need to pay their obligations. Many initiatives have just stagnated, incomplete.

China: Getty Images

China Rolls Out New Measures To Fix Its Property Crisis, Spur Growth

He Lifeng, a deputy premier, stated that officials would implement laws tailored to each city and “fight the tough battle of dealing with the risk of unfinished commercial housing.”

“We will solidly advance key tasks such as guaranteed housing delivery and absorption of existing commercial housing,” He said during a top-level property policy teleconference, according to the official Xinhua News Agency.

The drive to entice more families to buy homes has gathered traction after previous moves, such as interest rate cuts and government-backed financing, failed to attract buyers when developers struggled to produce housing that had already been promised and paid for.

Housing is a mainstay of Chinese investment due to the cheap interest rates paid by banks, and many potential purchasers may be waiting for the market to bottom out before making fresh purchases. Furthermore, layoffs and other economic disruptions caused by the pandemic have made many individuals wary of spending.

The People’s Bank of China said that beginning Saturday, the interest rate for first-time housing provident fund loans for less than five years will be reduced by 0.25 percentage points to 2.35%. The loan rate for loans for more than five years has decreased by 0.25 percentage points to 2.85%.

According to the report, the minimum down payment for first-time homebuyer loans will be 15% of the total purchase price. The tax on second residences will be 25%.

According to Chen Wenjing of China Index Holdings, a Nasdaq-listed company that specializes in information about China’s real estate market, the latest efforts, which have reduced down payment levels and mortgage interest rates to historic lows, demonstrate Chinese leaders’ determination to stabilize the real estate market.

China’s metropolitan landscapes: Image Pixa Bay 

China Rolls Out New Measures To Fix Its Property Crisis, Spur Growth

“Reducing the down payment threshold and home purchase costs for residents will likely boost their willingness to buy homes,” Chen stated. He said that if large cities follow through with such initiatives, market sentiment would likely rise even further.

Dong Jianguo, vice minister of Housing and Urban-Rural Development, stated that officials should focus on ensuring that property buyers receive what they paid for, and if that is not possible, the courts may have to intervene.

“In judicial proceedings, protecting the legitimate rights and interests of homebuyers should also be a top priority,” Dong said at a news conference in Beijing.

Earlier Friday, officials from the National Bureau of Statistics acknowledged that domestic demand — spending by consumers and businesses — remained “insufficient” and said the government was considering additional ways to revitalize the property industry after housing prices fell 9.8% in January-April compared to the previous year.

“The complexity, harshness, and uncertainty of the external environment are rapidly growing. “There is insufficient effective domestic demand, high business pressure, and numerous risks and hidden dangers,” said Liu Aihua, a bureau spokesperson.

“The foundation for recovery needs to be strengthened,” Liu stated.

One of the primary measures being implemented is for local governments to buy units that have gone unsold owing to low demand and rent them out as cheap housing in pilot schemes that are national policy.

As part of the newest policy easing, the central bank announced the establishment of a 300 billion yuan ($42 billion) fund to finance the purchase of vacant homes by state-owned enterprises and local governments for use as affordable housing.

China’s economy expanded at a healthy 5.3% rate in the first quarter of this year, but this is rather slow for a developing country, and signals of fragility remain.

China’s metropolitan landscapes: Image Pixa Bay 

China Rolls Out New Measures To Fix Its Property Crisis, Spur Growth

On Friday, the National Bureau of Statistics said that manufacturing output increased by 6.7% in April compared to the previous year, while investment in fixed assets such as factory equipment increased by 4.2%.

However, housing starts plummeted nearly 25% yearly, while sales by floor area fell 20%. Financing for property projects declined by 25%.

Retail sales increased only 2.3% in April.

Officials predicted demand would revive as the government implemented initiatives encouraging people to sell their old cars and appliances and acquire new ones.

SOURCE – (AP)