China eyes plan to buy millions of empty homes amid property crisis

The CSI 300 Real Estate Index, which tracks seven mainland-listed major developers, jumped 5 per cent after the report. Offshore yuan and Australian dollar edged higher. The Hong Kong stock exchange, where most private developers are traded, is closed for a holiday.

While Beijing has experimented in the past with state buying of unsold apartments, most smaller-scale initiatives have met with little success.

In early 2023, the People’s Bank of China made 100 billion yuan ($20.7 billion) available to some financial institutions through a specialised lending facility. The money was meant to help eight cities on a trial basis buy unsold properties for use in local subsidised rental programs.

The Economic Observer newspaper reported in January this year that cities including Qingdao and Fuzhou had started using those funds to buy apartments. Still, only 2 billion yuan was extended under the program as of March, the central bank’s latest quarterly data showed, implying caution among banks and local authorities.

Since the Politburo meeting last month, several major cities including Hangzhou, the homebase to Alibaba Group, scrapped all their remaining curbs on residential purchases to lift transactions.

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Meanwhile, more than 50 Chinese cities rolled out “trade-in” programs that offer residents incentives for selling their old homes and upgrading to new properties as part of efforts to boost housing demand. Among them 11 local government or city-backed entities are conducting trials of buying housing inventory, according to a note from Tianfeng Securities Co. this week.

Not enough

Even so, China’s property sector is unlikely to stabilise until the gap between housing supply and demand closes, according to Bloomberg Economics.

Unsold housing inventory climbed to 3.6 billion square feet last year, the highest since 2016, official data showed. It will cost at least 7 trillion yuan ($1.5 trillion), or 78 per cent of China’s budget deficit this year, for the government to absorb the inventory in 18 months, Tianfeng Securities estimated.

The new plan to enlist local governments to reduce housing glut could further exacerbate their debt level, which has soared to 56 per cent of gross domestic product as of last year. Banks would also be under pressure as their balance sheets have already been eroded by rising bad loans and narrowing margins.

Bloomberg

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