China offers US$41 billion of funds to buy unsold homes in bid to manage crisis

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China property: Beijing launches US$41 billion of funds to buy unsold homes, repurchase of 'idle' land in drive to rescue housing market

Beijing has announced 300 billion-yuan (US$41.5 billion) in funding to help clear excess housing inventory, as well as measures to ensure developers have access to financing and to encourage the repurchase of "idle" land, as China embarks on its most ambitious effort yet to rescue the property sector and shore up the broader economy.

The "relending" funds will enable local state-owned enterprises to buy unsold homes they can then offer as affordable housing, top officials told a media briefing on Friday afternoon.

They will be offered to 21 national lenders, from policy banks to state-owned commercial banks and joint-stock banks, at a rate of 1.75 per cent, according to Tao Ling, deputy governor of the People's Bank of China.

The move aims to encourage financial institutions to extend financing to selected regional state-owned companies to support their purchases of unsold homes, said Tao. It is likely to translate into about 500 billion yuan in bank loans for housing purchases.

"This is a significant move by central government in response to the changes of supply-demand dynamics in the property market, and to cater to people's need for quality homes," Tao said. "We will promptly implement it and launch multiple measures."

The money should be used to buy homes that have already been constructed but not sold, and local governments will be able to decide whether to join the programme according to their needs. The policy is applicable to all types of property developer, regardless of ownership, according to Tao.

"[The relending] is a good start and can add more funding, if needed, as central government looks determined to solve the property market problem," said Raymond Cheng, managing director of CGS International Securities Hong Kong. "But it may take a few months to realise."

Other moves announced on Friday included measures to ensure the timely delivery of housing stock and to encourage the repurchase of "idle" land.

"Ensuring home delivery is tied closely to people's rights," said Dong Jianguo, the vice-minister of housing and urban-rural development. "We will take multiple measures to ensure projects are delivered on time … and for those that can't be delivered, we will take legal action."

Friday's media briefing was attended by officials from the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the central bank.

It came on the same day that the People's Bank of China announced it would remove the national lower limit on mortgage rates for first and second homes. The PBOC also cut down-payment ratios for first- and second-time buyers to 15 and 25 per cent, respectively, compared with 20 and 30 per cent previously.

In another move to stimulate demand, the central bank lowered interest rates on loans tied to individuals' housing provident funds by 0.25 percentage points.

The raft of measures also came just hours after a meeting in which Vice-Premier He Lifeng called on local governments to purchase unsold homes.

"Local governments should recover or purchase the idle stockpile of residential lands properly according to the situation, to help ease pressure on distressed developers," He said during a meeting on Friday, according to a Xinhua News Agency report.

The package of measures underscores the determination of policymakers to rescue the property sector, which accounted for about a quarter of the country's economy. On April 30, the Politburo, a top decision-making body of China's Communist Party, called on local authorities to digest existing housing inventory.

Recent official data showed that the property industry is still in a downward spiral. Prices of new homes in first-tier cities fell 0.6 per cent in April to cap an 11th straight month of decline.

Property investment dropped by 9.8 per cent year on year in the first four months of 2024.