China is reportedly converting unsold residential properties into economic housing to dispose of this notable inventory. Economists and Chinese property developers have said that the action will not significantly help this financially challenged market.
Property Inventory Clearance Unlikely To Help Chinese Developers
In May 2024, Beijing announced a proposal for a 300bn CNY credit facility that could trigger bank financing for state-owned enterprises (SOEs) to buy unsold homes. Based on a Reuters report, Chinese banks are expected to furnish reduced loans to SOEs through this facility supported by the People’s Bank of China (BOC). This will enable SOEs to buy completed homes from developers at reasonable or discounted prices.
Private developers, however, indicated that this will hold little benefit for them as the scheme only applies to bigger cities and the proposed lending facility is not viable. They also expect offers for unsold homes to be below par.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
Analysts predict that this unenthusiastic response could hamstring the initiative and see it join other failed efforts to resuscitate the property sector. When thriving, this market made up roughly a quarter of China’s gross domestic product (GDP).
Reuters said that Xintangzhen’s local authority was the first to indicate that it will buy “suitable housing stock” at cost price. Some developers feel that cost-price offers are better than anticipated.
Financial problems for Chinese property developers started in 2021 when the government implemented policies to limit their lending amounts. This caused numerous companies to renege on their debt repayments.
The CNY continued its battle against the USD and closed at 7.2539 on Tuesday 11 June 2024.
