China to Pump $561 Billion into Its Housing Market

China’s ailing property market is set to stabilise as the government is planning to introduce a slew of incremental measures to reignite the sector, China’s Minister for Housing and Urban-Rural Development Ni Hong said on Thursday.

As of April this year, more than 50 real estate developers, accounting for 40% of China’s home sales, have defaulted since 2020, driven by the government’s close regulation of the sector through the “three red lines” property rules and later, the slowdown in sales due to the pandemic, according to Acuity Knowledge Partners.

The financial crisis was sparked by the 2021 default of Evergrande Group, which along with other Chinese property developers, experienced financial stress in the wake of overbuilding and subsequent government-led clampdown on developers’ borrowing capping their debt limits.

The crisis spread beyond Evergrande in 2021 to such major property developers as Country Garden, Kaisa Group, Fantasia Holdings, Sunac, Sinic Holdings, and Modern Land.

Pointing to positive signs in home purchase data from October, the Minister told reporters that the market has bottomed out and the government will eventually win the tough battle to preserve the sector.

The government will step up support for urban village and dilapidated housing renovation projects, Ni said and added that China will complete the renovation of an additional 1 million such housing units by providing monetary compensation to residents, he said.

The minister also stressed all eligible real estate projects will be included in the ‘white list’ mechanism and that their reasonable financing needs will be met through loans.

Loans Approved So Far

As of October 16, loans approved for the 5,392 ‘white list’ real estate projects reached around $313.11 billion, Xiao Yuanqi, deputy head of the National Financial Regulatory Administration, said at the press conference.

It is expected that by the end of this year, the approved loan amount for ‘white list’ projects will be more than $561 billion by end of 2024, Xiao said.

At the same press conference, Tao Ling, a deputy governor at the central bank, said that interest rates on existing mortgages were expected to drop by an average half a percentage point, benefiting 50 million households and 150 million residents. The rate cuts helped households save $21.69 billion, she said.

Under the ‘white list’ mechanism launched in late January, local authorities are recommending that financial institutions provide financial support to eligible real estate projects. This mechanism is part of China’s efforts to stabilise the sector weighed by debt problems and boost confidence in an industry that accounts for nearly 6% of the country’s GDP.

The pledges for more financing for cash-strapped developers and urban redevelopments are part of a series of measures announced in recent weeks aimed at stabilising a sector that plunged into crisis in 2021 and has acted as a drag on growth in the world’s second largest economy.

On Saturday, China’s Finance Ministry officials also announced measures to prop up the property sector, allowing local governments to use funds from special bonds to buy unsold homes and idle land.