China’s commitment to nearly double the loan quota for unfinished residential projects to ¥4 trillion ($562 billion) did not meet market expectations, leading to a decline in property shares as investors sought stronger policy measures. The government established a new year-end target for loans to “white-list” property projects, having disbursed ¥2.23 trillion as of October 16. This initiative, designed to ensure the completion of homes, was part of a series of measures introduced during a briefing on Thursday.
The announced plans were perceived by some analysts as merely “incremental.” A Bloomberg index of property stocks in Hong Kong decreased by over 8%, causing Chinese stocks to lose previous gains. Despite the challenges, authorities are tasked with reviving a sluggish stock market rally. Housing Minister Ni Hong, along with other officials, expressed confidence that the government could arrest the decline in the real estate sector. They noted that China’s residential market is starting to stabilize. Bruce Pang, the chief economist for Greater China at Jones Lang LaSalle, commented that policymakers are adopting a more pragmatic approach, aiming for the property sector to neither drive nor hinder economic growth, but rather serve as a stabilizing factor.
The “white-list” program is part of a comprehensive plan to ensure the completion of unfinished homes and to avoid another extensive mortgage boycott. According to Nomura Holdings Inc., completing China’s sold but unbuilt homes, estimated at 48 million units, will require about 3 trillion yuan in direct funding from the central government.
Additionally, China is considering allowing banks to issue loans for purchasing idle land and increasing support for affordable housing for families with two or more children. The government also plans to renovate 1 million homes in older, deteriorating buildings in large cities. This decision aligns with the government’s ongoing efforts to refurbish shantytowns, though on a smaller scale compared to initiatives from 2016 to 2018. Raymond Cheng, head of China property research at CGS International Securities Hong Kong, expressed that the market may be disappointed by the lack of a specific number for special bonds intended for purchasing unsold units.
These announcements come on the heels of several previous policies by the central government to assist the world’s second-largest economy in achieving its growth target of approximately 5% this year.
