China Ramps up Spending on Housing Projects to $562bn

China has unveiled further plans to alleviate the long-running property crisis that has weighed down consumer spending and created huge burdens for local governments.

Senior officials held a press conference on Thursday to say that the government would expand its “white list” of housing projects deemed a priority for funding.

They will also increase bank lending for such developments to 4 trillion yuan ($562 billion) by year-end, Minister of Housing and Urban-Rural Development Ni Hong said.

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‘Urban villages’

Redevelopment of cities will also gather pace, with a million “urban villages” to be included in such plans, Ni said at a press conference, adding that people being resettled will help absorb existing housing inventories.

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, dragging on broader growth in the world’s second-largest economy.

“It can be said that the bottoming out of the property market has begun,” Ni told reporters.

Since last year, China had implemented incremental policies to lift home buyer confidence amid concerns about persistently declining home prices, timely deliveries of homes by developers, and the status of their own jobs and incomes in a fragile economy.

No official estimates have been released on the number of presold but unfinished homes. According to a Nomura report published in January, 20 million units were sold but not yet constructed.

Ni said 2.46 million new homes have been delivered since May.

Loan approvals rising

In January, China announced a plan for a “white list” of projects that can receive financing to ensure that developers could complete construction and deliver homes to buyers. As of this summer, banks had approved 5,392 such projects, with financing reaching nearly 1.4 trillion yuan.

Approved loans for the “white list” projects had risen to 2.23 trillion yuan (close to $314 billion) as of October 16, Xiao Yuanqi, deputy director of the State Financial Regulatory Administration, said at the press conference.

“A key positive that emerged from the presser was the central government’s plan to revisit monetary resettlement for urban village redevelopment projects – a major policy tool that drove rapid expansion of property sales during 2014-17,” Nomura said in a note on Friday (Oct 18).

“Clearly, these measures are insufficient to fully arrest the decline in the property sector,” Ting Lu and other analysts said. “However, the significant expansion of the ‘white-list’ programme signals that Beijing is intensifying its efforts to ensure the delivery of pre-sold homes, which we have long viewed as a key to rebuilding homebuyers’ confidence and reviving the housing markets.”

Mortgage rate cuts to help millions

China’s yuan held steady against the US dollar as reaction to the housing policy briefing was muted overall, traders said.

The country’s CSI300 real estate index shed 5% to hand back two days of gains in shares, with no new steps to excite markets.

“From today’s press conference, we think few incremental policies on boosting home demand were announced,” Morningstar Research equity analyst Jeff Zhang said.

“The most significant directive pertains to credit support to projects in white-list… We expect an acceleration in execution with more distressed developers receiving funds for home completions, which would help shore up homebuyers’ confidence.”

On Saturday, 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.

In late September, the central bank announced measures including cuts in the minimum down-payment ratio to 15% for all buyers.

Interest rates on existing mortgages are expected to drop by an average half a percentage point, benefiting 50 million households and 150 million residents, Tao Ling, a deputy governor at the central bank, said at the same press conference.

The rate cuts helped households save 150 billion yuan, she said.

In a September meeting, the politburo, a top decision-making body of the ruling Communist Party helmed by President Xi Jinping, called for further measures to stabilise the market.