China is set to enhance its financial backing for essential real estate projects, expanding the “whitelist” initiative and accelerating bank lending for unfinished developments. By the end of the year, the housing ministry plans to increase bank lending to these projects to 4 trillion yuan (approximately $561.8 billion). This is a significant rise from the 2.23 trillion yuan already approved in loans for whitelisted developers.
Launched in January, the “whitelist” initiative allows city governments to recommend specific residential projects to banks for expedited lending. The primary goal is to ensure the timely completion of these developments, allowing buyers to receive their homes. Ni Hong, China’s Minister of Housing and Urban-Rural Development, announced the plans during a press conference attended by officials from the central bank, the finance ministry, and the National Financial Regulatory Administration.
As part of this initiative, all commercial housing projects will now be eligible, significantly broadening the scope of the whitelist. Ni emphasized the importance of swift fund deployment by banks, advocating for full loan disbursements to developers rather than staggered payments.
The announcement follows several high-profile government policies aimed at revitalizing the economy. Notably, in late September, Pan Gongsheng, governor of the People’s Bank of China, reduced the reserve requirement ratio (RRR) by 50 basis points and lowered the minimum down payment for second-home loans nationwide from 25% to 15%. Shortly after, during a high-level meeting chaired by President Xi Jinping, officials committed to halting the decline in the real estate market and fostering a stable recovery.
Mixed Reactions and Market Volatility
Despite the positive steps, experts caution that the recent policy adjustments may simply fine-tune existing measures rather than deliver immediate results. Bruce Pang, chief economist at JLL, noted that it would take time for improvements in sales and prices to translate into investments and construction activity.
Investors had anticipated more aggressive stimulus measures from the latest briefing, and their disappointment was reflected in the market. As the announcements were made, the Chinese CSI 300 real estate index plummeted over 5%, reversing earlier gains. Chi Lo, a senior economist at BNP Paribas Asset Management, commented on the ongoing volatility, indicating a lack of confidence among investors regarding the effectiveness of the announced stimulus package.
However, positive investor sentiment was briefly sparked when local governments were allowed to issue more special bonds for land purchases and when affordable housing subsidies were permitted for existing housing inventory. Following these announcements, Chinese property stocks saw a surge, with the Hang Seng Mainland Properties Index climbing more than 2% and the CSI 300 index for real estate advancing by nearly 5%.
Continued Challenges in the Real Estate Sector
Despite the recent measures, the real estate sector in China remains in a challenging position. Since its peak in 2020, the market has suffered significant losses, with over 80% of the Hang Seng Property Index dropping. In May, Minister Ni stated that developers who must go bankrupt should either face bankruptcy or undergo restructuring.
More than 50 cities across China have enacted policies to stimulate the real estate market. Ahead of the Golden Week holiday, Guangzhou announced the removal of all restrictions on home purchases, while major cities like Beijing, Shanghai, and Shenzhen have eased restrictions for non-local buyers and reduced down payment ratios.
These measures come after previous efforts yielded little significant recovery. New home prices in August fell at the fastest rate in over nine years, with a 23.6% decrease in new home sales year-to-date through August. Average home prices also declined by 6.8% in August compared to the previous month, highlighting the sector’s ongoing struggles. Once a cornerstone of China’s economy, the real estate industry has faced severe downturns since 2021 due to a crackdown on high debt levels, leading to defaults among numerous developers and leaving many housing projects unfinished. This has further eroded homebuyer confidence in the market.
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