China Pledges $42 Million In Aid To Struggling Property Market

The Chinese government has pledged support for state-owned entities that will allow them to buy unsold apartments.

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Chinese authorities announced last week a slew of measures designed to support the country’s struggling real estate sector.

Among those measures is support for state-owned entities that will allow them to buy unsold apartments, an effort that may give developers the funding they need to finish construction on already-sold properties, according to a report from CNBC

People’s Bank of China Deputy Governor Tao Ling told reporters on Friday that the central bank will provide 300 billion yuan ($42.5 billion) to financial institutions to lend to state-owned enterprises for the purchase of unsold apartments that have already been built.

Real estate companies can then use the profits from those sales to finish building not-yet-completed apartments.

China’s property market has been plagued with an influx of pre-sold as-yet-unfinished homes in recent years as developers ran into financing problems. Estimates have placed the number of pre-sold unfinished homes at 20 million.

At the current sales pace, it will likely take more than two years to clear the existing stock of new, finished homes, according to a report from Caixin.

China’s real estate issues will likely take a considerable amount of time to resolve, experts agree. One roadblock the new measures face is that local governments still have limited resources, putting a constraint on the number they are able to buy.

Homebuyers in China are also facing a steep barrier to entry, with housing prices preventing many from becoming homeowners.

“Unless potential home buyers sense some serious change of housing prices going up, the current housing price is still too expensive for household income or rent yield,” Zhu Ning, a professor of finance at Tsinghua University, told CNBC. “However, I am not sure whether the government is willing to go as far as to engineer another big run-up in housing prices.”

On Friday, the People’s Bank of China took measures to address this by removing the floor on mortgage interest rates and lowering the minimum down payment ratio for first- and second-time homebuyers.

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