China mulls new property-market support package to boost economy
CHINA is working on a new basket of measures to support the property market after existing policies failed to sustain a rebound in the ailing sector, according to people familiar with the matter.
Regulators are considering reducing the down payment in some non-core neighbourhoods of major cities, lowering agent commissions on transactions, and further relaxing restrictions on residential purchases under the guidance of the State Council, the people said, asking not to be named because the matter is private.
The government may also refine and extend some policies laid out in the sweeping 16-point rescue package it rolled out last year, the people added. The plans have yet to be finalised and may be subject to change, according to the people.
The housing ministry didn’t immediately respond to a request for comment.
China’s property sector has avoided a collapse but remains a key drag on the world’s second-largest economy. Signs of renewed weakness are emerging in the residential market, with a rebound in home sales slowing in May to just 6.7 per cent from more than 29 per cent in the previous two months.
“The basic picture was one of regression,” Bloomberg Economics and Intelligence analysts including Chang Shu and Kristy Hung wrote in a May note. “Despite signs of steadier activity, though, the sector is still sick.”
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China’s recovery lost momentum in April after an initial burst of consumer activity. Economists surveyed by Bloomberg now expect gross domestic product to expand 5.5 per cent this year from a year ago, edging down from a prior estimate of 5.6 per cent. Home price growth also slowed in April.
Despite a broad range of policies last year, a mountain of developer debt – equal to about 12 per cent of China’s GDP – is at risk of default and poses a threat to financial stability, according to Bloomberg Economics.
In the coastal city of Qingdao, the government this week lowered the down payment ratio for first- and second-time home buyers in areas not subject to purchase restrictions, local news reported.
A number of developers are struggling to get creditor support for their restructuring plans after China’s real estate sector defaulted on more than 100 dollar bonds.
Two of the country’s most high-profile developers, Dalian Wanda Group and China Evergrande Group are showing escalated signs of distress.
Wanda is on an asset-selling spree to generate more liquidity, while seeking a loan relief plan that may allow it to extend principal repayments for some borrowings from Chinese banks, people familiar said in May.
Evergrande said this week it faces more than a thousand lawsuits involving US$49 billion. The embattled property developer has yet to win enough support from creditors for its overseas debt restructuring plan.
Speculation about potential support measures helped propel a gauge of Chinese property developers to a more than 6 per cent gain on Friday, the most since December. BLOOMBERG
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